In February 2024, Spain’s Ministry of Labour announced a rise in the national minimum wage (Salario Mínimo Interprofesional or SMI) by 5.0% to €1,134 per month (calculated over 14 payments per year). This decision was aimed at protecting the purchasing power of low-income workers, following an average inflation rate of 3.5% in 2023.
However, business federations have criticized the increase, arguing that the decision could harm small and medium-sized enterprises (SMEs), particularly in sectors such as agriculture and hospitality, which already face tight profit margins and high operational costs.
With reference to the data above and your knowledge of economics, assess the likely benefits of increasing the minimum wage for employees and firms in Spain.
