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Unemployment in Spain

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Economic Blog: Unemployment in Spain

Economic Blog: Unemployment in Spain and its Causes

The continuous weakness of Euro-zone economies has resulted in the rising level of unemployment in European Union. Spain was also hit by disease of unemployment around 15 years back in 1996 and since then it has suffered from highest persistent rate in the European Union for several years. This problem was worsened by the credit crunch and the real estate bubble in 2008, which has created a critical situation in Spain due to continuous rise in the unemployment level.

The main problem behind the disturbed situation of Spain is that the Government of Spain has imposed tough measures in order to reduce its debts; therefore the economy has not been able to create jobs for unemployed till now. The economy of Spain also failed in creating jobs due to the global financial uncertainty, from which even the most successful countries of the world are suffering. In fact Spanish economy has suffered and is suffering the effects of the world recession far more than any other most advanced country.

Currently unemployment in Spain has reached to 21.5% and around 5 million people are jobless which means that Spain has the highest jobless rate among all the industrialized countries (BBC news, 28th October 2011). This rate of unemployment is the highest recorded in Spain after 15 years; earlier it reached 21.6% in third quarter of 1996.

According to the Spain's National Institute of Statistics (INE), the unemployment in third quarter of the year has reached to this highest level of 21.6%, despite having a strong summer tourist season because the temporary contracts have been completed and have come to an end.

Unemployment has also badly hit the youth of Spain with several layoffs of people with ages below 25 years, which has made this problem even more critical. There have been continuous and huge layoffs in all sectors; especially the service sector which has showed highest number of layoffs this year. According to the European Union data, the current youth unemployment in Spain is 46.2% which is the highest rate in Europe.

Elena Valenciano, the campaign manager for Socialists, pointed out that the economy is slipping back towards recession and Spain is the victims of this turmoil, where families are not able to consume and kick start the economy. Spanish National Radio also pointed out that it is very difficult to create jobs for the unemployed in these circumstances.

The jobless rate of Spain has now almost tripled; compared with the four years back figures, when the global crises started to bite and eat the economies. The rate lowered little bit in the second quarter as companies hired people for the meeting the needs of tourism rush but this relief didn't last longer.

According to a Statistics Report, more than 2000 people stopped looking for jobs during the third quarter of this year. In consequence of which the jobless rate has been recorded much lesser; otherwise the number of people actively looking for jobs would have been bigger resulting in high jobless people rate.

In order to solve the problem of unemployment; it is important to first identify the causes and then choose the right policies. There are several factors which have played an important role in giving rise to this critical situation in Spain.

One factor from these is the activity of Spanish economy, in dealing with a strong exchange rate. Credit Crunch and housing bubble in 2008 also played an active role, as the economy is significantly affected by the boom and bust of the property. In result of which there is a large surplus of unsold property in Spain which has given break to further construction. This way the construction industry which was one of the major employers for the people has now scarce jobs. Furthermore, the uncompetitive Spanish firms due to the rising costs have also contributed towards unemployment level by drawing employees in order to save business and make profits.

There are also serious issues concerned with the educational system of Spain and the labour market, which have resulted in the high level of unemployment especially in case of youth. The early school leaving of the students, which is highest in Spain than anywhere is Europe, causes an imbalance between the job supply and demand at the education levels. This makes it complicated for the youngsters to penetrate in the labour market, which negatively impacts their professional career. The lack of labor motility, from moving between unemployment to employment is also a factor has also contributed towards the rising unemployment problem.

Possible Solutions to the Unemployment Problem in Spain

Spain is working hard to overcome the problems and recover economic growth, after crawling for two years in recession period, which also resulted in a collapse of real estate bubble in 2008. Spanish Government is making continuous efforts to solve the problems and move towards improvement.

It has taken several steps to help its jobless people; one from which is giving them unemployment benefits. The number of Spanish people receiving benefits has increased consecutively and according to the Labour Ministry it made a new record of 5 million in last few months.

In order to solve the unemployment problem in long run, it is very important that the Spanish education system should also be improved by increasing the number of schools & training centers and also the rate of early school leaving.

In order to do this, two actions are needed; first is to improve, control and support the students who are at risks and second is to motivate students and youngsters through policies to continue their studies. Parents should also be encouraged to guide their children to complete their higher education in order to have a better job and career in future. This issue is very serious and must not be ignored because currently Spain has the highest number of least educated youngsters than anywhere else in Europe. This will also help in solving the issue of polarization of population and maintaining the balance between job supply and demand.

In case of labour market, there should be reduction in the segmentation and unemployed youngsters should be activated. A good way to overcome the temporary nature of jobs, which has actually become a trap which threats the careers of young professionals and reduce their chances of getting job, is to create single permanent contracts; either partial or full time.