Sébastien Berda / AFP

MADRID (ILO News) – Spain’s current export-driven economic recovery – with growth projections of 1.5 per cent this year – needs supplementary measures to solve the massive unemployment the country faces, warns a new ILO report.

“Spain: Growth with Jobs” calls on the government and social partners to develop together an employment action plan to avoid a situation of so-called “jobless growth,” which would have a lasting impact on the livelihoods of Spaniards.

“The economic recovery has at last translated into some employment gains, with over 200,000 net new jobs created during the first half of 2014,” said ILO Director-General Guy Ryder. “This is very good news. Yet growth remains incomplete, with the average income of Spanish people 8 per cent lower than it was in 2007.”

“Financial analysts may consider that the crisis is almost over. However, it is still very much a reality for millions of job seekers in Spain, especially youth,” Ryder added. “Even if the fast pace of job creation witnessed in the second quarter of 2014 were to continue, it would still take until 2023 to restore employment to 2007 levels.”

Jobseekers dropping out

Meanwhile, the jobless rate of over 24 per cent in the second quarter of 2014 continues to surpass previous historical peaks. The youth unemployment rate exceeds 50 per cent and ranks second highest in the European Union, just after Greece.

The economic recovery has at last translated into some employment gains." Guy Ryder, ILO Director-General

The report shows that over 60 per cent of jobseekers have been unemployed for more than a year and 42 per cent for more than two years. It also warns of the high risk of many jobseekers dropping out of the labour market.

Raymond Torres, Director of the ILO Research Department and the report’s coordinator, points to the negative effects of long-term unemployment on poverty levels and social exclusion, which have increased throughout the crisis.

There are currently 4.5 million households in Spain with at least one member who is unemployed. Half a million of these households do not have any income at all.

A comprehensive employment policy is urgently needed

Improving the employment outlook requires, first of all, an economic strategy that facilitates transitions to a new growth model. There could be an important role for the European Investment Bank (EIB) in this respect.

Likewise, the credit system requires reform, as it is still unable to serve viable enterprises. This also makes it difficult for small enterprises to expand and reach the medium size needed to raise productivity and create better paid jobs.

Boosting prosperity

Spain is burgeoning with start-ups and small businesses." Raymond Torres, ILO Research Department

“Spain is burgeoning with start-ups and small businesses,” says Torres. “However these initiatives, when they survive, tend to remain small. The result is that the economy lacks the network of medium-sized enterprises, which is needed for growth with quality jobs. Unlocking this potential would considerably boost prosperity in the country.”

Second, a series of policies geared towards stimulating quality job creation would be welcomed.

This would include strengthening the Public Employment Service, in order to provide adequate services to jobseekers, according to the report. Wages need to grow along with productivity to provide sufficient demand while the recovery gains momentum.

The report stresses the need to increase the quality of employment, which has continued to deteriorate since the start of the labour reform. The incidence of low-paid employment is on the rise, which may push talented people to emigrate and perpetuate low-productivity traps.

Spain – Key labour market statistics
	T2 2007	T2 2009	T2 2011	T2 2013	T2 2014
Unemployment rate (aged 16-64)	7.9%	17.77%	20.64%	26.06%	24.5%
Youth unemployment rate (aged 16-24)	18.1%	38.06%	45.87%	55.98%	53.1%
Long term unemployment (over a year)	24.6%	26.47%	47.79%	58.32%	62.1%
Wage growth (annual, nominal)	3.9%	3.8%	0.7%	-0.6%	0%
Note: Wage growth refers to the wage series adjusted for calendar and seasonal effects.

Source: INE (Instituto Nacional de Estadística).

The study recommends a reassessment of labour market reforms and points to possible ways to improve the design of active public policies of the Autonomous Communities concerning hiring incentives and skills training. All these would contribute to increase the quality of employment and to avoid a brain drain.

Third, the report calls for social protection measures such as a major work programme to bridge financial gaps in coverage for jobless households.

The short-term budget cost of these policies is small compared to the longer-term benefits in terms of jobs and budget revenues. The report also recommends front-loading European Structural Funds and re-deploying European Investment Bank operations. Intensifying the fight against tax evasion and action to formalize the informal economy would also help.

The report considers the setup of a tripartite body to support positive employment and social developments. The ILO is ready to help the government, employers and workers in their efforts to boost dialogue on a new path to growth with quality jobs.