Home > Uncategorized > Employment growth in Spain and OECD sillynomics.

Employment growth in Spain and OECD sillynomics.


For over a year now Spain shows high year on year employment growth. Excellent news and a clear sign of a serious recovery! But does this also mean that structural reforms are paying off? Four remarks:

A) The graph shows that. before 2008 (i.e.: before the reforms of the labour market), the Spanish labour market was extremely dynamic already, showing the highest rates of job growth of the entire North Atlantic economy. Which means that the 3% growth we witness at this moment is not any kind of proof of the success of structural reforms.

B) Spain also witnessed an, in a historical perspective, extremely and almost uniquely long period of 5,5 years of serious declines of employment. The sheer length of this period bears witness to the disastrous nature of business cycles and monetary and fiscal policies in the Eurozone (including, of course, the pre-2008 extremely pro-cyclical policies).

C) The sustained very high rate of Spanish job growth between 1995 and 2008 was possible because of very high pre 1995 unemployment, a dramatic increase in the female participation rate and massive immigration of foreign labour (Romanians, Moroccans, people from South-America). The words ‘very’, ‘dramatic’ and ‘massive’ have to be used here. At this moment, unemployment is even higher than before 1995 but the increase of the female participation rate is less fast than it used to be while foreign labourers are leaving. Which means that the Spanish labour market is less dynamic than it used to be (‘despite’ the sham reforms).

D) Having said this, the sustained decline of the 20% pre-1995 unemployment rates after 1995 indicates that the OECD estimates of 19% ‘structural unemployment’, as published in the June 2015 issue of the OECD economic outlook, are severely of the mark. I see no reason at all to assume that the supply side of the Spanish labour market has become petrified, though supply responses to rapidly increasing demand may in the long term (over five years) be slightly less vigorous than between 1995 and 2008. But in those days, Spain’s supply side employment dynamics were, as stated, the highest of the entire North Atlantic economy and at this moment there is no reason to assume (as the OECD does) that the overwhelming majority of the five million inhabitants of Spain which want to work but do not have a job is not extremely eager to accept work. The OECD estimates should be characterized as sillynomics.

  1. Francisco-Javier Braña
    August 26, 2015 at 2:36 pm

    Maybe be readers could be interested in the kind of employment the labour market is offering in Spain. According to the records of the Social Security (it is not survey, they show real data) comparing first quarter of 2011 with the same quarter of 2015, there are 703,244 less full time open-ended (permanent) employments and there are 258,885 less full time temporary jobs. On the other hand, there are 89,760 more workers hired under the so called “apprenticeship contract” (you can remain being an apprentice till your 30’s and the content of learning is close to zero), 169,154 temporary partial time (from one hour to four or six though in these latter case the real working hours are eight or even more) and 258,885 temporary full time and 133.288 permanent partial time (again, from one hour to four or six though in these latter case the real working hours are eight or even more). So the quality of the jobs is dramatically decreasing. My english is not good enough to find a word to name this kind of labour market, that it looks the OECD report is not interested in.

    • August 26, 2015 at 5:46 pm

      The labor market shift to part-time, low-wage jobs is also happening in the US.

  2. JdeV
    August 27, 2015 at 12:15 am

    And in Uk. specially an outrage called a “zero hours contract” (google Mike ashley+sports direct+zero hours for an egregious example).

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