The Spanish economy faces a horizon of an average annual increase of 3% in labor costs until 2030 with zero growth in productivity.
That is the scenario that the Independent Authority for Fiscal Responsibility (AIReF) points out this week in which it warns of the risk of losing competitiveness due to this combination of data. "A wage recovery without sufficient productivity improvements could put pressure on unit labor costs, causing a deterioration in external competitiveness," the institution points out.
AIReF points out that only in 2026 and 2027 will labor costs in Spain rise by 3.3% while productivity per full-time employee will remain frozen, although without falling as happened in 2025 in Spain, despite being the second largest recipient of European funds.
The institution points out that its estimate of the increase in labor costs does not incorporate the growth of the Minimum Interprofessional Wage (SMI) pending the Government's decision. If the proposal of the second vice president, Yolanda Díaz, to raise the SMI by 5.3% is successful, well above the cost of living and productivity, the expected labor costs will be higher over time.
At the moment, the director of the Economic Analysis Division, Esther Gordo, points out that the salary increases agreed in agreements are around 3%, but that the persistence of inflation can cause it to feed back into the feared so-called second round effect. "According to the Bank of Spain Survey on Business Activity for the third quarter of 2026, the availability of labor limits the activity of 43.1% of companies (...) And in construction, close to 60% (...) These restrictions could intensify wage pressures to attract and retain workers and, if the higher costs are passed on to sales prices, prolong inflation," the report indicates.
The scenario outlined by AIReF for the next legislature if there is no change in policies is that "productivity per employee will remain stagnant" and the fact that labor costs will continue to grow in 2028 although at a lower rate than in 2027, remaining between 2.3 and 2.7% until 2030.
The labor cost also takes into account social contributions and AIReF highlights that a part of the latter, the Intergenerational Equity Mechanism (MEI), is in principle stabilized from 2029.
On the other hand, the rise in the wage bill in the public sector will cause a new record in 2027. According to AIReF, the total remuneration of public employees will grow by 6.2%, the largest increase since, at least, the pandemic, according to their calculations.
In this percentage, AIReF takes into account the commitment of the Minister of Digital Transformation and Public Function, Óscar López, to increase the remuneration of public employees by 5% this year. This percentage means applying the 4.5% already agreed within the agreement for the period 2025-2028 plus an additional 0.5% due to the higher cost of living increase than expected this year.
In addition, AIReF takes into account the effects of salary slippage and growth in public employment to calculate the increase in the wage bill. It will be a new record in absolute figures although not so much in percentage of the Gross Domestic Product as long as it continues to grow. AIReF estimates that it will be 10.7% in 2027, the equivalent of a level already of 190,000 million euros distributed among the more than three million public employees in the country in the different administrations.
The CSIF union has asked López to formalize the salary increase agreed in the agreement before the general elections on November 29. This has guaranteed in any case that the agreed increase will occur.
