Why raising Spain's minimum wage to €1M fails

Minimum wage of a million: The joke that explains Venezuela

Every time a country redenominates its currency, the same thought experiment returns: if poverty stems from low wages, why not set the minimum wage at €1,000,000 and make the entire nation wealthy? This idea circulates in debates as a caricature of decree-based raises and has an uncomfortable second half. In Venezuela, amid open hyperinflation, President Nicolás Maduro's government applied a new 60% wage hike, according to the thread. With that figure on the table, the joke stops being funny.

The canonical explanation involves something counterintuitive: money is not wealth; it is a unit of account. Raising nominal wages without increasing production does not distribute existing goods better; it moves prices. In Spain, there is a laboratory case, as one participant argued: when the peseta was replaced by the euro, a de facto exchange rate of €1 = 100 pesetas was applied, whereas the official equivalence was 166. According to that calculation, this resulted in hidden inflation of 66%. Paychecks did not shrink. They bought less.

What lies behind the proposal for a €1 million minimum wage?

The proposal stems from a widespread intuition: if workers are poor, let them earn more by law. The problem is that wages are prices, and prices are not set solely by decree. There are two limits that no regulation can lift. The first is production: if a company pays more than its product is worth in the market, it loses money and stops hiring or producing. The second is the money supply: printing bills does not create goods. It is the gap between nominal wages, those shown on the paycheck, and real wages, what they actually buy.

What peine in France when Mitterrand raised wages by decree?

Unemployment multiplied, exports slowed, and prices eventually absorbed the increase. This is the summary drawn in the debate regarding events in France over three decades ago, when the socialist government implemented its common program: wage and benefit hikes, reduced working hours, and greater public sector weight. To mask destroyed jobs, 200,000 civil servants were hired, and inflation exceeded forecasts by 40%, always according to the narrative cited in the thread. By the end of the cycle, purchasing power was back where it started.

Venezuela, the bolívar, and scarcity: What happens when the State sets prices

With the 60% hike and a free-falling currency, the next step in the official narrative is price controls. And there the mechanism breaks down from the other side: no company produces at a loss indefinitely. If the government forces continued production, the result is scarcity; if businesses refuse, the response ends up resembling that of the Soviet Union, where production was sustained administratively. Empty Venezuelan shelves are not a system accident: they are its most predictable part.

Why is €750 misery in Madrid but a great salary in Extremadura?

Here lies the least debated argument of the matter. A single national minimum wage ignores geography and sector: the same €750 that won't pay for a room in Madrid is a good salary in a town with four cafés and few customers. If the business cannot afford more, that job is not created. And there is a detail often left out of headlines: each minimum wage hike drags up social security contributions, so the cost to the employer exceeds the raise seen by the worker. Hence, sector-specific agreements adjusted to territory are proposed before a national figure.

Why are Spanish wages low?

Spain experienced unprecedented labor growth: the active population rose from 16 to 23 million between 1995 and 2005, a 45% increase in a decade, according to data handled in the thread. Germany and France needed half a century for something similar; the United States took 35 years to grow by 50%. This gives an idea of the pressure on the labor market. Some argue that a country's wages reflect its productivity, not its government's benevolence: if a worker could earn more independently, they already would. The opposing view, also present in the debate, holds that negotiation is not free when one party has the playing field leveled, and that the massive influx of migrant labor has weakened the position of job seekers.

Work pace, hours, and the Henry Ford myth

Also entering the discussion is how much work, not just how much is earned. The experience of Spanish healthcare and audiovisual professionals who have worked in the United States describes more intense shifts, with rigid procedures and deadlines, and salaries that sometimes double those here in exchange for pressure many cannot withstand: arriving one minute late could miccionan a firing threat. And then there is the founding myth. Henry Ford did not distribute wealth out of generosity, but because he needed workers who wouldn't leave. The full story dismantles the fable of the philanthropist businessman who raises wages so employees can buy his cars.

With these elements, the point where analysis stalls is always the same: almost no one argues against the existence of a minimum wage—it is there to prevent paying a bowl of rice for forty weekly hours—yet no one has found a way to raise it without part of the increase being eaten by shopping basket prices or subsequent staff adjustments. The ironic derivatives of the approach do not resolve the issue either.