Always the Same Problem: Per Capita Income Doesn't Grow

It has been explained multiple times: good macroeconomic data doesn't necessarily translate into good micro data. In the end, macroeconomics is public accounting and lends itself to statistical embellishment. The clearest example is pensions. Through transfers and statistical tricks, Social Security is presented to us as an impeccable financial system.

In any case, just stepping outside and checking your wallet is enough to perceive the economic reality. Moreover, there is an indicator that macro accounting can't indefinitely embellish: per capita income. That is, the real purchasing power, which allows work to be translated into consumer goods and savings.

It's All About Productivity

As the economic journalist Carlos Segovia recently explained, the rating agency Moody's has highlighted the problem of Spanish per capita income. If a historical series analysis is conducted, Moody's observes that Spain is with respect to the rest of Europe as it was in 1999. We return to the same point: absolute GDP growth doesn't necessarily translate into per capita GDP growth.

In Spain's case, the famous "convergence" with Europe has been revealed as completely circumstantial. This means that when Spain grows, it grows a lot, but when it falls, it also falls a lot. During the Aznar-Zapatero era (development and collapse of the bubble), Spain converged with Europe and even surpassed it. After the crisis, however, we have remained at levels typical of Cyprus or the Czech Republic.

Everything is explained by the economic model, which is not precisely characterized by high productivity. "Spain has stopped converging with Europe in a sustained way since the 2007 financial crisis, and the main reasons are low productivity and low employment rate," explained the former governor of the BdE, Hernández de Cos. And to all this, we must add demographic growth that further dilutes per capita income.

Meanwhile, Moody's warns the same to international investors. "Spain's long-term growth prospects are uncertain due to structural problems. For example, there is no necessary housing infrastructure to sustain migratory flows. On the other hand, European funds have not had an attraction effect for private investment," explains the rating agency.

The Demographic and Migratory Tandem

Essentially, the problem boils down to an economic model that, to advance, has to devour itself. With very low productivity and dependence on job creation, Spain needs large migratory flows. This leads to a dilution of per capita income, a decrease in wages in low-productivity sectors (almost all) and an increase in housing costs, which is the capitalization vehicle par excellence for Spaniards. Consequently, per capita income stagnates or decreases.

Although Moody's doesn't highlight it (but does mention population aging), this economic model also manifests in population segments. Those who have arrived late (young people) and from outside (immigrants) are the most affected by the lack of capitalization, while boomers - de facto pensioners - enjoy previous capitalization and the Welfare State. This reaches the absurdity that the beneficiaries of public incomes (pensioners) earn more than those who finance them (workers now entering the labor market).

On paper, the only way out of this situation would be i) a very deep increase in productivity to not depend on migratory flows, and ii) a budgetary reorganization of the State. As is evident, for these two factors to occur in a partitocratic context like the current one is perfectly implausible. The big question is what the long-term future of this situation is: without housing, without savings, and with low wages.