Spain and Its Unemployment Problems

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Table of Contents

Introduction
Analysis
Conclusion
Works Cited

Introduction

Since 1982, the rate of unemployment in Spain has not fallen below 15%. However, the unemployment impact was felt when the rate hit 24% in 1994. The low rate of employment (between 16 and 64 years) is the most renowned characteristic of the Spanish economy as per the close of the Twentieth Century (Howell 32). It is clear that Spain is distinguished from other countries as per the employment statics as reflected in the years 1985 and 1996 where those who could work amounted to 44.7% and 48.1% respectively, which is less than half the employee population. The persistence of the unemployment problem has had and indeed still has an enormous social impact.

Analysis

The productive capacity of a major part of a population between fifteen and thirty-five years is since there are not enough jobs. The rate of unemployment among those under 25 reached a sad record of 45% in 1994. Many individuals looking for jobs have not had previous jobs. For example, the year 1993 expenditure unemployment benefit was 3.3% of the Gross National Product (GNP). Many young people without jobs were excluded from the benefit. This problem produced an explosive situation. It is mainly due to the stabilizing role played by ancient social players like the family, which takes a social security net for the unemployed young people.

Inflation contributes immensely to the unemployment problems faced in Spain. Inflation comes with increasing costs in manufacturing, production, operation, and service delivery by companies. Again, the persistent increase in the general price levels, in a country, may reflect the increase in economic performance but a downward trend in autonomous income, low investments, and employment level.

According to Brown (17), inflation may be classified into two, harmful inflation and harmful inflation. Harmful inflation leads to an increase in aggregate demand, which is a signal for investors to acquire factor inputs for further production. This also includes labor and leads to employment increment. Harmful inflation discourages saving. This is because many people fear to lose the value of their income. As such, fewer income earners hold salaries rather than save. Therefore, inflation, low investments, and risks of unemployment escalate significantly.

The relationship between inflation and unemployment according to Philips curve is that Philip explained the relationship between inflation and unemployment. He asserted that is difficult for any economy to solve the problem of inflation at the same time solve the problem of unemployment that is an economy wants to reduce unemployment. This will be forced to expand the money supply using both Fiscal and monetary policies, which will cause inflation as the money supply in circulation, will expand. The government will be forced to reduce the money supply using both fiscal and monetary policies to control the economy into stability, decrease inflation, and increase employment.

A major cause of mass unemployment in Spain is the outdated product and labor market institutional framework. In addition, two crucial shocks took place in the mid-70s, namely the oil price shock and the political transition. The latter has been extraordinarily welcomed event, but much of the activity of the government in the mid-70 was focused on the creation of democratic institutions with relatively little effort devoted to labor market reform.

However, the basic reason is an outdated product market structure and outdated labor laws. In the early 1970s, the product markets in Spain were characterized by the presence of quasi-monopolistic situations in many markets, from the perspective of the product structure. Many producers were protected through high import barriers or export subsidies. Obviously, this situation was not sustainable. The result was high consumption of oil and the product market was hit extremely seriously by the oil price shock.

On the labor market side, certain laws and regulations had been adopted in the 1940s and 1950s because of the corporatist philosophy, which prevailed in Spain at the time. In other words, there was extremely limited freedom of association, at both the enterprise and national levels. At the same time, the government gave concessions to workers in the form of high employment protection.

The reasons as to why the unemployment rate is so high are rapid population growth rate. The population grows faster than the overall economic growth. Thus, leading to a situation that the labor force joining the labor market is more than the absorption capacity of the economy. The use of inappropriate technology, technology is often labor-saving or capital intensive, which leads to unemployment since most of this economy has labor surplus (excess labor).

Nature of the education system, the education system adopted is geared towards white-collar jobs, which do not conform to labor markets of the economy. Seasonality in production, this is where changes in weather conditions lead to seasonal unemployment in this sector. Limited product market, the product market is less concentrated thus leading to unemployment.

Some of the problems caused by unemployment include; an increasing number of social problems such as crime, prostitution, and family break ups. Waste of potentially productive human capital gives the implication that labor is unemployed. As such, the message sent to the national income is low-income earners as well as the poor welfare of the population. This leads to a loss of human capital since unemployed labor will lose its skills with time.

Lead to problems such as housing and sanitation that are mostly slums. In order to maintain a stable employment level, the government will be forced to increase its expenditure on social amenities, which could be used for other developed ventures (White 87).

The policies that should be implemented to combat unemployment in Spain include; Offer relevant education that is the education system adopted should emphasize the talents and skills required by the labor market. There should also be an emphasis on technical and science education, which is geared towards self-employment. Seasonal unemployment, this can be solved by diversification of economic activities and more innovations.

Diversification of product market, firms should also seek new markets for their commodities that are they should exploit the opportunities available within the trading blocks. Encouraging Foreign direct investment, to attract foreign direct investment the country should aim at making its political, economic environment more stable for investment (Smith 23).

Conclusion

It is clear that Spain is distinguished for its unemployment rate. Spain’s unemployment problems are caused by internal factors rather than external factors. Unemployment comes with many socio-economic problems like the increasing number of crime, prostitution, and family break ups. Spain’s most unemployed age group is 16 to 36 years. This age is a wealth of productive capacity, which is wasted. Monetary policy enacted by the Central bank monetary will aims to control a stable financial condition as well as a beneficial pattern of economic activities.

Works Cited

Brown, Jeffrey. In Spain, Crushing Unemployment Piles onto Economic Worries. 2012. Web.

Howell, David. Fighting Unemployment and the Limits of Free Market Orthodoxy. New York: Oxford University Press. 2005.

Smith, Aaron. Spain’s jobless rate hits record high. 2012. Web.

White, Gregory. Spain’s Youth Unemployment Problem Swells one In Five under Thirty Still Hunting for First Job. 2012. Web.

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Spain and Its Unemployment Problems

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