Youth employment in Spain: from bad to worse

High unemployment rates, short-term contracts, overqualification, underemployment, little (or none) job training, low wages. No matter where we look at it, it is a fact. The employment situation experienced by many young people in Spain is much worse than that experienced by young people in neighboring countries. These circumstances limit not only the income of young Spaniards but also their opportunities for professional development. Therefore, what is really at stake is the future of our country’s human capital.

But why does this happen?

During the last decades, things have gone from bad to worse. In each of the crises our economy has experienced, the youth have been the group whose employment situation has suffered the deepest deterioration. Besides, it is not a problem that affects only those young people who finish their studies and enter the labor market during a crisis and carry the negative consequences of this circumstance several years after graduating in what is known as the “scarring effects” of recessions. 

The real problem for young people in Spain is that their employment conditions do not fully recover once the crises end. On the contrary, young people who finish their studies and enter the labor market in the expansionary period following each recession do so in worse conditions than young people who started working before that crisis.

Economists Samuel Bentolila (CEMFI), Florentino Felgueroso (Fedea), Marcel Jansen (UAM and Fedea), and Juan F. Jimeno (Bank of Spain and University of Alcalá) analyze this phenomenon in a paper entitled Lost in Recession: Youth Employment and Earnings in Spain, recently published in Estudios sobre la Economía Española (Fedea).

As the authors explain it, in general, the employment conditions of young people tend to be worse than those of older workers. They have less experience, tend to work in positions of less responsibility, in many cases (although, unfortunately, this is not usual in Spain) they look for part-time jobs that are compatible with their studies, etc. 

Furthermore, in times of crisis, younger workers are often the first to lose their job. In most countries, they are less protected due to the higher prevalence of short-term contracts or the shorter notice period or severance compensation that legally correspond to them. 

However, Spain is different. Here the problem of youth employment is much worse than in neighboring countries. For instance, it is very frustrating to learn that in the 1983-2019 period, in Spain, the average unemployment rate was 32.7% among young people aged 20 to 24 and 22.3% among young people aged 25 to 29, while in the European Union (EU-28) it was 17.8% and 11.5%, respectively. Or, realizing that, in 2019, the employment rate of people between 15 and 34 years old in Spain was only 64.6%, while in the European Union (EU-27) this figure rose to 75.7%.

Yet, what is saddening is to see to what extent this situation has deteriorated in our country in recent decades, so young people face each new crisis in worse conditions than the previous one. For example, in 2019, youth unemployment rates were 29.8% in the 20-24 age group and 19% in the 25-29 age group, when in 2007, on the eve of the Great Recession, those figures only amounted to 15% and 9% respectively. And something similar happens with wages. In Spain, from 1980 to 2019, the monthly salary of young people decreased in real terms between 26%, among workers aged 30 to 34, and 50%, for those aged 18 to 20. On top of that, we have witnessed a pronounced decrease in the average duration of their contracts and an increase in part-time hiring, which causes many young people to work fewer hours than they would like.

The authors do not analyze the causes of the deterioration of the employment conditions of young Spanish people in recent decades. But still, they point out, among the possible factors to be explored, the effects of changes in labor regulations introduced during crises that facilitate more flexible hiring and firing of young workers, as well as the growing imbalances between supply and demand in the Spanish labor market, the consequence of technological advances and the small weight of STEM disciplines in Spain, among other deficiencies in our educational system.

Some imbalances that, for example, mean that in our country we have the highest overqualification rates in the European Union, but, at the same time, the proportion of university students in highly qualified jobs (high skill jobs) has decreased since the beginning of the decade of the nineties, with only a slight improvement in the last five years.

Reference

Bentolila, S., Felgueroso, F., Jansen, M., Jimeno, J.F. (2021). Lost in Recession: Youth Employment and Earnings in Spain. Estudios sobre la Economía Española – 2021/12 

Image Wayne S. Grazio under a Creative Commons license