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In a doctrinal article, Todolí argues that if economic policy does not put an end to wage devaluation, Spain will face a deep recession.
The lecturer in Labour Law and Social Security at the Universitat de València (UV), Adrián Todolí, analyses in a research study the need for public intervention when it comes to adopting measures to put an end to wage devaluation and tackle the inflationary problem.
The study "La devaluación salarial se mantiene: análisis de la reforma laboral de 2021 desde la perspectiva salarial en un contexto de inflación desbocada y propuestas de cambio" analyses the problem of inflation and wages, reaching four conclusions.
Todolí explains that in the last 30 years there has not been a CPI figure as worrying as the current one and, precisely, this relative stability of prices in recent decades has meant that collective bargaining is, at present, poorly prepared for this phenomenon.
"The last time inflation was at such alarming levels as it is today was the so-called Moncloa pacts of 1977, where the main political parties - government and opposition - with the acquiescence of employers and trade unions, managed, very successfully, to reduce inflation without causing a collapse in economic growth. But in the current political climate this situation seems unrepeatable”, he says.
With this data, Todolí's first conclusion is that, if economic policy does not put an end to wage devaluation, we will face a deep recession in Spain, which is why he goes on to argue that public intervention is necessary.
"Collective bargaining is paralysed and the measures of the 2021 labour reform aimed at empowering the social partners will be insufficient in an inflationary context and without agreed wage revision clauses," the study adds. Moreover, these regulatory changes must be designed to empower the social partners.
As a fourth conclusion, Todolí points out that patience is needed because, in order to avoid second-round inflation and achieve a balance of interests, the agreements or legislative changes should come into force after the worst of inflation has passed.
In short, the research shows that the measures adopted by the 2021 labour reform will not succeed in halting wage devaluation, let alone recovering the purchasing power lost over the last ten years in an inflationary context.
For this reason, this study advocates legislative changes to achieve a triple objective: the recovery of purchasing power for workers to prevent the collapse of domestic consumption; to reduce cost competition between companies so that they can compete on quality and productivity; and to ensure that these wage increases do not end up generating second-round inflation.
