No more mirages

Juan Carlos Martínez Lázaro. Professor. IE Business School

5 October 2009

The reality of the unemployment situation in Spain has returned following the disappearance of the mirage created over the summer. Unemployment will continue to grow as long as the government and unions fail to understand the need to reform our production structure.

Changes in the labour market in August have dispelled the mirage. After three months in which unemployment fell thanks to the ´summer effect´ and the push of the famous Plan E for local investment, unemployment figures have again started to climb to the levels to which we have become accustomed. Unfortunately, it is not easy to predict when we will see another month in which unemployment falls, because the arrival of autumn suggests that the number of people without a job will continue to grow. At the earliest, we will have to wait until spring to find new falls in unemployment and even that depends on the start of the new tourist season and the long-awaited commencement of our economy´s recovery.

We should not accept what happened to the labour market in August simply because it was expected or because it has happened before. Furthermore, we should not be contented by the fact that the increase in unemployment has been lower this year than in August 2008. The reality is that our labour market continues to fire workers at high rates and our level of unemployment is double the average figures of our EU partners. It is all down to the size of the economic recession because there are several European countries in which the effect of the crisis is greater in terms of growth, but their employment levels have not plummeted like Spain’s. And if the problem lies in the productive structure of our economy, then things are worse than they seem, because the structure is not going to change from one day to the next.

However, our labour market does not only differ from that of most of our partners in levels of unemployment, but also in aspects such as levels of temporary or part-time work. The reforms implemented in recent years have not managed to reduce these differences despite a period when we were happy to think we were close to full employment. The end of the growth cycle has been enough to take us back to the crude light of day.

There are many opinions that have recently advocated labour reforms. Some of them, such as that of Commissioner Almunia or the Governor of the Bank of Spain, are particularly transparent. And yet, the government and the unions do not seem to acknowledge the situation and insist on their rejection of any reform, which they compare only with cheaper reduncancies.

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