What if low salaries are the problem?

Reading an article about salaries in Spain which confirms what we all know: vast majority of the population with a job (there's 20% unemployment at the moment of this writing) fits on the salary segment between 641€ and 1100€. To be noted that 641€ is the minimum salary as per current law. This is what leads to the term "mileuristas", which can't be translated and isn't a real spanish word (yet) but means "those who earn around 1,000€".

To me this is a big problem. And I wonder if it is the biggest problem of all. I think so in two ways:

(1) People with salaries in that range make very small contributions through income tax. This has two bad consequences. One is that they rely a lot on "help" from governments and/or family to make a living, and the other one is the fact that they can't contribute much to the state budget (means a large number of people is working, but their effort can't sustain the state).

(2) Because of the clear discrepancy between those salaries and the actual cost of living, these people can't consume much (they don't have money to do it). This is certainly bad for the economy. It is clear that if more people can buy goods and services, economic activity increases.

A third problem is that "mileuristas" also have a hard time to make an independent living. This creates a bigger social problem, as they need to live with their parents until they are in their 30s and 40s (they can't afford living on their own), because it becomes almost impossible to make up a family. There is also the difficult to assess impact in the overall frustation and creation a sentiment of "I can't do anything" which is very bad for the society as well.

So while many say we need to lower salaries in Spain, and it may be true in some cases/industries, overall I think the opposite is true. This is simplistic, I am sure I am losing many angles, but if there'd be a policy from the state to bring significant tax deductions to companies who invest benefits in raising salaries, I believe things would change for good.

The companies could (and should) increase salaries based on goals and productivity - so, not to everybody just because, but more to those who earn it. This wouldn't cost them money, because what they spend in salary increases they get back as tax relieves, hence the impact on the labour costs is zero.

Of course you would say: yeah, but now the state will get less money (as it is giving it back in tax deductions to pay for the salary increase). Absolutely BUT, a part of it will come back through income tax paid by the employees, and another part by increase in consumer spending and therefore ingress through VAT. This would also incentivate the overall economy and we should see growth.

As long as salaries are "just" (and in Spain, at the moment, they are not), I think the best model is to lower the taxes on companies and let individuals (employees) pay more (within reason). This works because it incentives companies to hire and grow, and creates potential for consumer spending.

Moreover, the more people feel they "pay" to maintain social welfare, education, etc. the better: people feel committed, and also demand more from politicians.

With low salaries, you create the spiral of politicians offering help and subsidies to the low income classes, which then become dependents (clients) on such politicians. Sets the stage for populism. Very bad. This is where Spain is at today. Needs changing.

Señorio ... (or lack of it)

Señorio is a Spanish word which would translate for 'lordship'. But the concept is that of elegance and courteous behavior. In soccer, Real Madrid is a club which has always proud itself in such behavior.

Rivals would criticize that Real Madrid rarely honor the concept and as of late, Barça has claimed to be THE club in Spain that truly acts and conducts themselves with "señorio" as opposed to Real's bad manners. In fact, they call it "seny" for they prefer to use the catalan word in many cases. Real's bad manners have all to do now a days with Mourinho, of course, the all-evil coach responsible for bringing Real Madrid into Champions League semi-final after eight years absence and winning Spanish Cup after 18 years of not seeing that title ...

Then, yesterday, months after the high tension lived between the two clubs when they faced each other four times in four weeks, we saw some surprising comments from Barça's president. After all tension was relieved (almost forgotten), after they won (brilliantly) the Champions League and Spanish Liga. He threatened Real Madrid to break relations with them if they would misbehave again ... but, alas, being so nice as they are, he also said he was willing to give Real a second chance (for everybody deserves one, even Real).

Amazing. This is "seny" in its maximum expression. Funniest thing is, Barça's president says he will break relations if they see Real misbehaving again (for which Barça people seem to be the only qualified judge of course). Well. So what?! ... It is ridiculous. Kid's thing: you are not my friend anymore, and I don't talk to you.

No te gusta el café? Pues toma dos tazas ...

The title translated means "You don't like coffee? Have two cups then". Yes, I was not blogging in three years and today I have started not one, but two blogs. Reason is that really it does not fit to use the same blog to talk about the lack of government in Belgium after one year of the elections, and the latest networking technology evolutions. People reading one couldn't care less about the other (with exceptions).

Yeah, there's categories on the blog and such, but overall, I think it makes more sense to have two different blogs. So this one will be more ... personal, and "Out of Nillo's mind" more professional, or simply about technology.