The Spanish labor market is relatively stabilizing, yet it remains precarious. Unemployment rates are no longer rising as fast as they did during the early stages of the crisis and will probably decrease marginally in 2014. However, the workforce is shrinking, and those who are lucky enough to find a job are unlikely to sign permanent contracts or work full time.
According to official data, the total number of unemployed people fell by 1.1 percent year-on-year (or by 69,000 people) in the final quarter of 2013, the first annual reduction since the second quarter of 2007. But at the same time, the active population — people who are working or looking for a job — fell by 1.17 percent (or by 267,900 people).
The figures also reveal that most of the jobs being created in Spain are part time. The number of full-time workers dropped by 218,000 people year-on-year in the final quarter of 2013, while the number of part-time workers rose by 153,100. In late December, the Spanish Ministry of Employment announced that only 7 percent of all the contracts that were signed in 2013 were for permanent, full-time jobs. The rest of the contracts were for different types of temporary jobs, part-time jobs or apprenticeships. In the short term, this offers some relief for workers, since they are at least receiving some monthly income. But it often means that people are struggling to reach minimum levels of consumption to have a decent standard of living. These temporary or short-term contracts create uncertainty for the workers but are meant to give companies more flexibility and incentives to hire.
Job losses affected all sectors in 2013 except agriculture, which created 0.9 percent more jobs than in 2012. The biggest loss of jobs took place in construction (-8.9 percent), industry (-4.6 percent) and services (-0.01 percent). Public sector jobs decreased by 4.16 percent, while the private sector only contracted 0.5 percent year-on-year. This is primarily because Madrid is committed to reducing the size of Spain's public sector in order to meet the EU goal of 3 percent of fiscal deficit.
Registered unemployment shows the number of people out of work who are formally registered at their local employment office as looking for a job. Not every unemployed person is registered at the official employment offices, only those who want to qualify for unemployment benefits. So there are people who work in the informal economy and are formally registered as unemployed, unregistered people who work in the informal economy, and people who have no job at all but are not registered as unemployed.
The Problem of a Shrinking Workforce
While record-high unemployment is Spain's most evident problem, the reduction of the workforce presents problems of its own. According to Eurostat data, the Spanish workforce contracted by 1.7 percent between the third quarter of 2011 and the third quarter of 2013 (a loss of some 400,000 workers).
Several factors contribute to the shrinking labor force. Since the beginning of the European economic crisis, Spain has seen record levels of foreigners and nationals alike leaving the country. Also, as the Spanish population ages, many people are retiring, and the informal economy (which is extremely difficult to measure, but according to some studies represents 20-25 percent of Spanish gross domestic product) presents an alternative to joining the official workforce. Lastly, some people have simply stopped looking for a job.
This last issue is particularly significant, because recent statistics show that one in four young people in Spain do not work or study (from 16.8 percent in 2008). These people will have a hard time finding a job, because they either do not have enough qualifications or have lost whatever training or expertise they once had. It also means that they depend on their parents' or grandparents' salaries, savings or pensions, which means that a growing number of Spanish households depend on decreasing sources of income.
Around 10.5 percent of Spanish households have all their active members out of work. In the final quarter of 2013, the number of such households grew by 24,600 over the previous quarter. The length of the crisis means that almost 700,000 households have exhausted their unemployment benefits and do not receive any form of official income. Total expenditures on unemployment benefits contracted by 12.5 percent between November 2012 and November 2013.
A contracting workforce also means fewer people are paying labor-related taxes. Spain's fertility rates are relatively higher than countries such as Italy and Germany, but like most European states, Spain is dealing with the challenges of a shrinking and aging population. In late 2013, Madrid approved a reform of its pension sector aimed at offering pension increases below inflation levels. More reforms are likely as the number of retirees grows and the number of workers decreases.
In addition, Madrid is having trouble collecting taxes. While the government of Prime Minister Mariano Rajoy has raised taxes since coming to power in 2011, Spain's fiscal revenues have only marginally increased. Madrid is currently working on fiscal reforms to make the system more effective and collect more taxes, but even if the overhaul passes, Spain's high levels of unemployment and a contracting workforce will limit its success.
These numbers suggest that the unemployment crisis in Spain is stabilizing to a degree, since unemployment figures are not growing as quickly as during the early stages of the crisis and will probably decrease (albeit mildly) this year. But this also means that unemployment will keep affecting a quarter of Spain's active population — and roughly two-thirds of the youth — for a long time, despite recent forecasts that the Spanish economy could grow by around 0.7 percent in 2014.
As a result, Madrid will still be dealing with the consequences of the economic crisis — from frequent street protests and a decline in support for the government to instability in its labor markets — for the foreseeable future. Though 2014 will probably see some timid economic growth in Spain, the crisis is still far from over.
