Spain Created One In Three Jobs In Europe, But Bad Politics Could End This

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Prime Minister Rajoy loves to say that Spain is the country with more GDP and employment growth in the EU. And, of course, he is right. When the PP took office in December 2011, unemployment was increasing at a rate of 7.9 per cent a year. Now four years later, as the PP’s leader has recalled, ‘it’s dropping at an annual rate of 8 per cent.’

Indeed, Spain’s unemployment rate has fallen to its lowest level in over four years. In the fourth quarter, the rate dropped to 20.9% of the workforce, when at the end of 2013 it was just under 27%. In fact, Spain is the European country where the unemployment rate has decreased most in the last year. There are now 678,000 fewer unemployed Spaniards than a year ago. Italy, in second place, has reduced its jobless figure by 526,000. France, on the other hand, only cut its unemployed numbers by 126,000 and Germany by 185,000.

Nevertheless, these positive statistics don’t seem to impress either the socialists or Podemos leaders, or indeed even a handful of analysts outside Spain. A lot of them, as if they had colluded with the Spanish left, have warned that Spain’s labour market is still in dire straits.

In the first place because Spain has the second largest unemployment rate in Europe. Only Greece has a higher level, running at 24%. These analysts have also recalled that a good part of the drop in unemployment is due to the fact that the workforce continues to shrink because of migration (young Spaniards who go abroad and inmigrants who return their countries). In addition, long-term unemployed workers have given up their search for work.

Many economists writing for the foreign press are very sceptical about the possibility of there being a drastic reduction in the unemployment figures in the coming years, basically because a large section of Spain’s jobless is virtually unemployable.

While we are seeing a strong recovery amongst those unemployed people who remained close to the labour market, the outlook for the long-term unemployed is still very worrying. There are 1 million jobless who have been out of work for over four years. And in spite of this reality, only 6 per cent are in training.

But the most common concern for foreign analysts is the low quality of the jobs being created in Spain. Nobody questions the labour market reforms, which were badly needed. But at the same time, many critics contend they have pushed more and more workers into precarious job situations and have aggravated inequality. They maintain the economy has created a variety of part-time jobs, forcing many to accept positions with low pay and little room for advancement.

Eveybody hoped that the quality of jobs would improve as soon as there were fewer unemployed and the economy started to recover strongly. But the growing doubts over the strength and soundness of the economic recovery, coupled with the uncertainty over the political outcome of the recent elections, are questioning Spain’s ability to produce good, well-paid jobs.

That said, nobody outside Spain thinks that the answer is to repeal at least part of the PP government’s labour reforms, in contrast to the view of PSOE and Podemos. Foreign analysts see the answer in finding viable solutions to gradually  improve the job market. Most of them think that additional reforms are needed to address excessive labour market duality, unacceptably high unemployment, particularly long-term unemployment, and low productivity.

And what is worse, the PSOE’s announcements about a change in the law have alarmed business leaders at home and abroad. Needless to say, the corporate world and the media believe that the greatest risk for the labour market right now is the present political deadlock.

Almost everybody considers that the issue of government has to be resolved as soon as possible, avoiding an almost expected slowdown in private investment that would undoubtedly damage a very fragible labour market. A decline in confidence – and in investment – as well as the possibility that the economic cycle begins to deteriorate, could start to eliminate thousands of jobs, particularly the most precarious ones.

About the Author

Fernando Barciela
Fernando Barciela has been a regular collaborator for Spain's leading daily El Pais' business section since 1994. He is also a regular collaborator on foreign policy. For Grupo Consejeros he interviews the top executives of Spain's listed companies. He was a correspondent with Diario de Noticias, Portugal's leading daily newspaper, in 1987-2004. He has a degree in Business Science and Journalism from the Complutense University.