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Spain – a pyrrhic recovery in unemployment

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Everyone is looking for a turnaround in Spanish unemployment, as if a glimmer of improvement was the fundamental proof needed that Europe’s policies and Wall Street’s investment strategies make sense – truly marking the beginning of the end of the crisis and the grip of recovery.

And some of the recent data is encouraging … But while commentators may cluck about recovery, optimism and confidence, the magnitude of the problem and the potentially irreversible damage that this crisis has done to the life opportunities of a generation cannot be glossed over in the interests of European feel-good.

Dip in number of unemployed in Spain adds to optimism – says the Financial Times

Latest figures out of Spain show an improvement in the unemployment picture. Even if things are not getting better, at least, it seems, things have stopped getting worse. But how real is this turnaround? First let’s look at Social Security data on registered employment. Exclude agriculture and the recovery we have been applauding since the summer seems less than robust.

Spain - employment ex agriculture

Notwithstanding the role of a bumper olive harvest in reducing unemployment, the latest labour force survey shows that a number of worrying trends continue apace with no imminent signs of slowing. The most startling is the trend in long-term unemployment.

In Spain, there are 2.3 million people who have been out of work for more than 2 years – the number is growing each quarter and seems even to have accelerated during the so-called autumn jobs recovery.

Spain - unemployed for 2 years or more

Indeed the “recovery” has made little dent in the ominous expansion in the ranks of Spain’s long-term unemployed.

Spain - unemployed by time out of work

14% of Spain’s total working-age population is currently more than six months unemployed – one in seven working age adults.

In Andalusia (880 thousand people) and the Canary Islands, 16% of the working-age population is currently more than one year unemployed.

Spain - long-term unemployment by region

Spain - Andalusia long-term unemployment

And there are currently 334 thousand people in their 20s, unemployed and looking for their first job.

Spain - looking for first job

A total of 135.5 thousand people with higher education, unemployed and looking for their first job.

Spain - looking for first job

We may have become numb to such figures, but their impact on the generation that should be powering Spain’s economy is staggering. It is being decimated.

Spain - employment status

Spain - employment status

Spain - working and studying

We may marvel at how Spanish society has coped with this tragedy, how it has not imploded. But I don’t think that is something we should take for granted.

Spain - unemployment in households

And can the productive sector really bear the weight of supporting Spain’s unemployment and non-employment for much longer?

Spain now counts 14 million private sector workers (including 3 million self-employed) vs 7.5 million pensioners, 1.2 million permanently disabled, 2.1 million adult students, 5.9 million unemployed and 2.8 million public sector workers. See: ORGANIGRAMA ESTRUCTURA POBLACIÓN ESPAÑOLA EPA 4T 2013 from @Absolutexe.

Spain - employed vs non-employed

Map of Spanish unemployment

And how does the Spanish Government respond?

It raises minimum social security contributions for 900 thousand self-employed company owners by 52 euros per month to 314 euros per month, so that from January this year, a couple with a shop set up as a limited company will be paying an extra €1250/year social security. Over 7500 euros in total between them. Regardless of whether they are making or have ever made a profit.

Perhaps I don’t appreciate Spanish humour, but they passed the measures (with almost zero prior debate) in a law called “measures to encourage employment”.

Spain has not just created millions of unemployed, but millions of people who are becoming unemployable, just at a time in their lives when they should be starting families, setting up businesses and laying down pensions. People who have little chance of returning to anything but a basic, unskilled jobs market and risk never being able to repair their social security contribution records (leaving them adrift of Spain’s welfare net). People who have been 2 years out of work. People who have never had a job. People who have dropped out of the labour market.

It is a tragedy of such enormity, anything short of panic seems complacent.I’ll end with two recent images of Spain – the smiles may be genuine, they may even be justified. But, ultimately, they may be irrelevant.

Spain - the recovery

Spain - the recovery

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