Unemployment is Spain's main obstacle to recovery

Spain is off work. Unfortunately, she won't be "back in five minutes", as it reads in those little notes which Spanish employees leave on their desks when they go out for half an hour. Many Spaniards are out of work for real, at a staggering 19.7% jobless rate – twice that of the eurozone as a whole . While the markets obsess about our debt , this is the true obstacle hampering Spain's recovery (and the main cause of the debt itself, as the state has to expend in benefits for the jobless). And yet it is not just the crisis. Unemployment has been high in Spain for almost 40 years now. But why? To begin with, blame it on the brick, the totem of Spain's economy. This over-reliance on the housing market began in the 60s, when General Franco literally built his way to modernity in brickwork. Since then, the successive democratic governments have done very little to find an alternative model of growth. The pressing need to join the EC first, and then meet the Maastricht criteria, made them follow the same yellow brick road. It was Spain's fast buck, and her coastline bears witness to the effects of this construction industry transformed into a destruction industry . Moreover, cement is solid as a building material, but not as the basis for a sustainable economy. The result is that Spain needs to grow over the 3% mark to create jobs. And she did during most of the 80s and 90s, in what came to be known as the "Spanish miracle". Only that it was no miracle, but a mirage, and the financial crisis has only made it clear the hard way. Yet bricks and mortar don't explain everything. What about the job market? Isn't it as rigid and expensive as employers and pundits insist? It may well be rigid and bureaucratic perhaps, but expensive it is not. Not as much as we're often told, in any case. Typically, a dismissal with a severance pay in Spain costs the employer only around 5% more than a rightful dismissal, a mere additional 1% in relation to rich European countries. And that's not all: wages in Spain are so low (among the lowest in the EU) that its workforce turns out to be 20% cheaper than that of France and 40% cheaper than that of Germany. That's why the labour reform requested by the employers, and soon to be forced on the workers by the government, won't be the panacea everybody has been lead to expect. We tend to forget that employers are also "unemployers". Had they proposed a labour reform when the going was good, you could believe they were only trying to make it easier for them to hire. In the present situation, what they want is to make it easier for them to fire. You can understand their motives, but it has nothing to do with "creating more jobs". This doesn't mean that reform of the job market is not needed, far from it. It could address the other major employment drawback in Spain: the abuse of the temporary contract – a curse from previous labour reforms. Temporality promoted a mostly unskilled workforce, less flexible, less productive and more prone to working accidents (another field in which Spain, regrettably, stands out). Since it also blurred the line between the skilled and the unskilled, it convinced the young that it paid off to drop out of school as soon as possible. The trend took off in 1996, right after the generalisation of the temporary contract, and has been escalating ever since, to a shocking 30% of youths today who have no qualifications. With their unemployment rate at 40%, at least there is a lesson they won't miss: In a time of crisis a degree does make a difference. Education reform, in fact, would be the real labour reform, but the aggressiveness of Spanish politics has made it impossible for the parties to agree on this crucial issue. What should we expect from the future? My bet: the brick will come back, as soon as the crisis is over – and as long as there is an empty square metre in the whole of Spain. • This article was commissioned via the You tell us page. If you have your own suggestions for subjects you would like to see covered by Cif, please visit the page and tell us