Effects of the economic crisis on employment

In Spain, 3.3 million jobs were lost between 2008 and 2012. A recent report shows that the job losses have particularly affected poorly qualified workers and temporary workers, hitting men and young people hard. Spain’s unemployment rate reached 25% at the end of 2012, one of the highest in the European Union. Other characteristics of the job market have also changed; long-term unemployment and labour turnover has increased, and the average length of temporary contracts is shorter.

Introduction

The effects of the economic crisis in Spain have been analysed by the First of May Foundation, a non-profit institution created by the Trade Union Confederation of Workers’ Committees (CCOO). Its findings have been published in a report, The economic crisis and its effects on jobs in Spain (in Spanish, 789Kb PDF), that examines several variables, such as business structure, employment trends, activity, unemployment and labour market entry and exit.

Business Structure

The report says the economic and financial crisis is leading to an increase in small-scale businesses and the polarisation of the business structure. These trends are an obstacle to the development of a sustainable productive model. International experience shows that in poorly-structured contexts business projects have lower added value.

Employment

The Spanish labour market has been extremely sensitive to the crisis. It is estimated that 3.3 million jobs have been lost between 2008 and 2012, as indicated by Figure 1. Only 274,000 jobs were created in the same period. This massive loss of jobs has been largely caused by a crisis in the property market and the resulting loss of 1.4 million jobs in the construction industry between 2008 and 2012.

Job losses have been primarily among posts requiring few qualifications, and unstable and seasonal temporary work. However, the report’s analysis also shows that a large number of jobs lost were full-time posts and that part-time work has slightly increased, often in the form of involuntary part-time work – in other words, an enforced reduction of hours turning a full-time job into part-time work.

Figure 1: Indefinite and temporary employment contracts, 2008–2012 (millions)

Source: First of May Foundation, ‘The economic crisis and its effects on jobs in Spain’.

The impact of the crisis has been particularly felt by men. This is mainly because the economic sectors most affected by the crisis are male-dominated. Young people have also been badly affected, with precarious employment and high temporary employment rates being considerably extended. These findings are shown in Table 1 and Table 2.

Source: First of May Foundation, ‘The economic crisis and its effects on jobs in Spain’.

Source: First of May Foundation, ‘The economic crisis and its effects on jobs in Spain’.

The report also indicates that although the initial impact of the crisis was directly linked to the weaknesses of the productive model, there is a subsequent stage (from 2010 onwards) aggravated by public austerity policies.

Activity rates

The growing incorporation of women into the labour market has resulted in a modest increase of women’s activity rate. The report attributes this increase to:

• decreasing household income, caused by job losses;
• rising prices, making it increasingly difficult for families to live on a single source of income;
• the higher economic dynamism of industrial sectors where women’s presence is relatively significant.

Meanwhile, the activity rate among youngsters has fallen and many have chosen to return to the education system. Despite this, there has also been a rise in the number of young people with low qualification levels who neither work nor study.

Unemployment

Spain’s unemployment rate growth has been the highest in the European Union, and it now has one of the EU’s highest unemployment rates. At the end of 2012, 25% of the economically active population were unemployed, a total of 5.7 million people.

There has also been an increase in long-term unemployment. Just over half of all unemployed people were classed as long-term unemployed at the end of 2012, compared to 21.1% in 2008.

The number of households where everyone is unemployed has also increased to 1.7 million at the end of 2012. This increases the number of people who are at risk of poverty and/or social exclusion.

Labour market entry and exit

The number of new recruits hired via open-ended contracts has decreased by almost half. It has dropped from 1.12 million new open-ended contracts signed in 2008, to 649,100 in 2011. At the same time, labour turnover has increased from 3.1 temporary contracts per salaried person before the crisis to 3.4 temporary contracts per salaried person in 2011. This figure reflects the shorter average length of temporary contracts. It appears that 2010 and 2012 labour reforms have not succeeded in creating employment and promoting labour stability.

Conclusion

The report says that government’s austerity policies are delaying the country’s exit from the current economic crisis. It argues that economic policies should be reoriented and a change of the production model should be promoted, based on employment quality and higher added-value products and services. Helping young people, those over 45 with low qualification levels and the long-term unemployed back into the job market should be a priority. Finally, the report also suggests that social dialogue and democratic participation should be reinforced.

Antonio Corral, IKEI Spain