Home > jobs, unemployment > The great Spanish job machine… (charts)

The great Spanish job machine… (charts)

from Merijn Knibbe

Is Mario Draghi, banker in Frankfurt, right when he, implicitly, describes for instance the Spanish labor market as sclerotic and not able to create jobs:

“National economic policies are equally responsible for restoring and maintaining financial stability. Solid public finances and structural reforms – which lay the basis for competitiveness, sustainable growth and job creation – are two of the essential elements”?

Not really.  In fact, for some decades the Spanish job market has been the most dynamic of the entire EZ. Even despite the ‘recent’ downturn (unemployment has been rising for 52 months in a stretch now and it’s bound to breach the 25% threshold) Spain still has created more jobs than the Germany in this period (Source: Eurostat. Mind: the graphs are in percentages and indices, not absolute figures).

Larger graphs here (1) and here (2).

The Spanish labor market was perfectly able to create loads of jobs, enabling a thorough transformation of the entire Spanish economy (and society, as many of these job went to the increasing number of working women). And it will surely be able to do so, again, when demand increases (though solving 25% unemployment of course not only needs ‘demand’ but also massive investments and creative construction). So, we can’t blame the present Euro-troubles on the Spanish labor market. Something else must have gone entirely wrong.

Again: Spanish U-3 unemployment is bound to breach the 25% threshold quite soon. And a 30% unemployment rate is conceivable. The Spanish should consider every trick in the book to solve this, from abolishing VAT on labor intensive services to learning German (yes, it’s that bad…and I’m serious).

But a supposedly sclerotic Spanish labor market is not the cause of the present Euro problems. Draghi has to look elsewhere, to solve these.

  1. November 22, 2011 at 2:57 pm

    Job creation in Spain is coupled with similar levels of job destruction, because most jobs created are fixed term contracts with very little prospect for ‘conversion’ to permanent employment. Not mentioning the job destruction issue in the comparison with Germany is just a little short of ‘being creative with the truth’

    • merijnknibbe
      November 23, 2011 at 12:18 am

      Ronald,

      * Unemployment in Spain is 24% and might reach 30%, not because of any kind of so called ‘imperfections’ of the labor market (but which market is ever perfect!) but because of a Great Depression kind of slump, You don’t solve this problem with any kind of flexibility or whatever of the labor market. Remember that labor markets in the thirties were much, much more flexible than nowadays – but that did not stop unemployment from rising to ‘Spanish’ levels. There seems to be an insider/outsider problem in the Spanish labor market and I’m all in favor of empowering temporary workers – but at this moment that’s not the most important issue.

      * Obvious as that may be – at this very moment powerfull forces try to use the situation to do the opposite: disempowering Spanish labor even more (read the OECD report on this), my basic argument in this blog is that there is no need for this. We should not spend our time and effort on all kinds of measures which in the best case scenario might lower unemployment with 0,5%, while fourty times as much is needed. Promoting such policies distracts attention from the real problem: a new Great Depression in Spain.

      * And though temporary employment in Spain is quite high (25% in 2010), it is sizeable in Germany, too (15%, and 18% in the Netherlands, against about 5% in the Baltic countries…). As far as I know, there is quite an ‘Unterschicht’ of flexible Polish labor in Germany, too, at this moment. And have you ever read Gunther Walraff? Ample scope for temporary work did, by the way, not seem to improve the succes of the German job market.

      * However, I’m missing your point: job destruction in Spain. The graph shows the NET Iincrease of employment, which is the result of job creation minus job destruction. And the net increase of employment in Spain was very, very high compared with the rest of the EU (7,7% a year for females in some sub periods!), surely when compared with Germany or Denmark. Spain did real well. Up to 2007. And it indeed seems necessary to hammer this down.

      * But indeed: each year, an amazing number of jobs are ended and started in any modern economy, which to me is a much better indicator of dynamism and flexibility than any kind of legal rules about hiring and firing and we seem to agree that economists should pay more attention to this. Countries with rather strickt rules, like France, also do now high levels of destruction and creation.The methodology of counting total job creation and destruction and net job creation can be found here (this is for the Netherlands. The fun thing: job destruction is much more influenced by cyclical movements than job creation which turns the popular understanding of Schumpeter upside down):

      Click to access 2011k2v4p63art.pdf

      Spain seems to have had, for whatever reason, a very favorable construction/destruction rate. And I don’t see any reason why present labor market rules are holding a Spanish recovery back (other things do, as wel know). But again: I do agree with you that temporary workers in Spain should probably be empowered.

      The EU-data on employment as well as definitions and methodologies can be found here (especially table 4 and figure 7):

      http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Employment_statistics

  2. Tony
    November 23, 2011 at 11:03 am

    I find something very odd about the idea that we have to “create” jobs. The whole concept of a ‘labour market’ is something which we should seek to stamp out. It’s deeply insulting; we are not ‘commodities’ to be traded.

    As I look around me and as I speak with others, I see work to be done. I see people willing and competent to do this work – yet they are “unemployed”. This flaw in the ‘labour market’ never seems to be considered.

    Our politicians celebrate when ‘jobs’ are created – often jobs making things no one really wants to be paid for with ‘money’ we haven’t got.

    Meanwhile, the real work is not done!

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