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Question:
In a person’s life, losing the job is one of the most distressing economic event. In the economy, most of the people rely on the labor earning to maintain their living standard. In this, the loosing of job means a lower living standard in the present, insecurity about the future, and reduction in the self-esteem. In general, unemployment rate refers to the rate at which the people of the country want to work but, cannot find the appropriate job so that they can contribute to the economy’s production of the goods and services (Shimer, 2012). Due to complex nature of unemployment, the rate of unemployment varies over the time and across the countries.
There are various causes that increase the rate of unemployment in the country such as recession, economic downturn, etc., which negatively affect the employment in the country and increases the unemployment rate (Fujita, 2014). In this way, this paper discusses the key macroeconomic problem of Spain such as unemployment rate. It is because in recent years, the rate of unemployment in Spain is on higher peak, which affected the country as well as societies in negative ways. Along with this, this paper also discusses the causes of unemployment rate and its impact on the economy and society. In addition, this paper also describes the policies that the Spanish government implemented to solve the problem and to reduce the unemployment rate in recent years.
In the European Union, Spain is one of the leading tourism and cultural countries of the world. But, at the same time, the country has faced various macroeconomic issues that affect the economy as well as societies in the countries. Different macroeconomics issues such as low consumer consumption, high debt, emigration, income disparity, and higher unemployment rate affect the economy and limit its growth rate. In this, it is identified that the higher unemployment is one of the macroeconomic issues in Spain that affect the growth of the economy as well as negatively impact on the living standards of the people in the societies (Boura, 2015).
In the country, most of the companies do not want to higher local people due to various reasons such as low efficiency, lack of required skills, and competencies, which also generates the issues of unemployment in the country. It is identified that after the global economic recession, unemployment becomes the greatest issue in the Spanish society. According to one of the data presented by the European Union’s Statistics office, it is found that the unemployment rate in Spain was at 19.8% in May 2016, which is higher than the average of 8.6% of the other European Union countries in the world (Eavis, 2016). Along with this, it is also identified that the number of jobless in the country is much higher than the economic laggard countries such as Italy and Portugal. In this, it is also found that aged between 18-25 years, 45% people are unemployed in the country due to skill shortage (Tadeo and Duarte, 2016).
From the economic analysis of Spain, it is also found that in the country, there are more than 5 million people, who are jobless, which is a large number of unemployment. But, at the same time, it is also analyzed that due to the rise of temporary contract, the number of jobless people has decreased in the recent years, which positively impact on the economic performance and growth (Gardner and Mitchell, 2013).
Spain has a rigid labor market law because there is widespread use of temporary contracts. These contracts offer little protection, low discharge payouts and usually dismal pay. Further, at the end of notice, severance payments were higher. Hence, this made loath to the employees towards their job as compared to those workers who place on permanent contracts. Moreover, the system also creates the volatile market as employers leave their temporary employees at the first sign of economic recession. That’s why Spain’s unemployment rate has spiked greater than the other European countries (Chislett, 2014).
The education system is one of the causes of the higher unemployment rate. In the Spain, students leave their schools between the ages of 18 to 24. After dropped out of the schools, they work in the construction and other related sectors. Moreover, Spain gradually has poor job performance because there is the relatively large number of employees with low levels of education and incomplete employable skills (Buck, 2016).
Additionally, people are poor in the reading, mathematics and scientific knowledge due to lack of training and education. There is also a lack of research, development and technology spending. Therefore, the property or building sites work is more demanded. When construction works stop, then millions of low-skilled workers are jobless. As a result, it creates higher unemployment rate in the Spain (Chislett, 2014).
In addition to this, in the Spain, there is a lack of access to technology or the internet. Schools are also unable to afford these tools to educate the young people about the digital market. Hence, these young people are jobless due to lack of knowledge in the digital sectors (Brydsten, et al., 2016).
There are more immigrants workers in the company as compared to other European countries. Because there is little pressure to find the new jobs. Further, immigrant workers engage in the construction and agricultural sectors, as there were not enough skills in Spaniards to accomplish the effective and efficient work. As a result, Spanish employers heavily employ as temporary workers. Thus, there is a high degree of fluctuation in the labor market. Hence, it transforms into the higher unemployment in the Spain (Tanveer et al., 2012).
Young people who want to start their own work by starting businesses has struggled to find the affordable loans. Because lack of collateral to access the capital in the Spain. Further, high-interest rates create difficulty for young people to repay their loans on the time (Buck, 2016).
