The economy of Spain rumbled along like a high-promptness train for ten years till it decelerated radically in the year 2008. Only lately has Spanish economy emerged from a 5-year recession. Yet the jobless rate in the economy has tripled to twenty-six percent (4-times the United States level) and will not get back to its pre-crisis level for up to ten years. Why is this?
Between the years 2000 and 2009, Spanish economy accounted for about thirty percent of all novel homes build in the EU though the economy merely generated about ten percent of the total Gross Domestic Product (GDP) of EU. In a single year alone (2006), the quantity of housing starts (762,214) surpassed Germany, Italy and France merged together. Following Spain joining the euro in the year 1999, rates of interest remained stumpy, property was perceived as a healthier investment in the economy with extremely high home ownership (eighty-five percent), and high foreign demand for retirement and holiday homes was observed as a result of the sixty million tourists that visited the country yearly (Marelli & Signorelli, 2017).
Following the bursting of the property bubble, there was a massive destruction of jobs as swiftly as they had been established. Since the construction sector remained highly labor intensive, the collapse of the sector reverberated via additional areas of the Spanish economy. Between the years 2002 and 2007, the total jobholders number, several of whom were temporary contracts, increased by a huge 4.1 million, an increasingly steeper upsurge than in any other European Union economy and over three-fold higher than the quantity established in the forgoing sixteen years. Since year 2008, over three million jobs have been lost in the country, about half of such lost jobs established in the construction and associated sectors (López, Martínez-Ortiz & Cegarra-Navarro, 2017).
The Spanish economy has a labor market which is dysfunctional. The rate of unemployment in 2007 stood high at eight percent despite the peak of the economic boom. That was a high rate in the eye of the United States standards. It made the Spanish employers hesitant to place workers on the contractors that were permanent. The Popular Party conservative government in 2012 approved reforms after returning to power at the lapse of year 2011. The reforms sank the cost of dismissal besides giving companies the advantage, based on their financial health, in collective wage haggling agreement between unions and management. Such reforms, however, are yet to have discernable influence of creation of jobs. The reforms have, nevertheless, led to lower growth of GDP threshold for the net creation of jobs to 1.3% from about 2%. The economy of Spain is expected to grow by over one percent in 2017 (Michael & Stelios, 2017).
The forty-five regionally-anchored along with not listed savings banks, that accounted for about 0.5 of the financial system of Spain, remained nearly linked to businessmen and politicians. Several of whom made irresponsible loans to developers and remained hugely exposed to the property as it crashed. The land reclassification for the purposes of building besides building permits granting, in the local authorities’ hands, established a corruption breeding ground. Bad loans ascended to 13% from 0.7% of the whole credit in the year 2007. The European Stability Mechanism (ESM) rescued certain banks in 2012 with a bail-out package of forty-one billion pound in return for the far-reaching restructurings (Peinado & Serrano, 2017).
The quantity of savings banks has subsequently been lowered to 7, with high losses in jobs. Spain departed the bail out in 2014 January. Spain became ranked forty out of one-hundred and seventy-seven in the latest corruption perception rankings done in 2014 by the Transparency International based in Berlin, down 7 places from the previous year. Spain scored 59 points that was 6 points lower compared to its past score in the year 2012, in the numerical indices where the cleanest economy remained those closest to the one-hundred score. Spain subsequently lost more points compared to any nation, topped solely by the war-ravaged Syria.
The Spanish education industry is holding back the Spain’s need to establish an increasingly sustainable economic model. 1 in every 4 individuals in the country between 18 and 24 years are early school dropouts, double the European Union average. This figure is even down from the peak of one in every three individuals in the course of economic boom, where learners dropped out of school at the age of sixteen thereby flocking in droves to work in construction and affiliated sectors.
Almost a quarter of the 15-29 age bracket are out of education, employment or training. The outcomes in the test in reading, scientific and mathematics knowledge conducted by OECD’s Pisa International for the fifteen-year-old learners and 4th grade kids in TIMS alongside PIRLS tests remained extremely poor. No University in Spain is among the global leading 200 in the ranking of the main academics. Innovation and R&D expenditure, at 1.30 percent of GDP, remains way below that of the other advanced economies. In such conditions, the more knowledge-oriented economy creation remains panacea of a pipe dream coupled by the unfortunate emigration among the brightest young engineers and scientist.
As the Spanish began to rapidly expand, more immigrants were enticed to the country. The number of immigrants soared to 5.7 million from 900,000 between 1995 and 2012, the hugest upsurge in a European nation in the shortest period. These immigrants were primarily required in the agricultural and construction sectors since inadequate Spaniards were prepared to work in mentioned sectors. At the 2007’s boom peak, over half of the 3.30 million non-European Union immigrants in Spanish economy worked in construction sector.
