'Phoenix Report': a diagnosis and a therapy

In recent months, I have been part of a team of economists who have been reflecting on the evolution of the Catalan economy and its prospects. We have focused on the concept of “highly subsidized” wages. We consider those to be wages that do not allow the worker to contribute – via taxes and social contributions – to pay even for those public services that they will directly consume throughout their lives (without including the many they will indirectly enjoy). We have calculated that this limit was, in 2023, at €27,500 gross, which in 2026 would be equivalent to €30,000.Since society has to supplement the cost of the services that these workers benefit from, it is deduced on the one hand that the employer pays them below their cost, and, on the other hand, that the final customer benefits from a hidden subsidy, since they do not pay the full cost of the service they receive.All societies that enjoy a progressive tax system and a strong welfare state have many workers who earn below the level we have defined. This is not, therefore, the issue. What has interested us is the existence of sectors that meet three conditions.The first, that not only employ “highly subsidized” workers, but that the average salary is below that level, because it is as if all their workers were. In this case we are talking about “highly subsidized” activities and we consider that society should consider whether they should exist or whether they should pay their workers so little.The second, that they be very job creators. The primary sector, for example, is an "highly subsidized" sector, but it is not creating jobs, and, moreover, it has the additional social value of combating the desertification of the territory.The third, that the ultimate beneficiary is a non-resident, because this means that the subsidy goes from taxpayers to people who are not, so that the country is impoverished through exports that, in the end, are sold below their cost.Unfortunately, a large part of Catalan growth in the last 25 years has been driven by economic activities that meet these three characteristics. This prominence explains why the enormous growth of the Catalan economy in the last 25 years – not exceptional within the Spanish framework, but yes within the European one – has not translated into higher well-being for the average Catalan, but rather, on the one hand, into migratory flows that pressure the housing market and saturate public services, and, on the other, into wage stagnation.

In our work we identify the main sectors that have these characteristics: tourism, particularly sun and beach tourism, and the meat industry. We have named our work Phoenix Report because we believe we have the tools to correct a trajectory that is not only economically unsustainable but also socially devastating, because it is destroying the foundations that justify the population's adherence to the established order.I cannot refer here to the proposals of the report, but it should be evident that the growth of sectors like those we have defined must be considered pathological and that it could only be acceptable if they contributed more to society, either through taxes or through wages.For example, it is evident that the privileges enjoyed by the tourism sector must be reviewed: the reduced VAT and the tolerance for a pattern of discontinuous labor contracting that proves very burdensome for the public treasury. It should also be evident that we are not doing anything well in labor market management when in the last 25 years Catalonia has created the incredible figure of 1.1 million jobs without this leading to a reduction in the number of unemployed, which has gone from 269,000 to 436,000 (!). The fact that all of these jobs have had to be filled by immigrants, and the fact that in many cases the salary requires the taxpayer to bear part of the public expenses that the newcomer entails, forces us to consider whether those jobs should have been created. It can be argued that it makes sense in the case of care, but it is impossible to do so when the beneficiary is a foreign client. Obviously, in either case it would help if the minimum interprofessional wage were higher, because then the implicit subsidy would have to be lower. Some of our business owners are calling for more immigrants; society must respond that this is only possible if it is to fill jobs that do not require an implicit subsidy. In other words, if they are paid a dignified wage.