Trend of exit from labour market due to sense of despair

An increasing proportion of Spain’s working age population, particularly men and young people, are opting out of the labour market altogether, discouraged by the stagnation of the Spanish economy. A recent survey published by the General Workers’ Union says that the apparent lack of any hope of recovery or new job creation is responsible for a marked fall in the percentage of the population, employed or unemployed, recorded in official statistics as economically active.

About the survey

Spain’s General Workers’ Union (UGT) has published a short report, The aggravation of the discouragement effect in the economy and society (in Spanish, 596KB PDF), that shows there has been a reduction in the proportion of the population recorded as economically active in official statistics. Released in June 2013, its conclusions are based on data from the Spanish Labour Force Survey collated between 2008 and 2013.

Main findings

The UGT report shows that between the first quarters of 2008 and 2013, the number of economically active people in Spain, whether employed or unemployed, decreased significantly. The largest decreases were among men (4.6%) and young workers. The overall percentage of economically active women increased by 8.9% during the same period.

Active population in Spain (% variation, Q1 2008–Q1 2013)

Age

Total

Men

Women

16–19

-47.9

-48.4

-47.1

20–24

-23.1

-26.8

-18.7

25–29

-21.5

-24.9

-17.6

30–34

-8.5

-14.1

-1.5

35–39

9.0

2.6

17.5

40–44

8.8

4.2

15.0

45–49

14.7

8.7

22.7

50–54

23.6

14.5

36.7

55–59

24.8

12.8

45.8

60–64

9.9

-5.6

40.3

65–69

8.2

-2.4

28.1

70 and over

-17.1

-22.4

-8.8

Total

1.2

-4.6

8.0

Source: INE, EPA

The available data also show a dramatic reduction between 2008 and 2013 in the proportion of those aged 29 and under who were economically active. In contrast, the proportion of economically active people aged between 45 and 59 have increased.

Analysis by gender and age shows that as middle-aged workers and particularly women have increased their presence in the labour market during this period, reduction in economic activity has been greatest among the youngest and oldest male workers.

‘Discouraged’ workers

The UGT’s conclusion is that a key factor in these changes is an increase in the number of ‘discouraged’ workers, individuals who decide to opt out of the labour market as their belief that they will eventually find a job is greatly reduced or becomes non-existent.

Unsurprisingly, the UGT’s report concludes that Spain’s current and long-standing economic stagnation, together with apparently limited prospects of new job creation, are behind this high incidence of discouraged men and youngsters, especially among the long-term unemployed.

Young people, suggests the report, are increasingly opting to return to or continue their education instead of joining the labour market. At the same time, the economic crisis has encouraged many middle-aged and previously economically inactive women to look for work to compensate for reduced household income caused by job losses and pay cuts among primary earners, many of them men.

However, it is important to stress that the number of economically active women in Spain has clearly dropped again since the third quarter of 2012. This is also the result, says the UGT report, of the same sense of discouragement which has increasingly spread among women in the workforce.

The discouragement effect is said to be affecting other groups of workers, particularly foreigners. The percentage of active individuals of other nationalities in the labour force dropped by 3.6% between the first quarters of 2008 and 2013, and the decrease is mostly explained by the departure of non-Spanish nationals from the country, particularly since the second half of 2012.

Conclusion

The report makes it clear that both the current stagnation of the Spanish economy and the negative recovery prospects (especially for unemployment) are discouraging many people who would otherwise be economically active.

The UGB says there is a need to move from the current austerity-based economic policies to more active demand-based policies that will help foster both short and long-term economic growth and employment creation. This is the only way to counteract the current bleak situation.

Reference

Unión General de Trabajadores [General Workers’ Union] (2013), Se agrava el efecto desánimo en la economía y la sociedad (in Spanish, 596KB PDF) [The aggravation of the discouragement effect in the economy and society], UGT, Madrid.

Iñigo Isusi, Ikei Research and Consultancy

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