Productivity and long term growth

Going for Growth 2016: Spain

 

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‌Spain has seen a recovery in output as a substantial reduction in unit labour costs improved its competitiveness. However, its unemployment rate remains painfully high, in particular the incidence of long-term and youth unemployment, which is among the highest in the OECD. This undermines long-run growth through skills erosion and reduces the prospect of career building and social mobility for affected youth, with the risk of a further widening of income inequality. The most pressing agenda for Spain is to mobilise a broad range of policies to improve job opportunities for the unemployed and to facilitate their return to work. Furthermore, productivity growth is low and reforms that raise productivity must be pursued to ensure mid- to long-term recovery in output and employment.

1. Data for long-term unemployment for Korea refer to 2013.

Source: Source: OECD, Labour Force Statistics Database.

Previous Going for Growth recommendations include:

  • Strengthening active labour market policies by boosting resources and efficiency of public employment services, strengthening activation and extending training measures for the unemployed, and by allocating funds towards training schemes which, following evaluation, turn out to be the most effective at increasing employability.  
  • Making wages more responsive to economic and firm-specific conditions by gradually increasing representation requirements for both union and firms for new sectorial collective agreements or by requiring firms to opt-in rather than opt-out from such agreements.
  • Reducing the gap in job protection between temporary and permanent contracts by harmonising key provisions across different types of contract, such as severance pay, which should be set so that for all types of contract it is initially low and then gradually increasing with tenure.
  • Improving access to higher education and ensuring that associated programmes adapt to labour market needs notably by making school-based vocational education more practice-oriented and by raising employers’ involvement in training design.
  • Lowering entry barriers in non-manufacturing industries by reducing the number of professions requiring membership of a professional body, raising competition in the retail electricity market and lowering entry barriers in rail and maritime transport.

 

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Recent policy actions in these areas include:

  • A new activation programme targeted at the long-term unemployed has been launched.
  • A reform of vocational training programmes that focuses on the specific needs of firms and provides life-long training opportunities for employed workers has been introduced, and the provision of training programmes has been opened to competition.
  • The implementation of the Market Unity Law that addresses the internal market fragmentation for product and service markets and simplifies business licensing and other administrative burdens.

The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, narrowing current account imbalances and reducing income inequality).  In the case of Spain, easing access to higher education, including vocational education and training, while making associated programmes more attuned to the labour market would increase employability among young workers. By facilitating the return to work for long-term unemployed, more effective active labour market policies would lower risks of poverty and social exclusion, hence reducing inequality.

Economic Policy Reforms 2016 

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