Spain’s unemployment inched up by 2.2% (60,404 people) in January as the country continues to deal with lower productivity.
In total, the number of unemployed people hit 2.77 million last month. This was mainly due to an uptick of 58,721 jobless people in the services sector, as well as a rise of 1,256 unemployed people in the agriculture sector.
Industry also witnessed 440 more job seekers. However, the number of unemployed people in the construction sector reduced by 1,234.
The number of net formal jobs also increased by 38,357 in January, taking the total number of jobs to 20.88 million, according to a separate Social Security Ministry report.
Why is Spain struggling with increasing unemployment?
One of the main reasons for increasing unemployment in Spain is due to the country’s tight labour market regulations, which are also seen in the housing market as well as the medicine market.
Since this creates a number of complications for employers to either hire or let go of employees as needed, it has resulted in the country having a dual labour market. This means that there are mainly two types of employment contract frequently seen, regular open-ended contracts and fixed-term temporary contracts.
As such, younger, unskilled or semi-skilled workers, as well as immigrants, face most of the brunt of unemployment, being the likeliest to be hired on temporary contracts. This is mainly due to them being the most in demand for seasonal sectors – such as tourism, construction and hospitality.
While these sectors can do quite well during peak or boom times, they are also some of the most impacted during off-peak times, recession, slowing demand or other cases such as pandemics.
Spain continues to deal with productivity challenges
Another key reason for Spain consistently seeing higher unemployment than the rest of Europe is due to the country continuing to face low productivity, even though most employees work longer hours than the rest of Europe.
Most of Spain’s economy is also pushed forward by smaller firms, which often deal with capital and talent issues.
As reported by El Pais, according to Arturo Lahera, a professor at the Complutense University of Madrid, “these companies have less productivity, so their benefits are always more limited and their investment rates are lower. And lower investment rates mean less employment”.
Cost-of-living support measures to continue
Spain’s headline inflation rose to 3.4% in January, while core inflation came down to 3.6%. The country’s Q4 2023 quarter-on-quarter gross domestic product (GDP) also increased 0.6%.
Spain has also recently announced that it will continue to extend its cost-of-living support measures, especially as the country has been hit quite hard by rising prices due to the Russia-Ukraine war and the COVID-19 pandemic.
These measures will include allowing all sections of the population, not just young people and minors, to receive public transport subsidies. Value-added tax (VAT) will also be slashed for products such as vegetables, cooking oils, pasta and fruit.