Spain is faced with high unemployment rates since the 1980s. the country consistently ranks among the highest within the European Union with unemployment rate of 11.6% in the third quarter of 2023, which translates up to 2.77 million individuals , according to Statista. the uemployment rate average of the EU is 6.4%. The World bank indicates that the youth unemployment rate is at a concerning 27%. unemployment rates for individuals under 25 years old were above 50% in 2012, 2013, and 2014 but there has been significant decreases in this rates since 2017 where it was determined to be at around 35% (Verd et al., 2019). This prolonged period of elevated youth unemployment has had profound socio-economic repercussions, affecting not only the individuals directly impacted but also the broader economy and society as a whole. socio-demographic characteristics and career trajectories contributes to this high unemployment rates in spain.

2. Unemployment Causes and Remedies in Spain
Spain has been faced with high unemployment rates since the 1980s, and consistently ranks among nations with the highest number
of unemployed people within the Europe. The country had an unemployment rate of 11.6% between July and September 2023, which translates to
2.77 million individuals, according to Statista against the EU average of 6.4%. According to the World Bank, the rate was 12.9% compared to
5.8% average of Europe and central Asia.
The World Bank indicates that the youth unemployment rate is 27%. Unemployment rates for individuals under 25 years old were
above 50% in 2012, 2013, and 2014, but there have been significant decreases since 2017 when it was determined to be around 35% (Verd et al.,
2019). This prolonged period of elevated youth unemployment has had profound socio-economic repercussions, affecting not only the individuals
directly impacted but also the broader economy and society. Socio-demographic characteristics and career trajectories contribute to the high
unemployment rate among youth in Spain.
Fig1,
https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?contextual=aggregate&end=2022&locations=ES&start=1991&view=chart
The figure above shows data collected by the World Bank indicating unemployment rates in spain against the unemployment average of Europe
and central Asia, from 1995 to 2022.

3. Causes of Unemployment
• Labor market segmentation and temporary contracts
• The COVID-19 pandemic
• The great recession
• Labor market rigidity
Labor market segmentation and temporary contracts, common nationwide, are drivers of unemployment. Labor market
segmentation has a dual system where temporary contracts are prevalent. The labor market segmentation system is coupled with high
firing costs for permanent workers, discouraging employers from creating permanent jobs. Over 24% of the workforce is employed on
temporary contracts, which can be easily terminated, which impacts the country's high unemployment rates. Precarious employment
conditions in temporary contracts make it difficult for workers to develop their skills and education, leading to a cycle of
underemployment and unemployment (Úbeda et al., 2020). These contracts also discourage employers from investing in training their
workforce.
Labor market rigidity has also been identified as a significant cause of unemployment in Spain. It contributes to slow
adjustments to labor market shocks; therefore, few employment opportunities are offered. The empirical literature by Parello (2011)
highlights that factors like firing costs, severance payments, and the unemployment benefit system characterize rigid labor markets.
Rigidity in the employment sector is inversely correlated with productivity growth, as low productivity is coupled with low
employment rates. Better policies can improve the productivity-unemployment mix in the economy, as improving labor market
performance increases innovation rates and decreases equilibrium unemployment.

4. Causes of Unemployment
The COVID-19 pandemic caused a profound economic downturn, with declines in GDP and job losses in various sectors. The
lockdown caused demand for commodities and services to reduce sharply. There was also decreased consumption, and increased
household savings, according to Pinilla et al. (2021). The tourism sector was also significantly affected by measures imposed during the
pandemic, such as travel restrictions, which added to the GDP decline (Moreno-Luna et al., 2021). revenues, businesses in tourist
regions like the islands of Canary and Balearic which had decreased revenues, resulting in layoffs and closures. Production: The
pandemic also caused disruptions in industrial production, contributing to the number of people who lost employment. The decline in
domestic demand also contributed to employers' use of temporary contracts. According to IMF youths were most affected, with more
than 50% losing their jobs.
Fig 2, https://www.imf.org/-/media/Images/IMF/News/news-article-images/2020/eng-social-spending-mcd-cf-sept-9-chart-1/eng-social-
spending-mcd-cf-sept-9-chart-1/eng-cf-spain-nov-6-chart-5/eng-cf-spain-nov-6-chart-5.ashx?h=524&w=550
Figure shows loss of employment among youth as a result of the COVID-19, according to data collected by IMF in 2020.

5. The study by Verd et al.(2019) also determined the recession-impacted impact of youth unemployment on individuals' career trajectories
leading up to the crisis. Youths with longer and more stable employment experiences before the recession were generally better equipped to acquire new
employment. The great recession was observed in many European countries including Spain after the 2007–2009 financial crisis, as indicated by
González-Pernía et al. (2018) . The IMF’s analysis shows that there was a steady rise in unemployment rates which peaked during the pandemic, for
teleworkable and non teleworkable jobs. This was a result of a significant decline in aggregate demand, which affected consumer and investor confidence
and led to a reduction in market opportunities. The sporadic shocks in the business cycle also affected individuals' perceptions of entrepreneurial
opportunities.
Fig 3, https://www.imf.org/wp-content/uploads/2020/07/eng-unemployment-july-20-chart-1-880x1024.pngFigure shows the continued increase of unemployment rates due to the
2007 finacial crisis. The figure shows continued increase in unemployment after the great recession or both remote an nonremote workers.

