Problem of youth unemployment in Spain

9 September 2016

Spain, the ninth largest economy and its population over 47 million, struggles with the highest unemployment in its history. (CIA 2012). This paper examines the problem of why so many young people in Spain are unemployed, although in many cases reached the tertiary level of education. The “Lost Generation” (in Spain called „generacion cero” or the “ni-nis”) is a term used for youth long-term unemployed people aged 15-24. The problem is not only that they could not find a job but moreover that they are losing their self-confidence and enthusiasm to change the situation.

The paper is divided into three parts. Firstly, the study will focused on reasons why so many young people are out of work. Apart from the global economic crisis, there are a few other reasons which have impact on youth unemployment. Spain’s large budget deficit and poor economic growth are connected with unemployment rate which will be shown in figures in the first part. Second part will be devoted to the consequences which the distorted labor market brought. Economic as well as social problems will be examined. Finally, the possible solutions will be introduced.

The role of government is highlighted because there is the evidence that the reform of labor market is needed. There are several recommended policies which can help to solve the problem of youth jobless. 1. Youth Unemployment in Spain since the World Economic Crisis As Eurozone is struggling with difficulties with euro currency, there came up another serious problem – unemployment. According the Eurostat statistics, the euro area seasonally-adjusted unemployment rate was 10. 4 % in December 2011. This remained the worst record in Eurozone history.

Moreover, the unemployment hits hardest the young population. At the end of 2011, the youth unemployment rate1 was 22. 1 % in the EU-27 and 21. 3 % in the euro area (EUROSTAT 2011). The critical situation is in Spain where every second Spaniard is out of work. According to a report by Spain’s National Statistics Institute, the number of unemployed Spaniards rose to 51. 4 % in December 2011 which is more than double the European Union average (GOVAN 2012). 1. 1. What led to the massive youth unemployment in Spain? There are three dominant reasons why the youth unemployment remains to be so high.

Firstly, there is no doubt that youth unemployment is associated with recent economic crisis. Spain experienced a housing bubble which was even worse than the one in US. As many as 800 000 houses remain unsold, the banks are still fighting with their losses (ELDER 2011). This caused that the economy of Spain continued to be less productive. Figure 1 shows the growth of GDP in Spain from 2000 to 2011. 2 The Spanish economy was hit by the world economic crisis relatively quickly. In 2008 the growth of GDP slowed and dropped to 0,9 %.

A year later, Spanish economy got to recession which continued in 2010. The estimated GDP growth in 2011 is 0,8 % (IMF 2011). Figure GDP Growth (% change of GDP volume) Source: Author, based on data from Country statistical profiles: Spain http://stats. oecd. org/Index. aspx The figure 2 shows unemployment rate of youth for the same period of time. It is clear that between these two indicators exists a nexus. The youth unemployment rate remained stable in 2000-2007 and never exceeded 20 %. The situation got worse in 2008 when the world was hit by economic crisis.

Despite the fact that the Spanish economy is now recovering, the distorted labor market is nowadays the largest issue in Spain. Many experts forecast that it will take long time to reduce unemployment rate, especially in some poorer regions. Figure Youth Unemployment (as a % of the age group 15-24) Source: Author, based on date from Unemployment Rate, quartely avarage, by sex and aged group http://appsso. eurostat. ec. europa. eu/nui/setupModifyTableLayout. do Secondly, because of the recession, employers are more aware of hiring new staff, particularly inexperienced newcomers.

The companies are uncertain about their future therefore they tend to hire less and less employees. Moreover long term contracts are connected with higher costs than the temporary contracts. The strict laws have increased the costs of hiring to the point where companies are reluctant to take on new staff in permanent positions. Thirdly, huge differences between euro-zone economies have shown up in persistent imbalances. “Reforms are required throughout the euro zone. Europe needs even greater integration, which would allow its companies to take advantage of a true single market” (ELDER 2011).

Spanish companies show long-term weak competitiveness (SCHUMAN and MATEO-YANGUAS 2010). Because of the inability to compete with other more competitive companies, many Spanish companies went bankrupt during the recession. And those which have survived the crisis do not invest in new projects and do not create new job positions. 1. 2. Consequences There are several consequences which are more or less connected with youth unemployment. If young people do not work they can? t pay taxes and they can? t provide for their families. Households cut their spending as they struggle to repay their debts.

