Spain’s Lost Generation

t1larg.spain.unemployment.giBy Advai Pathak

Since democratization the brightest star in Europe and at the forefront of global cinema, sports, and fashion is Spain, a nation anchored by its debt crisis. Higher taxes and harsh austerity measures have taken their toll on Spain’s citizens. Half a million citizens and immigrants are expected to leave Spain by the end of this decade in keeping with recent population declines. However, all of these issues derive from the deep-seated structural issues in education and employment that plague the country’s recovery and cast a long shadow on its future prosperity.

At the inception of the European debt crisis, Spain’s government actually had smaller debts relative to the size of its economy than either France or Germany. However, private sector borrowing accounted for an enormous and unsustainable level of total debt. Much of this profligacy was related to the construction and real estate boom that Spain experienced over the past decade. Real estate prices increased 44% between 2004 and 2008 and this drove growth and provided money and jobs to millions.

Spain was prosperous and much of its youth wanted in on this ‘dinero facil’. Many left school prematurely to supply the vast demand for jobs in construction and they were well paid while it lasted. Once demand for housing slowed, however, the industry’s bubble popped and with numerous private firms going into receivership, much of Spain’s labor force suffered.

National unemployment is edging closer to 27% while youth unemployment is stands at an alarming 55%. Despite national unemployment being at its highest point since records began, analysts find the second figure considerably more worrying, amid concern that much of Spain’s youth could remain on the fringes of the labor market.

An increasing percentage of Spain’s younger generations are becoming structurally unemployed and there are widespread concerns that they will struggle to find work even after the Eurozone rights itself. With only partially completed high-school educations, the majority of these workers have little to no basic skills and, with many having worked on production lines in factories or in basic labor roles on construction sites, they have few practical skills to offer either.

The Spanish government offers generous welfare payments for up to 2 years. However, this seems only to exacerbate the issue as their system has become more lucrative than the low-skill jobs available. Many unemployed workers only start searching for jobs near the end of their welfare contract. Violent crime, rising in Spain, is increasingly becoming an option for idle young people.

As in most countries around the world today, there is a disconnect between the skills companies need and those the national labor force is able to provide. Blame is being apportioned to the Spanish school system, lackluster parenting, and a prevalent laidback culture amongst young people growing up in a time of prosperity. Part of the problem is also the result of legal loopholes that discourage investment in long-term workers. The gulf in protection between full-time and temporary workers incentivizes companies to hire workers on short-term contracts.

The government, losing both tax and social security revenue while doling out increasing sums in welfare, has taken note. Although legislation takes time to unravel, more immediate reforms have been instituted. Special training programs are being put in place to develop fundamental skills. Tax breaks are being offered to small companies that prioritize hiring workers under 30. Just as importantly, Prime Minister Mariano Rajoy has created a special office to manage Spain’s national brand.

There is still promise amidst the crisis. With real estate prices having plummeted, many people have pooled their resources to use these spaces in innovative ways. Series of ‘pop-up’ shops and entrepreneurial centers have appeared across the country for young people to market designs, ideas, and products. Thus far there have been instances of success. A drastic overhaul of the national education system is also currently in the works. A growing segment of the Spanish population is driven to outlast their current problems and to return to prosperity. A fight back is underway.

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