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Unit labor costs in Spain have increased 25%, thus losing competitiveness with respect to the European Union

Unit labor costs (ULC), which link wages with productivity, are an indicator of the competitiveness of a region: the higher the ULC, the lower the level of competitiveness. In Spain, unit labor costs grew 30% between 2000 and 2009, driven by an intense wage growth that was not compensated by an increase in productivity. The year 2009 marked a turning point in this aspect when ULC growth slowed down due to wage moderation and productivity gains as a result of the intense job destruction experienced by Spain. So far during this century, unit labor costs in Spain have increased 24.7%, compared with the EU’s average 18.7%, indicating a loss in Spain’s competitiveness. However, some Spanish regions, such as Navarre and the Basque Country, have proven that an increase in competitiveness is possible despite an increase in wages as long as it goes hand in hand with improvements in productivity.