Weaknesses can sometimes become strengths. The Principality, with 270,000 pensioners – almost a third of its population – turns out to have a solid cushion against the impoverishment that rises in prices entail. The Government remains firm in updating pension spending based on the evolution of the Consumer Price Index (CPI). Analysts estimate that annual inflation will end the year at around 8%. If so, the single box will leave some 5,790 million euros in Asturias in 2023, which will be the highest figure in history.
In Asturias, about 300,000 monthly pensions are received. The latest data from Social Security, from last July, puts 299,598 items distributed in the Principality. Amount that is distributed among 270,675 pensioners, because there are those who receive more than one pension per month. The average amount of Asturian pensions is the second highest in the country, only behind the Basque Country. The latest data, also for the month of July, puts the Asturian average pension at 1,279.43 euros.
Updating pensioners’ income will allow them to maintain their purchasing power in a context of widespread impoverishment. The latest CPI data, relative to the month of July, placed year-on-year inflation in Asturias at around 11.1%. This comes to mean, although with certain nuances, that, today, life is eleven percent more expensive than a year ago. Analysts and very recently the European Central Bank itself do not rule out that prices will continue to rise in the coming months. Pensioners, thanks to the efforts of the central government, are practically the only ones who are “safe” from much of the loss of purchasing power that inflation implies.
The salaries of public workers, a group that is also significant in the Principality, will not have the same privilege. The latest statements by the Minister of Finance, María Jesús Montero, seemed to blur the possibility that the salaries of civil servants – around 80,000 in Asturias – were going to rise at the rate that prices do. Nor are workers in the private sector seeing how their salaries are updated based on the CPI. The public figures, which are those coming from the salaries that are governed by the agreement, leave the salary updates well below the increase in prices. This will be consolidated if the Government, the unions and the employers reach an agreement regarding the so-called “income agreement”. To contain the inflationary spiral, the three parties want to reach an agreement that goes through “fastening the belt” to limit the hitherto uncontrollable inflation.
Prices are set by the intersection of the supply and demand curves. If people cannot buy at the price set by the companies, they end up going down. Thus, economic theory marks the path of containing the increase in wages to prevent prices from continuing to rise without limit. The unions include in the equation what they call “corporate rents” and ask companies to limit their profits for the common good while pressing for a wage increase. The employers argue then that the rise in wages to avoid the loss of purchasing power of the population reverts to an increase in costs, already diluting the benefits. The differences of criteria and interests between one and the other is what makes it difficult to reach such an agreement.
With pensions one thing happens and the opposite. It is true that by raising benefits to pensioners they can maintain their level of consumption. With the update they will have a purchasing power very similar to that before the crisis triggered due to the rise in energy prices due to the invasion of Ukraine by Russia. This increase in their income, in principle, can be carried out without increasing the production costs of any company and, for that reason alone, it is viable. The additional cost for the public coffers of the income of Spanish pensioners, however, has to be charged at some point from the State accounts. It remains to be seen if it will be financed with the new special taxes on the profits of banks and electricity companies or if it will be financed via debt. Everything you do, in economics, has its downside.
At the regional level, despite everything, Asturias will benefit. The “single box”, which comes from the common of the Spanish, will have to bear the extra effort of more than 400 million in which the difference with respect to the transfers of this year is estimated.
The “indexing” of pensions to the CPI will be the “mattress” that will maintain a good part of consumption in the Principality during the next year. In Asturias, approximately and according to data from the Active Population Survey (EPA), there are nearly 300,000 workers in the private sector, some 80,000 public employees, another 50,000 unemployed people and some 270,000 recipients of some type of pension. These people manage the bulk of the money in Asturias and pensioners, as can be seen, are a very important part of the region as a whole.
The high average pension in Asturias and the demographic peculiarities of the region make it one of the communities most dependent on the reform proposed by the Executive and perhaps the most benefited from the measure. The weakness of the Principality – its low rate of active population and the limited productivity of the economy – will be its best lifeline against the price crisis. Pensioners will continue to buy and this will help maintain business and the circulation of money in the market.
With the updating of pensions, one of the characteristics of the region will become more acute, its dependence on the public. The Principality has incomes above the country average thanks, especially to the high pensions that originate in retirement from mining and public companies. Asturias will be able to continue enjoying a level of well-being earned and deserved by the effort of the past, but the “single box” will continue to be stressed.