The National Minimum Wage (SMI) is an amount set annually by the government by law, representing the minimum amount a worker must be paid for a day’s work, regardless of the type of contract, sector, or activity.
The purpose of the SMI is to ensure a decent standard of living for workers and their families, as well as contribute to social cohesion and economic development.
The Minimum Wage It is determined based on various factors, such as the cost of living, productivity, employment, economic growth, and social dialogue. Furthermore, it must comply with the principle of non-discrimination on the basis of sex, age, origin, or any other personal or social circumstance.
The minimum wage can be expressed in different ways: hourly, daily, monthly, or annually. In Spain, the minimum wage is usually calculated based on 14 pay periods, that is, taking into account the two bonus payments received in June and December.
However, It can also be calculated based on 12 payments, by spreading the bonus payments over each monthly paycheck. Likewise, the minimum wage can be adjusted for part-time work, being reduced in proportion to the number of hours worked.
In recent years, The minimum wage has risen significantly in Spain, rising from 655.20 euros per month in 14 payments in 2016 to 1,134 euros per month in 14 payments in 2024, representing a 73% increase over eight years. This trend is due to the political will to improve the purchasing power of lower-income workers, as well as to bring Spain’s minimum wage closer to that of other European countries with similar income levels.
Changes in the Minimum Wage in Spain
The following table shows the changes in the minimum wage in Spain from 2016 to 2024, both on a monthly and annual basis:
| YEAR | Monthly minimum wage (14 payments) | Annual minimum wage |
| 2016 | 655,20 € | 9.172,80 € |
| 2017 | 707,60 € | 9.906,40 € |
| 2018 | 735,90 € | 10.302,60 € |
| 2019 | 900 € | 12.600 € |
| 2020 | 950 € | 13.300 € |
| 2021 | 1.000 € | 14.000 € |
| 2022 | 1.080 € | 15.120 € |
| 2023 | 1.134 € | 15.876 € |
What effects does the increase in the minimum wage have on workers and the economy?
The increase in the minimum wage has a a series of positive and negative effects on workers and the economy, which can be summarized as follows:
Positive Effects
- Improves the standard of living for lower-wage workers, thereby increasing their ability to consume and save.
- Reduces in-work poverty and wage inequality, especially between men and women, and between young and old people.
- It stimulates domestic demand and economic growth, by generating more revenue and more activity in the sectors most closely linked to household consumption.
- It strengthens tax collection and the sustainability of Social Security, by increasing social security contributions and payroll taxes.
- It promotes social dialogue and collective bargaining, by establishing a framework for setting wages in collective bargaining agreements.
Negative Effects
- It can lead to a loss of competitiveness and jobs, by increasing labor costs and reducing companies' profit margins, especially for the smallest firms and those most exposed to international competition.
- It could lead to inflation and wage pressures, as the increase in the minimum wage is passed on to the prices of goods and services and triggers a ripple effect on higher wages.
- It can make it harder for the most vulnerable groups to enter the labor market, such as young people, the long-term unemployed, immigrants, or low-skilled workers, by requiring a minimum level of productivity to justify their wages.
- It may encourage the underground economy and labor fraud, by increasing the incentive to hire undeclared workers or to pay part of their wages under the table, in order to evade tax and social security obligations.
How does Spain's minimum wage compare to that of other European countries?
The The Spanish minimum wage is below the European Union average, which, according to Eurostat data, was 1,597 euros per month, paid in 14 installments, in 2020. However, the Spanish minimum wage has narrowed the gap with the European average in recent years, thanks to successive increases.
The Spanish minimum wage is also lower than that of its immediate neighbors, such as France (1,539 euros per month in 14 payments), Germany (1,584 euros per month in 14 payments), and Portugal (775 euros per month in 14 payments). However, the Spanish minimum wage is higher than that of other countries such as Greece (758 euros per month in 14 payments), Poland (614 euros per month in 14 payments), and Bulgaria (332 euros per month in 14 payments).
Based on all of the above, the setting of the minimum wage It must be done in a balanced and consensual manner, taking into account the economic, social, and labor situation in each country, as well as the recommendations of international organizations such as the The International Labor Organization (ILO) or the European Commission.
In Spain, the minimum wage has risen significantly in recent years, approaching the level of other European countries with similar incomes. However, The Spanish minimum wage remains below the European Union average, and there is a wide disparity among the different regions, sectors, and groups.
Therefore, the challenge for the future is to continue making progress in improving the minimum wage, without neglecting the impact it may have on competitiveness, employment, and inflation, and seeking the broadest possible consensus among the government, social partners, and economic stakeholders.
