Spain′s economic crisis takes heavy toll on youth | Business| Economy and finance news from a German perspective | DW | 11.10.2009
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Spain's economic crisis takes heavy toll on youth

Young people in Spain suffer the highest unemployment rate in the EU. And the financial downturn has only served to widen the gaps between the have and the have-nots in an increasingly two-tier labor market.

Sign in front of an employment office in Madrid

More than one third of young Spaniards have to visit the employment office regularly

Nothing divides Spain quite like the labor market. And the effects of the current economic crisis vary according to age, geographic location and sector.

Young people are one group that is disproportionately affected by soaring unemployment, which stands at double the eurozone average. The national rate is 18.5 percent, but among Spaniards aged between 15 and 24 years old, this figure climbs as high as 37 percent, according to Eurostat.

Job losses are concentrated in construction and the service industry - the same sectors that once drove the country's exponential growth. Figures from Spain's Youth Employment Observatory show the majority of workers laid off were recruited on temporary contracts , which account for a quarter of the nation's jobs, and half the jobs held by people under the age of 30.

First in, first out

When the global financial crisis forced Spanish businesses to downsize, young employees were the first to go, leaving one in three workers under the age of 25 to face a prolonged period of unemployment.

Young Spaniards wait in line at the employment office

Spanish dole queues are full of university graduates

"The crisis has caused social exclusion and unemployment for young people," confirmed Alex Martin from the youth branch of UGT, one of Spain's largest unions. He said many young people are moving back home to live with their parents and are attempting go back to their studies.

Martin denounced the fact that more than half of the 3.7 million Spaniards out of work are under 35. It's a fact that gives Spain by far the highest youth unemployment rate of any EU member state, with current figures reading 13.5 percentage points higher than in on 2008, according to the European Commission.

High skills, few openings

A lack of mobility in the labor market makes it very hard for young people to get a foothold in their chosen profession and to find pathways into employment. The UGT union states that only one out of every seven young Spaniards works in their desired field, and that it has taken them an average of nine jobs to get there.

This was the experience of Virginia Fernandez, who has been unemployed for eight months. An undergraduate degree and two Masters in the field of arts administration has resulted in paid posts in insurance, call centers and, most recently, as an archivist.

"It's really a lot harder now than it has been in the past. The only work around seems to be as a receptionist or as a telephone operator – not much more," she said.

Now more than ever, employers prefer to keep newcomers on easy-come easy-go, temporary contracts. September 2009 saw around 33 percent fewer permanent employees recruited compared to 2008.

Notoriously poor working conditions

Raul Garcia, a 30-year-old journalist, works in his chosen field but has yet to bag a permanent position. In the last six months he has been employed on no less than four separate temporary contracts, the last of which ends in 10 days' time. He knows many others in the same, precarious situation and said the insecurity is beginning to take its toll.

"You never know what's going to happen to you," Garcia said. "You know when your contract finishes but you don't know if you're going to be fired or have your contract renewed."

"I have to pay the rent, it's getting hard to bear it,” he said, adding that he was considering moving abroad to seek opportunities in other European countries.

The battleground for labor market reform

Spanish trade union supporters wave flags and banners reading 'Stand up to the crisis' during a demostration against the economic crisisin Barcelona

Spanish trade unions want the government to do more to fight unemployment

Business leaders insist that Spain's labor market is too rigid and propose measures aimed at increasing flexibility - a view backed by the IMF and Spain's Central Bank.

But unions and, for now, the ruling Socialist government reject this view. Prime Minister Jose Luis Rodriguez Zapatero has categorically refused to implement any measures that will accelerate job losses.

Economist and former minister Valeriano Gomez said Spain's labor laws offer similar protection to most other European countries.

"Spain is one of the least protective against mass redundancies, on a par with the UK, and offers less guarantees than the Swedes, Germans or Dutch for individuals," Gomez said.

“It's not about the differential cost of sacking. In 2007, we happily fired nearly a million people out of a working population of 20 million," he added.

Management and unions have yet to renew a round of social dialogue that broke off in July without having reached consensus.

Structural economic change

Santos Ruesga, an economics professor at the Madrid Autonoma University, believes the problem of youth unemployment lies with the structure of the Spanish economy.

"The challenge is not how to reform the labor market but how to reform the economy," he said.

"We need a different kind of productive model - one with much higher capital investment, a more intensive use of technology - that is much less anchored in low-skilled professions like construction."

In Ruesga's view, a restructured economy that creates jobs requiring higher qualifications will succeed in slowly absorb young people.

Government intervention

For now, the government has rolled out costly and significant emergency welfare measures. This includes a 100-million-euro per month scheme that provides Spaniards who have exhausted their social security coverage with payments of 420 euros a month.

Spanish Prime Minister Jose Luis Rodriguez Zapatero

Prime Minister Zapatero says he doesn't want labor reforms to result in job losses

The state has also pledged ambitious moves towards a new sustainable economic model based on innovation and technology, and set aside stimulus for the creation of quality employment.

But, the public deficit stands at eight percent, and the IMF has predicted it will reach double figures by 2010. The government has therefore announced concurrent cutbacks in the Department of Investment, Development and Research, which was touted as key growth driver in Spain's new economic model.

Reporter: Hazel Healy, Madrid
Editor: Sam Edmonds