Spanish public sector breaks inflation forecast

For the first time since the centre-right PP government took power in 1996 public sector workers in Spain have reached a pay settlement which exceeds government inflation forecasts.

The latest deal, agreed in principle earlier this month provides for a 2.71% increase in pay in both 2002 and 2003, of which 2.0% is added to the normal pay packet and 0.71% is to be paid in two additional lump sum payments, which are however, consolidated. A further 0.59% of the wage bill in 2003 is to be used to pay particular groups of workers and for the achievement of targets, which have yet to be agreed. In 2004 0.49% of the wage bill is to be paid into a pension fund for public sector workers.

This means that in total the 2003 increase is worth 3.3% and the 2004 increase 3.2%. This is higher than the current forecast of inflation of 2.0% but it is below actual inflation, which was 4.0% in October. Since 1996 public sector pay has been limited to forecast levels of inflation, which have normally been underestimates. The exception was 1997 when pay was frozen.

Other improvements in the deal include a promised cut in the number of temporary workers from 20% of the total to 8% and making geographical mobility voluntary rather than compulsory. The unions have had to accept, however, an extension of the opening hours of some offices.