OLIVE PRESS INVESTIGATES: 2014 – The real numbers behind the headlines

LAST UPDATED: 8 Feb, 2014 @ 09:49
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OLIVE PRESS INVESTIGATES:  2014 – The real numbers behind the headlines

DESPITE some green shoots of recovery, unemployment is still a very real problem for Spain, as more and more people have lost hope of finding a job. A significant 10% of Spanish households are without an earner, a phenomenon which is only getting worse,  and agriculture is the only sector not beset with job losses… so much for the much vaunted recovery.

The unemployment rate is finally decreasing, the labour market is beginning to stabilise and the Government has predicted a timid, yet very real 0.7% economic growth for the year.

But ordinary Spaniards still feel mired in the crisis that has dominated headlines and discussion in Spain for the last four years.

Last year, millions of people took to the streets in more than 50 Spanish towns and cities to protest against unemployment, high taxes and austerity measures.

As recently as November, protesters in Madrid read aloud a manifesto that stated Mariano Rajoy’s PP Government was not capable of leading the country out of economic depression.

Smaller protests were held in more than 30 cities around the world, from Vancouver to Vienna, where young Spaniards had emigrated to escape the unfathomable 55% youth unemployment rates, the highest in Europe, if not the Western World.

So Prime Minister Rajoy’s declaration that the recession-hit economy would begin creating jobs again in 2014 and return to growth raised more than a few unconvinced eyebrows.

Spain may have won the battle on paper in hauling the economy out of recession, but the war against unemployment – and more pressingly the challenge of persuading the people that the economy is back on track – will continue for the foreseeable future.

As we are continually told that the economy is picking up despite nobody feeling it in the pocket, the Olive Press decided to take an in-depth look at the numbers behind the headlines.

With help from a number of think tanks and agencies, including American analysts Stratfor, we piece together a truer snapshot of Spain as 2014 gets properly underway.

UNEMPLOYMENT

According to official government figures, 2013 saw the first annual reduction in unemployment since 2007, falling by 1.1%, or 69,000 people, while the number of people working or looking for work – fell by 1.2%, or 267,900 people.

However, underemployment, labour leakage and crippling youth unemployment continues to plague the country and it looks unlikely that the man in the street will be feeling the effects of the recovery any time soon.

So where are all the workers going?

While record-high unemployment is the most pressing issue, the reduction of the workforce is also a multi-pronged problem for Madrid, not least because there is a smaller number of people paying work-related taxes.

Recent, Eurostat data shows the Spanish workforce shrank by 1.7% between 2011 and 2013, which is a real terms loss of approximately 400,000 workers.

The headline exodus of foreigners and nationals since the onset of the crisis is one reason for the drop in numbers, but the reality is that many homesick Spaniards return after just a couple of months.

A recent study by Carmen González Enríquez, of the Elcano Royal Institute, revealed just 2% of Spanish people living abroad are nationals who left because of the economic crisis.

On the other hand, she argues the number who left the country between 2008 and 2012 — rather than the number of Spaniards living abroad –  is closer to 700,000 than the official figure of 225,000. Three times as high and most of them, crucially, graduates and trainees, who are vital to the economy’s recovery.

It is increasingly clear that startling Government statistics are anything but black and white and should always be taken with more than a pinch of salt.

More worrying than the exodus are the people who have simply given up hope of finding a job and stopped looking. Around a quarter of young Spaniards are neither working nor are in education (so called ‘ni nis’), relying on their parents’ or grandparents’ salaries, savings or pensions.

This of course becomes even more problematic if and when they resume their search, due to the long gap since their last job and their increasingly rusty skill set and level of expertise.

It’s not just the youth that are suffering. A significant 10% of Spanish households are without an earner, a phenomenon which is only getting worse; the number of families in this situation grew 24,600 in the final three months of 2013. And due to the length of the crisis, almost 700,000 households have exhausted their unemployment benefits and do not receive any form of official income.

The silver lining for the government is that total expenditures on unemployment benefits fell by 12.5% between November 2012 and November 2013.

 

PART TIME/TEMPORARY CONTRACTS

Even those that have managed to find work still face a big problem – underemployment. The majority of jobs being created in Spain are part-time and the number of full-time workers dropped 218,000 in 2013. At the same time, the number working part-time rose by 153,100.

The Spanish ministry of employment revealed just 7% of all contracts signed in 2013 were for permanent, full-time jobs, with the remaining 93% being temporary jobs, part-time jobs or apprenticeships.

Although these workers are receiving some monthly income, they are still struggling to reach an adequate standard of living and those on temporary and seasonal contracts face an uncertain future.

There is little sign of improvement, either. Agriculture was the only sector not beset with job losses in 2013, a trend which looks set to continue into 2014.

 

THE BLACK ECONOMY

Official figures are just part of the story, however, and only those who are registered at their local employment office, in order to qualify for unemployment benefits, are officially registered as unemployed.

There are people who do not have a job, but are not registered, and there are also those who are registered as unemployed, but still work informally or in the black economy.

The informal economy presents an alternative to joining the official workforce. It is extremely difficult to measure, but according to a recent, shocking study, it represents around 25% of Spanish gross domestic product (GDP). The largest such black economy in

Western Europe, even higher than Greece.

With this in mind, it is unlikely the 26% unemployment translates into reality.

 

PROPERTY MARKET

The property market is at least one potential ray of hope, especially in the Balearic isles where property sales hit record highs in 2013. Across Spain fewer homeowners fell behind on their mortgage repayments than in the previous year and there are distinct signs in Marbella, for example, that the market is finally turning.

However, before the bunting is rolled out it should be noted that half a million Spaniards find themselves in negative equity. Their mortgages are worth more than the property, and experts predict this trend is set to increase.

TAX REFORM

Despite having higher fertility rates than countries such as Italy and Germany, Spain – like most of Europe – is dealing with the challenges of an ageing population.

A reform of the pension sector was approved in late 2013, aimed at offering pension increases below inflation levels.

More reforms are likely as the number of retirees grows and the number of workers decreases.

While Minister Mariano Rajoy’s Government has raised taxes since coming to power in 2011, Spain’s fiscal revenues have only marginally increased.

Madrid is currently working on an overhaul of the tax collection system but even if it is more effective, the high levels of unemployment and shrinking workforce will certainly limit its success.

 

To conclude, Spain is likely to be dealing with the consequences of the economic crisis – from frequent street protests to a decline in support for the government – for the foreseeable future.

While the property market may be picking up and there are more jobs being created, most analysts and economists believe that a fast recovery is anything, but likely.

So keep hold of your seats, for the rollercoaster ride is not yet over.

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2 COMMENTS

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  1. The black economy is Spain’s biggest problem. It’s no wonder Spain has
    Little money for government services. The biggest tax dodgers are small businesses. The black economy colors every transaction over 500 euros. Most studies suggest 20-30 percent of all transactions are made in cash. In Ronda, my experience suggests most small businesses pay their workers in cash. In particular, Restaurants, bar, hotel and trade workers There is also a black and a white price for almost every real estate transaction. On the flip side, many small biz owners complain they are forced to pay under the table because spanish employment laws are too cumbersome. I wonder.

  2. @Harry, here’s a challenge. Find out all the steps, requirements and costs for setting a business in Spain. From scratch. To make it more interesting, make it a microbrewery and pub on the same premises. If you do, you’ll soon realise why everyone tries to dodge the system. The’d be no economy in Spain if they didn’t…

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