6. Remedies for Unemployment
In the aftermath of the COVID-19 pandemic, the government can directly implement fiscal
stimulus measures can be implemented to boost economic activity and employment. Pinilla et al.
(2021) and Moreno-Luna et al. (2021) demonstrated that financial support and relief packages for the
tourism and hospitality sectors, which were hard hit by the pandemic, and initiatives like temporary tax
cuts can stimulate consumer spending and business investment. Ensuring firms in this sector can access
affordable credit prevents insolvencies and layoffs. The central bank could provide liquidity facilities
to banks to ease lending conditions.
Remedies for labor segmentation involve various strategies to address the division between
different types of workers. One of the strategies is labor law reform, which can facilitate easy hiring.
Deakin (2013) further indicates that complementary mechanisms like basic income guarantees, active
labor market policies, vocational education, workplace social dialogue, collective bargaining, and
work-life balance laws can help alleviate segmentation. Transitional labor market policies have shown
easy transitions between different forms of employment. These policies ensure flexibility and
adaptability to changing circumstances.

7. The approach of decentralizing the wage-bargaining system can be adapted to solve labor
market rigidity. The study by Mauro and Spilimbergo (1999) argues that the approach would allow
wages to adjust more readily to local labor market conditions since falling in high-unemployment
areas would foster job creation in the areas, as observed in the UK.
Reforming programs that support workers in depressed areas is another proposed remedy
by Mauro and Spilimbergo (1999)—scaling back from initiatives like the Plan de Empleo Rural for
agricultural workers in Andalucia and Extremadura, which reduce incentives for workers to accept
lower wages or migrate by providing unemployment assistance to increase labor mobility and wage
flexibility. Their study also suggests reconsidering minimum-wage policies. The literature argues
that the statutory nationwide minimum wage prevents low wages that spur job creation in low-
productivity areas, thus improving labor market flexibility.

8. Extending and enhancing unemployment insurance benefits is a proposed approach to
countering the effects of the recession. Although the approach delivers a spending boost and
maintains consumer spending, it has little effect on employment.
Sheiner and Wessel also proposed that worker recalls by previous employers be an
approach to increasing employment after economic revitalization and post-pandemic. Policy
interventions incentivizing or supporting employers to recall laid-off staff could accelerate
recovery after recessions. Subsidies, tax credits, or other hiring incentives targeted at bringing on
new workers could boost labor demand when economic shocks dampen it.
Training and reskilling initiatives are an essential remedy for recessions and other
causes of unemployment, like labor market rigidity and segmentation, as they enable sectoral
labor shifts. According to Sheiner and Wessel, training ensures individuals are up-to-date and
aligned with areas of rebound and aids quicker labor reallocation and rehiring.

9. Lessons Learned
• Labor market duality and the prevalence of temporary contracts perpetuate high
unemployment and a lack of skill development.
• Economic shocks like the Great Recession and the COVID-19 pandemic resulted in
heavy job losses, especially in sectors like tourism.
• Labor market rigidities hinder adjustment and recovery.
• Decentralized wage bargaining can improve flexibility and allow better adjustment to
economic conditions across regions.
• Enabling worker reallocation is crucial after shocks accelerate sectoral shifts, and
policies enabling workforce reskilling and transitioning to new opportunities are
crucial.
A holistic policy approach is required as more than one remedy is required; job creation
incentives, training, and policy reforms are necessary.

10. References
Deakin, S. (2013). Addressing labour market segmentation: The role of labour law. Governance and Tripartism Department DIALOGUE
https://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---dialogue/documents/publication/wcms_223702.pdf
González-Pernía, J. L., Guerrero, M., Jung, A., & Pena-Legazkue. (2018). Economic recession shake-out and entrepreneurship: Evidence from Spain. BRQ Business
Research Quarterly, 21(3), 153-167.
https://www.statista.com/statistics/453410/unemployment-rate-in-spain/
Mauro, P., & Spilimbergo, A. (1999). "IV Regional Labor Markets in Spain". In Perspectives on Regional Unemployment in Europe. USA: International Monetary Fund.
Retrieved Mar 8, 2024, from https://doi.org/10.5089/9781557758002.084.ch004
Moreno-Luna, L., Robina-Ramírez, R., Sánchez, M. S. O., & Castro-Serrano, J. (2021). Tourism and sustainability in times of COVID-19: The case of Spain. International
Journal of Environmental Research and Public Health, 18(4), 1859.
Parello, C. P. (2011). Labor market rigidity and productivity growth in a model of innovation-driven growth. Economic Modelling, 28(3), 1058-1067.
Pinilla, J., Barber, P., Vallejo-Torres, L., Rodríguez-Mireles, S., López-Valcárcel, B. G., & Serra-Majem, L. (2021). The economic impact of the SARS-COV-2 (COVID-19)
pandemic in Spain. International journal of environmental research and public health, 18(9), 4708.
Sheiner, L., & Wessel, D. (n.d.). Recession remedies. https://www.brookings.edu/wp-content/uploads/2022/04/RR-Chapter-2-Unemployment-Insurance.pdf
Verd, J. M., Barranco, O., & Bolíbar, M. (2019). Youth unemployment and employment trajectories in Spain during the Great Recession: what are the
determinants?. Journal for Labour Market Research, 53(1), 4.
Úbeda, M., Cabasés, M. À., Sabaté, M., & Strecker, T. (2020). The deterioration of the Spanish youth labour market (1985–2015): An interdisciplinary case
study. Young, 28(5), 544-563.