March 15, 2017
Guest blog post by Adrian Sonder, policy advisor within the German Parliament.
The financial and economic crises that hit the Spanish economy contributed to a sharp increase in unemployment. In the six years since the start of the first phase of the Euro crisis unemployment rose from 8,23% in 2008 to 26,1% in 2013 (Federal Statistical Office of Germany). Spain also experienced a dramatic increase in the level of youth unemployment during this period of time. Over the past three years, there have been visible signs of recovery within the Spanish labour market. An important factor, which has contributed to this development, has been the labour market reform initiated in 2012.
The key elements of the reform are:
- Increasing the internal flexibility of firms (i.e. classification and reallocation of workers)
- Improving the external flexibility of firms (i.e. simplified rules for dismissals)
- Promoting dual training systems
These key elements were complemented by activation policies, which are aimed at reducing unemployment. Following the 2012 reform, supplementary measures were taken to improve the situation within the Spanish labour market. A new activation program for the long-term unemployed was developed in agreement with social partners in late 2014. Additionally, other activation policies were implemented such as the youth guarantee.
This comprehensive set of measures has over time contributed to the decrease of unemployment in Spain. The unemployment rate has decreased to approximately 19%. There are no signs to indicate that this trend will cease in the near future. However, in order to ensure the success of this initiative for the longer term, it will be necessary for the Spanish government to take further measures. Despite the positive outlook, the unemployment rate in Spain is still amongst the highest in Europe. Furthermore, youth unemployment is still a significant issue and remains high at over 40 percent.
The following policy recommendations will contribute to lowering unemployment in Spain and improving labour market policies:
- Improved individual support for long-term unemployed people: Around 46% of unemployed people are long-term unemployed. This category requires special and, most importantly, individual attention. The long-term unemployed often have multiple obstacles, which undermine their ability to secure employment (i.e. health issues). Therefore, they require a variety of measures to integrate into the labour market. Evidence from job centres in Germany suggest that individual attention and support is an effective means of integrating the long-term unemployed into the labour market. Consequently, efforts that strengthen the individual support to long-term unemployed persons must be instituted.
- Building better networks with business and industry: Local employment services (Oficinas de empleo y/o prestaciones) must build strong support networks to enhance their ties with the local economy. These ties are crucial in order identify the demands of the local labour market.
- Measure the impact of labour market policies: Policies must be evaluated and monitored on a regular basis. It appears that this evidence-driven strategy, which is currently used, only evolves gradually with regard to labour market policies. That said, this approach is crucial in assessing the effectiveness of the overall project and in determining where improvements need to be made.
- Foster continuing education and training: The skills demand within the labour market is constantly changing. One driving force behind this development is digitalization of the labour market. It seems that the skills base of a majority of the workforce does not always match with current or future skills demand within the labour market. Therefore, the Spanish government has to increase its efforts in foster continuing education and training.
- Increasing efficiency of active labour market policies: These policies are generally cost-intensive and hence must be optimized on an ongoing basis in order to ensure they become more efficient.