The Junta has decided not to cut the salary of public workers in Andalucia after the central government ordered that all civil servents lose their Christmas bonus this year.
It seems that the Junta is concerned that if it too applies a seperate salary cut, this will penalise government workers twice which is “unfair”.
The issue per se is: who’s paying the bills, and who will save the money?
The Junta had originally ordered a 1,5% pay cut in order to avoid firing an estimated 30,000 workers, and slashed (not eliminated) the summer and Christmas bonus, to save 777 million euros. This was… unpopular, especially with the IU who are the minority coalition partners of the PSOE in Andalucia. It also told people to work longer hours.
However, the central government has now stopped the Christmas bonus of civil servants altogether, although it will top up the pension scheme, causing an overall salary cut of around 5,4% in real terms. Topping up the pension scheme is a cunning plan – it pumps money back into public coffers and keeps the workers happy(ish).
Of course, the central government tops up the wage bill of the Junta, who pays for a lot of the civil servants in Andalucia (teachers, doctors, paper pushers in your local government office, etc). Although centralised government workers (police, army, centralised government workers) get paid directly from Madrid.
So if Madrid cuts the amount Seville receives for the wage bill, then Seville passes that onto the wage receiver. So yes, if the Junta implemented seperate cuts, the worker in Andalucia would have a bigger pay cut than those in the next region (ie Murcia).
But, the original Junta idea was to save 777 millions from its own budget, Seville never intended to pass that savings back up to Madrid. So, given that Madrid has ruled out giving Seville any more money for this or next year, and is trying to stop them issuing any more debt….
Where’s Seville going to find that 777 million euros it was going to save on the wage bill now?
The Junta is in a pickle, and there isn’t an easy way out. I support their position that they should not lay off workers. Increasing hours is ultimately defating the aim of protecting jobs, and makes it harder to justify wage cuts.
The only real solution is a programme of hours reduction with consequent pro-rata pay cut, along with voluntary early retirement. Offer a one time lump sum “thank you” (say, 2 months salary) to people to voluntarily take the deal. This maintains levels of employment whilst reducing costs.
There should be resistence to central government pressure to raise the retirement age, and a programme of voluntary early retirement. New workers can’t enter the workforce until old workers retire and free up their jobs. Furthermore, paying an older workers a salary and a younger worker unemployment benefits doesn’t cost much less directly than paying an old worker his or her pension and paying the salary to the younger worker, whilst the latter has a much lower long term socio-economic cost.
Jobless youth are more likely to turn to drugs, crime etc., and may well be supporting a whole young family on benefits. By contrast, the elder worker is less productive (increased time on sickness leave, longer time to train in new technologies and procedures) and higher cost (higher salary and leave due to time of service) than a young worker in the workplace, whilst at the same time retirement brings only a fraction of the socio-economic costs. People retiring are less likely to fall into drugs and crime than the long term unemployed youth, and is unlikely to be supporting a family.
IN summary:
* Reduce working hours and pay pro-rata, with incentive to take up the scheme voluntarily.
* Offer early retirement, and where possible replace with staff from the long-term unemployed youth bracket, possibly on a shorter hours pro-rata contract (either way their salary package will be less due to their being new recruits).
If additional savings are still needed, then making certain benefits given to pensioners means tested would be a start, i.e. the rubbish tax exemption.
Yes, but the Junta can’t do that now as it’s embroiled in the massive ERE scandal, where they have been accused of spending hundreds of millions of euros of tax money giving out fraudulent pensions to public workers.
So if they carry out your scheme, the PP and opposition parties will just scream that the corruption is continuing under a different name!
Economics meets Spanish politics : it’s like throwing jelly against a brick wall.
😆 Love the jelly meets brick wall image, and very true!
No real solution to that one, except go on the ideological offensive against PP – “Why do they hate pensioners?!” (cue picture of frail old woman on her own in black and white), “PP: Tough on jobs, tough on the causes of jobs” etc.
It does also bring to mind the real underlying issue. To get things back on track in the long-term, corruption and nepotism is going to have to be tackled, but f*** knows how, as I can’t think of a single country that has actually managed to do that (even Singapore, which claims to, ultimately did that by simply legalizing it).