Miquel Puig: "Work is the only call effect that there is"

PalmaThe economist Miquel Puig is one of the authors of the Fènix Report, critical of Catalonia's productive structure, and especially of the tourism model that creates low-wage jobs. This Tuesday he presented it, accompanied by the Minorcan economist Guillem López Casasnovas, in Palma.

The Fènix Report states that the Catalan economy is growing, but not generating enough wealth. How does it compare to that of the Balearic Islands?

— Catalonia is part of a group of economies with very similar characteristics, which are the Balearic Islands, the Canary Islands, the Valencian Community, and Andorra, where in the last 25 years there has been very high GDP growth, but with much lower per capita GDP growth than the surrounding areas. They have been characterized by very high population growth and immigration. The core of the problem is the same in Catalonia as in the Balearic Islands, although it is more serious in the Balearic Islands. Population growth here is much greater than in Catalonia. This is a problem because it puts pressure on public services and the housing market, and the population grows faster than the housing stock, hospital beds, and school places, which on top of that becomes complicated...

In the report you touch upon a delicate issue, which is the relationship between employment and immigration. Is low-wage work the real pull factor?

— It is the only pull effect there is. Why do newcomers come to Catalonia and the Balearic Islands, and not to Zaragoza? Because many jobs are created that require immigrants.

The half of the population from the Islands was not born here [but in other autonomous communities or outside Spain]. How does it affect the economy?

— On the contrary: it is the economy that determines the population. That of the Islands has been an economy that has grown a lot since the 1950s by incorporating people. During the first 50 years, the economy grew a lot, both in population and GDP per capita, and it was a phenomenal success. In the 1950s, the Islands had more than half of France's GDP per capita, and in 2000, 90%. However, from 2000 to the present, population growth has continued to be phenomenal, but GDP per capita growth has stopped completely. It has lost 120 points in relation to France, which is not an extraordinarily dynamic economy, but rather a sick one. The same model that worked very well for the Islands has not been working well at all in the last 25 years. For this reason, many citizens of the Balearic Islands feel dissatisfied and say: we live off tourism, but tourism does not let us live.

How does low-quality work affect public services?

— I am not talking about low-quality jobs or low-quality tourism. Instead, we can objectively talk about low-wage tourism and low-wage jobs. They affect public services because they generate little tax revenue, which is insufficient to fund them. This is a very indirect effect, but public services largely correspond to the communities, while a larger part of the revenue goes to the Spanish government. The communities suffer greatly from population growth, and in contrast, the State sees the revenue.

The thing that matters is that a lot of people come.

— Why are the Balearic Islands capable of attracting so many people? Because there are many people willing to work for little. Those who want to work for a lot are few and go to Germany. We are economies addicted to creating low-wage jobs. It is easy to create a business with low wages, and it is very difficult to create one with high wages.

Does seasonal work have negative externalities?

— We talk about subsidized wages or jobs when the income generated by the worker does not compensate for the services they consume throughout their life. This is much more exaggerated if the job is temporary. This means that there are a series of months in the year when this person is solely consuming public services. If employers were obliged to keep jobs open all year round, many fewer would be created, immigration would be much smaller, and the pressure on public services much less. All the facilities we give them are problems we are creating for the housing market and for public services.

You were talking about housing. But aren't prices also rising due to speculation and the exogenous demand from foreigners wanting to buy in the Islands? Is there a double squeeze on the market?

— Immigrants who have money still put more pressure on the public sector, because they want square meters. People vacationing or retiring and wanting to live here pose inconveniences, because they occupy space, but they also generate more taxes and capacity to generate for public services. In Barcelona, part of the housing problem are expatriates, immigrants with high salaries. However, we focus on job creation. The bulk of the problem is low wages. 

Therefore, does the model of tourist monoculture lead us to a deficit in the welfare state?

— It's not that it's bringing us there, it's already brought us there. Tourism, and monoculture tourism, doesn't have to be low productivity like it is in Catalonia. Let's take the Alps as an example, where there are regions of monoculture tourism and very high productivity, where the GDP per capita is very high and the population doesn't grow as much. It's possible to reconvert it. We say that Barcelona's tourism is much more efficient than the sun and beach tourism on the Catalan coast; and the Balearic sun and beach tourism is also much more productive than that of Catalonia, because steps are already being taken in this direction. Especially in Ibiza.

Which ones would you highlight?

— First, the control of tourist accommodation, which is what has created the big problem of the 21st century. It is not like in Barcelona, where it has already been announced that they will be eliminated, but steps have been taken. Then, a policy that restricts the number of hotel places and changes many one-star places to three-star places.

Is it possible, therefore, to improve the model?

— The tourism we should have is tourism that pays good wages, which it does not. Also, that it pays taxes like any other economic activity, which it also does not. Furthermore, employers should not go bankrupt. If tourism is to pay good, decent salaries and bear taxes without the employer going bankrupt, it cannot be affordable. If it is affordable, it means one of the three things is failing. Affordable tourism should go elsewhere.

How can the growth of a sector like tourism be stopped if there is no alternative?

— Stopping it and reversing it is indeed possible. To stop something, it must stop growing.

What do we do with workers who need a job?

— Initially, let's hope that next year they remain the same and the number doesn't grow. With that, we would already be doing a lot of work. Afterwards, we can gradually reconvert it, and reverse this tourism.

What would be, in economic terms, a good immigration policy?

— Raising the minimum wage is the best immigration policy there is. Employers must be told that they cannot create so many low-paying jobs. The same workers will come, but not as many. The second measure is a combination of VAT and tourist tax that makes tourism pay 21% of the service it receives. How would it do that? Well, exactly the same as when an item is bought, like an iron.

Is it better to change the tourism model than to diversify the economy?

— The Balearic Islands have such extraordinary tourist potential that the obsession must be to capitalize on it. It's like a person who sings very well. Should they diversify and learn typing? No. I would tell them: cultivate your voice. The Islands do not have industrial aptitude, because they are islands. Can they have very productive tourism that allows the entire population to live at a very high standard of living? Yes. Let them dedicate themselves to that.

If we continue as we are, are we heading towards the collapse of public services?

— We are now at the collapse. It is not a future possibility. It is a reality that is beginning. Public services do not collapse overnight. Is the housing sector in collapse? I would say yes. Is the school severely deteriorated in the Islands? I would say yes.