Following the subsequent economic recession, these immigrants bore a great share of the increase in unemployment, because a great portion of them worked on temporary contracts and became the first to be retrenched. The rate of jobless among the immigrants (thirty-seven percent) remains extremely higher than the 24% for the Spaniards. Immigrants in Spanish economy solely commenced to get back to their respective nations in substantial numbers in the year 2012. And the population of Spain dropped by 400,000 in the year 2013, an unmatched decline in the modern history of Spain (Martín-Oliver, Ruano & Salas-Fumás, 2017).
The government should use improved control and support for learners at risk to reduce the early school dropout rates. This will be achieved through early-warning policies alongside compulsory participation in the intensive support classes. The cabinet has approved measures that bring forward to fifteen minimum age for entry into the PCIP (Initial Professional Qualification Programme) alongside easier access as well as the extension of programme periods to two years will encourage students to stay in school. The government should also encourage youngster to stay in education system through policies that enhance education attraction to both parent and students.
The government should adopt awareness creation policies among parents and students about the return on education with regards to employment. The government must ensure it provides public info and advisory services. The government should also have greater control of school absenteeism. The government should also reincorporate early school dropouts into education system by adopting increasingly flexible education programmes such as the latest VE system reform that is a move in the right course. The government has ensured that learners who have finished PCPI compulsory modules can access medium-level VE cycles alongside enabling access to higher-level VE cycles among students who pass a bridging course. The government should also promote the training programmes that are youngster-oriented over the age of seventeen who are early dropouts.
The government should also enhance job insertion likelihood among the young population by easing the education system-labor market transition as well as avoiding situations of unemployment. The dual VE system will assist partially rebalance education system structures and boost youngster with higher training employability on offer as well as in creating working conditions for interns. A reform in the degree numbers, content, alongside duration is required in university education (Tang & Bethencourt, 2017).
The government should facilitate the likelihood of acquiring degree after 3 years following transversal training to reduce both number of youngsters failing to finish university studies and cost of training alongside underemployment. The government will improve graduate employability by seeing greater connections with private sector. The government should make sure that particular subjects have compulsory internships to provide learners with particular experience and knowledge. With respect to VE, the government integrate companies to play a huge role in establishing training plans alongside in internship financing (Rivera, Casal & Currais, 2017).
The government should reduce the segmentation and increase successful unemployed youngsters’ activation. The government should establish a single permanent contract to bar temporariness from being a trap which is a threat to youngsters’ professional careers, challenging human capital accumulation in companies and decrease their likelihood of employment. The government should adopt a combined (i) novel single contract without affecting prevailing contracts with severance cost which would increase in accordance with amount of time the employees had been with the firm; and (ii) a dismissal insurance system which is financial with contributions from social security would accumulate in accounts of individuals. Labor mobility would thus be encourage as employees who want to change companies take with them their accounts while for non-dismissed employees in their working life, would have their retirement pension added to the accumulated sum (Heimberger, Kapeller & Schütz, 2017).
Conclusion
The extension of trial period/probation on permanent contracts will also encourage youngsters’ hiring without experiences whose productivities are not assessable. Redesigning along with refocusing ALMP remain bound to enhance effectiveness of labor market.
References
Heimberger, P., Kapeller, J., & Schütz, B. (2017). The NAIRU determinants: what’s structural about unemployment in Europe?. Journal of Policy Modeling.
López, F. A., Martínez-Ortiz, P. J., & Cegarra-Navarro, J. G. (2017). Spatial spillovers in public expenditure on a municipal level in Spain. The Annals of Regional Science, 58(1), 39-65.
Marelli, E., & Signorelli, M. (2017). Monetary Policy and the European Central Bank: A Progressive Divorce from the Bundesbank Legacy?. In Europe and the Euro (pp. 45-57). Springer International Publishing.
Martín-Oliver, A., Ruano, S., & Salas-Fumás, V. (2017). The fall of Spanish cajas: Lessons of ownership and governance for banks. Journal of Financial Stability.
Michael, C., & Stelios, R. (2017). Defense Spending and Unemployment. Evidence from Southern European Countries. Peace Economics, Peace Science and Public Policy, 23(1).
Peinado, P., & Serrano, F. (2017). Unemployment, wages and pensions. International Review of Applied Economics, 1-11.
Rivera, B., Casal, B., & Currais, L. (2017). Crisis, suicide and labour productivity losses in Spain. The European Journal of Health Economics, 18(1), 83-96.
Tang, B., & Bethencourt, C. (2017). Asymmetric unemployment-output tradeoff in the Eurozone. Journal of Policy Modeling.
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