Jobless in Europe: The wretches of Spain
What kind of a social model is it that leaves half of young people out of work? George Eaton profiles Spain's employment woes.
What kind of social model is it that leaves more than half of young people out of work? In two European Union countries, Greece and Spain, this grim threshold has now been passed. Of the pair, it is the latter that is most striking. In the EU’s fifthlargest economy, youth unemployment stands at 56.1 per cent, a level that would once have been considered unthinkable by those who lived through the post-Franco Spanish “economic miracle”.
The chronic joblessness is largely attributable to the 2008 crash and the austerity subsequently imposed at the behest of Berlin. In the boom years the Spanish economy became dangerously reliant on construction, which at its peak accounted for 16 per cent of GDP and 12 per cent of employment. When the property bubble burst, after house prices had risen by more than 100 per cent in ten years, unemployment immediately surged.
The €27bn of spending cuts and tax rises introduced by the Rajoy government have made a bad situation worse, with the economy falling into a double-dip recession. Keynes’s advice to “take care of unemployment” and let the budget deficit “take care of itself” has been ignored by the austerians of Brussels.
Yet this alone cannot explain Spain’s exceptional youth joblessness, which stood at 18.2 per cent even before the crash. The root of the problem lies in the country’s two-tier labour market, which gives permanent workers huge advantage over their temporary counterparts. Unable to adjust the pay and conditions of long-standing employees established through collective bargaining agreements, companies took to laying off the third of workers on short-term contracts. A report last year by the Bank of Spain’s Centre of Monetary and Financial Studies found that 90 per cent of those who had lost their job since 2007 were in temporary employment. The apparent ease with which short-term work could be found before the crisis, most notably in the property sector, also encouraged the young to drop out of school as early as possible. As a result, 30 per cent of young Spaniards have no qualifications, leaving them unable to compete for high-skilled jobs. The problem is compounded by a welfare system that removes all support from claimants once they find work, however low-paid, prompting some to conclude they are better off remaining on benefits and working in the black economy.
The labour-market reforms introduced by the government, including allowing struggling companies to opt out of collective bargaining agreements and a reduction in the highest level of severance pay (aimed at encouraging firms to take a chance on new workers), may improve the situation at the margins but many are not waiting to find out. More than 280,000 young people left Spain last year in search of work, with Germany, the UK, Argentina and Venezuela the most popular destinations. Thousands of young scientists and academics have departed after a 40 per cent cut in state spending on research and development. It leaves Spain ill-equipped for when recovery comes.
In the meantime, those unwilling or unable to emigrate are left with the melancholy reflection that they are just halfway through what is almost certain to be a lost decade.