The higher unemployment rate in the country negatively affects the growth of the country as well as influences the living standard of the society. In concern to Spain, it is analyzed that the higher unemployment rate negatively affects the Spanish economy in terms of reducing the spending power of people (Altman, 2013). It is found that due to the adoption of wages moderation by the Spanish government and higher unemployment rate, the people has less enable to spend much money in the country, which reduces the spending power of people and creates macroeconomic problems in the country (Deubert, 2014).
On the other hand, according to Insider-outsider model of unemployment, the labor-market structure of the country also impacts on the economy as well as society of the country in positive ways (Tadeo, 2015). It is because, for example, in order to fight with the higher unemployment rate and low hiring rates, Spanish government forced the companies to develop temporary agreements with the labors, while existing workers could not be fired without incurring high separation cost (Casale and Perulli, 2014). It affects the labor-market structure of Spain because in the country, the productivity is low, which negatively affects the jobs of outsiders.
But, at the same time, the higher rate of unemployment negatively affects the spending power of unemployed person. It is because unemployed people want to save their money for the future to deal with the unwanted situation, which reduces the spending power of people in the country and also influences the economic situation (Mai, 2014). On the other hand, it is also analyzed that the higher unemployment rate in Spain negatively affects the people attitude and behavior in the societies. It is found that due to unemployment, people are more concerned to their jobs and drop their holiday or continue working at the time of ill due to fear of job loss (Bermeo, 2014).
In addition, it is also analyzed that due to higher rate of unemployment, the people of Spain also face metal distress in terms of lowing self-confidence, feeling unworthy, depression and hopelessness. It also negatively impacts on the attitude and behavior of the people and develop negative behavior towards common things and life (Arestis and Sawyer, 2012).
In February 2012, after joining the two months, the governor Mariano Rajoy has passed a landmark labor market reform law. This law introduces more flexibility within the labor market. This new regime gave preference to deal with wage struck over collective agreements at regional or national level. This policy is effective to decline unemployment rate. For example, reducing severance pay, regulatory changes to address labor market duality, promoting internal flexibility, offering subsidies to firm’s to hire young people, lower- skilled workers, women and improving labor market intermediation and the delivery of employment services. The government also establishes the temporary measures to promote permanent contracts, such as a one-year probationary contract for SME enterprises (OECD Observer, 2016).
Rajoy tries to make a coalition with his rivals. In this way, he offered cross-party projects to rivals to assess the flaws of the education system. There are seven distinct education laws since 1978. In the Spain, college does not provide the job hence student dropped out the schools. In such case, the government needs to execute the search and matching models. This model developed by Romer to build up the matching function. Through this model, firm’s maximizes their profit in order to set the level of vacancies. This model defines the assumption that there is no cost to recruit people. Hence, the firm will expand their vacancies until they have zero value (Parker, 2010).
In the election proposal, Rajoy party’s members declare that they put more importance on technology in schools. Since the availability of technology in schools helps the students in increasing their knowledge. During his first quarter, Rajoy appointed private agencies to work with unions. These agencies help to offer retraining, recruitment and also tied the financial support for public jobs programs (Bloomberg, 2016).
Governor also implemented “Agile” project management techniques to help companies to boost their productivity by using the IT systems. For using this technique, at least eight months of training is required. This training program is effective for employees to enhance their ability in order to make an agreement with senior executives (OECD Observer, 2016). Spain government focuses on building a new institutional planning to execute the better coordinate and program regional actions.
Further, sharing program has been developed by the government together with new activation tools like the national website of vacancies. This tool merges public and private opportunities in a single portal. Moreover, the private sector and advanced technological tools like social media networks facilitate by the government to provide knowledge to advance level. Furthermore, Spain government focuses on providing more opportunities to young people by using the European Youth Guarantee and the National Strategy (OECD, 2011).
The government also established the single labor contract for permanent employees like offer the excessively liberal compensation rights to permanent workers who currently employed. Moreover, in the proposed reforms, the government makes a plan to collective bargaining contracts as compared to regional and sector-wide contracts. As a result, it would allow firms to implement longer probationary periods for permanent contracts. Thus, single labor contract improves the employment prospects for youth, immigrants and temporary workers (O'Brien and Williams, 2013).
From the above discussion, it can be concluded that inflexible labor market laws, lack of educational and technical skills, economic recession, and shortage of skilled labor are some causes that increased the unemployment rate in the Spain. In the country, the current unemployment rate is approx 20%, which negatively affects the economic and social life of the people. It can also be concluded that higher unemployment rate negatively influences the social life of people in terms of providing stress, mental pressure, and influencing their behavior and attitude in the society. It also negatively impacts on the productivity and efficiency of the people.
From the above, it can also be concluded that the use of better education system, use of technology, labor market reform, digital training programs, and improvement employment prospect are some policies and ways that were implemented by the government of Spain in order to overcome the unemployment issue.
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