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Spain - Labor
The Unemployment Problem
Spain's most nagging and seemingly intractable economic problem has been the persistence of high unemployment. The industry shakeout of the 1975-85 period, declining job opportunities in agriculture, and the virtual drying up of the need for Spanish workers in Western Europe led to an unemployment rate that, throughout the 1980s, rarely went below 20 percent, the highest rate in Europe. Overall employment between 1976 and 1985 declined by almost 25 percent. The sharp slowdown in labor demand, following the first oil shock, coincided with the growing exodus from rural areas. The decline in industrial employment was due not only to production cutbacks in a number of key sectors, but also to prior widespread overmanning and to the abruptly urgent need to address deteriorating economic conditions by stressing higher productivity and lower unit labor costs. The ensuing slowdown in real wage growth did not moderate before 1980. As a result, real wages surpassed productivity between 1976 and 1979 by 22 percent.
Though government programs, such as the strengthened Employment Promotion Programs, led to the hiring of more than 1 million people in 1987--more than double the average of about 450,000 per year between 1979 and 1984--they did not appreciably alter the level of joblessness. With almost 3 million people unemployed in 1988, the official unemployment level of 20.5 percent was almost double the OECD average. Record numbers of new job openings were created in the buoyant economy of 1987, and total employment increased by 3 percent, but the new jobs barely kept pace with the growth of the labor force. Undoubtedly, the unemployment rate would have been much higher were it not for the relatively low level of participation of women in the labor force. The unemployment rate for women in the labor force was about one-third higher than that for men.
Youth unemployment was particularly high. The under-25 agegroup accounted for nearly 55 percent of all unemployment, a factor that contributed to juvenile delinquency and street crime. Thus the increasing participation of young people and women in the work force contributed to a persistence of high unemployment in the booming economy of the late 1980s because of the relatively low rates of employment among both groups. Another reason was that, although the economy was growing, part of the expansion was due to improved equipment, and not to increased employment. Industrial production, for example, rose by 4.7 percent in 1987, but industrial employment grew only by 2.5 percent. Nonetheless, these official unemployment rates were believed to be too high, for they did not take account of those persons believed to be working in the underground economy.
Throughout much of the twentieth century, there has been a dramatic shift in the makeup of the Spanish population and in the nature of its employment. As late as the 1920s, 57 percent of Spain's active population was concentrated in agriculture. During the next 30 years, the number of people employed in this sector fell by only 10 percent. Starting in 1950, however, the sector's share of the work force fell by close to 10 percent each decade, so that by the early 1980s its share had shrunk to about 15 percent. Even after the economic transformation in the 1960s and the first half of the 1970s, agricultural employment continued to fall steadily--by an estimated 4 percent per year between 1976 and 1985. Migration from rural regions to areas where employment was available led to the virtual depopulation of a number of rural towns and provinces, especially those in the middle of the country.
The evolution in the size and the composition of the working population offered an index to the country's modernization process. Since the 1920s, the number of workers employed in industry and services had virtually doubled. Industry's share of the work force had gone from about 20 percent in 1920 to a high point of 38 percent in 1975, after which it had begun to decline, dropping to 32 percent by 1985. The service sector had grown steadily, from 20 percent of the work force in 1920 to 52 percent in 1985, declining only during the bleak 1940s. It had surpassed the industrial sector at the end of the boom years in the mid1970s , when it accounted for about 40 percent of the work-force. Despite the economic slump of the 1975-85 period, the service sector grew strongly--an indication of Spain's development toward a postindustrial society and its increasing resemblance to the economic structures of other West European countries.
Spain has been fairly constant in the portion of its population actively involved in the economy. For all of the twentieth century, just over one-third of the population has either had a job or has been looking for one. A high point was reached in 1965, when 38.5 percent of all Spaniards were in the work force. During the 1980s, the figure hovered at about 33 to 34 percent.
Compared with other West European countries, however, Spain has been distinguished by the low participation of women in the work force. In 1970 only 18 percent of the country's women were employed, compared with 26 percent in Italy and 30 to 40 percent in northern Europe. During the 1980s, female employment increased, but women still made up less than 30 percent of the economically active population, considerably less than they did in Finland, for example, where nearly half of all those employed were female and where three-quarters of all women worked outside the home. Female participation in the labor market was increasing in the second half of the 1980s, and it had jumped 2 percent between 1985 and 1987, when, according to an OECD report, it reached 29.9 percent in mid-1987. El Pais, a respected daily, reported that there were 3.5 million women in the work force of 15 million at the end of 1987, which gave them a share of about 32 percent of the total.
The Underground Economy
With the growth in unemployment, rising labor costs, rigid legal regulations, increasing numbers of layoffs and discharges, and high employer social security taxes, since the 1970s Spain has experienced the growth of an increasingly important underground economy (economia sumergida). Its rise has been of growing concern to government policymakers. Observers estimated that it accounted for 10 percent to 15 percent of the GNP, and a 1985 government study suggested that the number of those employed in the underground economy amounted to 18 percent of the entire active labor force. Other analysts believed that as many as 33 percent of those officially listed as unemployed-- about 20 percent of the working population--were actually working in the shadow economy. Workers in this sector were particularly numerous in labor-intensive industries and services. According to official estimates, agriculture accounted for the largest share, estimated at perhaps 30 percent; services claimed up to 25 percent; construction, 20 percent; and industry, a little less than 20 percent. Most of those involved in the service sector worked as domestics.
Typically, workers in the underground economy were young people with minimal educational and professional qualifications. Many were single women, more often than not, those without family responsibilities. This sector of the economy was marked by high labor turnover; its employees earned substandard wages, and they often toiled in unhealthy surroundings, frequently at home. Though wages were low, those who worked in the underground economy could avoid paying taxes and social security contributions--an aspect of the sector that made it attractive to employers as well as to laborers.
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