Why everything costs more in Spain while wages stay flat

Why everything is so expensive in Spain if wages aren't rising

Everything costs more. Your payslip, not so much. And the question hovering over the supermarket checkout is always the same: if salaries have been stagnant for years, where does the difference go? The starting point is a blunt thesis put forward by some participants: the people who don't work are precisely the ones accumulating the money. From there, the figures laid on the table paint a picture far messier than the official narrative.

Why do prices rise if people earn the same?

Prices are not set by the Spanish consumer through demand, and that's the first sustancia ilegal. Some attribute the surge to a shortage of production in essential goods — olive oil and oil are the most frequently cited examples — while others add rising interest rates as extra fuel. Energy appears in almost every version as the master channel: when it goes up, it passes through in a second round to everything, because everything consumes energy and logistics.

And in that pass-through there is a silent winner. The more expensive everything gets, the more the State collects. The 21% VAT on every repair, on fuel, on any purchase of shoes or clothes: every price increase fattens the public coffers without a single tax having to be touched.

• VAT: 21% on most goods and services
• Social security contributions: around 30% of employer cost
• Maximum contribution base: around 4,000 euros per month

How much of each paycheck the State keeps

The part that makes people angriest has numbers attached. From every salary, employer and employee together pay around 30% in social security contributions on the employer cost: with a gross salary of 20,000 euros, the real cost to the company is around 25,000, according to the calculation presented. The problem is that this contribution has a cap — around 4,000 euros per month — so the highest earners stop contributing proportionally more. Pogre runs out exactly where it would start to bite.

And what about high earners? A calculation is circulating that should be taken with a grain of salt given how striking it is: someone generating 5,000 euros net per month would be losing, through taxes on work, consumption and inheritance, a bite of around 85% of what they produce. The figure is disputed, but it makes the prevailing feeling clear: the system doesn't reward producing more.

The 100 billion that leave and never come back

Here the tone gets rougher. It is claimed that Spain spends more than 100 billion euros a year on foreign aid, that the autonomous communities cost another 100 billion, that some 25,000 NGOs are funded, and that spending on equality policies reaches 20,319 million euros. These are figures wielded as an indictment rather than audited accounting, and it's worth remembering: they don't come from an official document, but from the tally made by those denouncing them.

The story that goes with them is always the same: money going down the drain while the class that produces tightens its belt. The physics of it is simple — what is spent in one place can't be spent in another — though the accounting behind it is far more debatable.

Working until 70 while the terraces are full

There is one image that keeps coming up bitterly: while the salaried worker counts the days left until retiring at 70, the terraces are full on any given weekday. The scene is more anecdote than data — a retiree on a terrace proves no theory about public spending — but it explains why the perception that a few support the many takes hold.

The gap between producers and extractors

Beneath the figures lies the deeper divide. Part of the analysis splits society between a productive class and an extractive class: those who generate wealth through their work, versus those who live off public money, subsidies, markups or rents. The tension grows when it is claimed that only 25% of the population works while the other 75% is supported — a proportion that doesn't stand up to serious analysis but captures a widespread perception.

What's striking is that the prescriptions for getting out of the hole point in opposite directions. Some suggest becoming a civil servant, securing the slice of the pie that goes into your own pocket. Others bet on a consumer strike, giving the system back the bare minimum. There isn't even agreement on whether the problem is taxes, debt, or the very design of the labor market.

Can a system be fixed where producing more barely improves your life, and where everyone agrees something doesn't add up — but no one agrees on what?