These issues result in low government incomes and in rise of the public debt. Young people do not have money for buying their own houses and banks are not able to borrow money for a low interest if the people, who ask for a loan, are jobless. Nowadays there are 1. 6 million unsold properties in Spain (Snyder 2010). As it was already mentioned, the employers do not want to have permanent contracts. It leads to the increase in part-time job employment between 2007 and 2010 8. 8 percentage points. (POWELL 2011). This is not a negative thing especially when young people are combining work and studies.

But for those who search for long term job, the part time jobs bring only little job security and few benefits which weakens corporate sector. The current situation brings not just economic problems but also social problems. It brings about depression, poor health, increase in crime rate and drug use. Some youths had to move back to their parents because they could not afford living on their own. ” If you are unemployed for a long period, you have a negative qualification compared to those who are entering after the crisis and don’t have that history of being unemployed.

That history can act as a stigma. ”(POWELL 2011). The long period out of work reduces chances in developing a career. This results in arising new trend in Spain education. Students tend to stay in education system as long as possible rather than searching for a job. (POWELL 2011). As a result of all these social and economic effects, there are people demonstrating around the country. They are trying to force the government to come up with quick solutions. The social media networks play a big role in organizing the protests.

A plenty of people around the country can cooperate via Facebook or Twitter which leads to massive protests. The last key protests were taken place in Madrid (GOODMAN 2011). Overall economic situation of Spain has a negative influence on the decisions of foreign investors to where direct their investments. According the OECD Statistics (2011) the inflow of foreign direct investments dropped from 137 077 million USD in 2008 to 74 572 million USD in 2009 and to 9 736 million USD in 2010. The decrease in the inflow of FDI has a negative impact on creating new job positions as well as on the whole economy.

Possible solutions Spanish government is familiar with the fact that youth unemployment is the big issue. Government is actively searching for solutions how to stimulate job growth and invest in youth. There are several recommended policy measures for promoting youth employment (ILO 2011): Develop an integrated strategy for growth and job creation – there is a need for a coherent policy framework, with measurable targets .

Establish broad-based partnerships – among governments, employer organizations, trade unions and other organizations Improve the quality of jobs and the competitiveness of enterprises – with labor legislation, these measures can reduce labor market segmentation Invest in the quality of education and training – an important element in facilitating the transition of young people to decent work Although the role of government is the basic in solving youth unemployment, there are many non-state actors, trade unions, workers’ organizations, private enterprises which can help where government cannot. Private organizations can cooperate with universities and offer internships to the best students.

On the one hand it would increase motivation of Spanish students and on the other hand for companies investing in youth makes business sense because they can educate their new future employees. Finally, the youth should be the most determinant to find a job. The problem is that they are losing motivation. Sara Elder, Author of the report ‘Global Employment Trends for Youth’, said: “I know that it’s not easy for young people but we should encourage our young people to not become discouraged, to keep themselves active.

It doesn’t have to be in the labour market – they can volunteer; they can come together through social networks, something that’s keeping them engaged. Because it’s the lack of engagement that can create a sense of social discontent, a sense of detachment. So, keep positive, keep engaged and push for a better future. ” (Elder 2011) Conclusion The purpose of this paper was to investigate the problem of youth unemployment in Spain. Due to recent economic crisis, which strongly affected Spanish economy, there was an enormous increase in youth unemployment which remains to be worst in the country?

Even though it seems that Spanish economy is over the economic crisis, the youth unemployment has reached its peak at the end of 2011. The youth unemployment rate increased to a greater degree than adult unemployment rate which supported the premise that young people are more sensitive to economic recession. Besides the global economic crisis, the Spanish labor market was strongly influenced by changes in employer? s preferences of temporary contracts rather than permanent contracts.

The difficulties with euro currency and struggling Eurozone have influenced the competitiveness of Spanish companies in common market. Spanish companies and foreign investors postpone and cut their investments and do not create new working positions. Apart from economic consequences there are also social problems connected with high youth unemployment. Young people could not afford living on their own and have to move back to their parents. They suffer from depression, health problems and with feelings of inferiority.

Because of the difficulties with finding jobs, a new trend has appeared in Spain – youth tend to stay in the school as long as possible to avoid being unemployed. Finally, the possible solutions were introduced. The role of government is highlighted but there are also recommendations for private sector and for jobless youths. Government efforts to boost the economy through stimulus spending, extended unemployment benefits, and loan guarantees.

The cooperation between private sector and universities could help youth to get working experiences during their studies which make them more attractive on labor market. Youth should stay active in searching for job even if it is so hard finding job which matches their education and qualification. The principal conclusion is that youth unemployment takes longer recovery than the adult unemployment and that government interventions are needed more than never before.

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