Remarks by Mathias Cormann, Secretary-General, OECD
Virtual, 31 March 2023
Dear Mr. [Arturo] Criado,
Dear colleagues, distinguished guests,
Thank you for the invitation to share the OECD’s perspective on the Spanish labour market in this third Wake Up Spain Symposium.
Certainly, the labour market in Spain has improved over this past decade.
In May last year, Spain recorded its lowest unemployment rate since the start of the 2008 financial crisis.
Since then, unemployment has remained relatively stable at around 13% - while still much too high, it is down by half from the peak levels of early 2013.
Public policy reforms, including the labour market reforms twenty or so months ago have made an important contribution.
Those reforms addressed the over-reliance on temporary contracts, while providing businesses with flexible alternatives to adapt to changing economic circumstances.
A prevalence of temporary contracts means workers disproportionately carry the risk and often end up bearing the brunt of any economic downturns.
People employed on temporary contracts can find it more difficult to access credit and housing, can have more difficulties in building a career, and in strengthening their skill sets.
The Government’s reform has limited the circumstances in which temporary contracts can be used.
As a result, permanent contracts are now more widespread.
At the end of 2022, 82% of wage earners had permanent contracts, a 7-percent increase from early 2021.
We expect this reform will have positive effects on worker’s wellbeing and employability over the long run as well.
Those December 2021 labour market reforms also introduced a new framework for scaling up support to firms and protecting employment in exceptional circumstances.
The “Employment Flexibility and Stabilization Instrument” enhances policies on short-time work schemes, which help keep workers employed by funding a portion of their wages.
The new instruments provide flexibility for companies to adapt the size of their workforce in case of an economic downturn, or when their sector is undergoing structural changes, which require labour reallocation or upskilling.
We believe that Spain can keep the momentum going, and build on those 2021 reforms by addressing a number of further key structural challenges.
First, by increasing the labour market participation of women.
Spain has taken significant steps to promote a more equal distribution of paid and unpaid work between men and women.
For instance, it currently grants the longest paid paternity leave in OECD countries, of up to 16 weeks with full income support for the average earner.
This has contributed to an increase in the female workforce participation rate over this past decade.
In the third quarter of 2022, six out of ten women in Spain were in gainful employment – equivalent to one additional woman in ten compared to ten years earlier.
However, there is still a 10-percentage point gap between male and female employment participation rates.
Increasing the availability of childcare and early childhood education, particularly for children under the age of three – would help close that gap further.
Four out of ten children under the age of three are enrolled in early childhood education, compared to around three across the OECD. However, Spain spends relatively less on early childhood education and care than the majority of OECD countries.
This results in affordability issues in particular for low-income households.
Plans to create a further 65,000 places in public creches from 2024 are a meaningful step to address this challenge.
More children attending early childhood education, will help more women to join the workforce – especially those from lower-income households.
Second, by supporting young people in finding gainful employment.
Currently, around 30% of young workers, aged 15 to 24, are unemployed.
This is the highest rate of youth unemployment across the OECD, and about three times the unemployment rate for people aged 25 or above.
In addition, Spanish workers are experiencing a steep decline of their purchasing power.
Between the fourth quarters of 2021 and 2022, real wages in Spain decreased by 5.4%, which is one of the strongest declines across the OECD.
That situation is even more serious for young workers, who have seen significant decreases in their real wages decline over the last two decades.
To provide young people in Spain with more opportunities, the Spanish government designed the Youth Guarantee Plus Plan 2021-2027.
With an envelope of more than 3 billion euros in European funds, this plan supports young entrepreneurs, reinforces career guidance, and promotes training among young people.
The OECD will help Spain monitor and evaluate its results, in collaboration with the state and regional public employment services.
Third, by fixing the mismatch between the skills available and the skills required in the labour market.
The demand for skills in Spain is more polarised than in many other OECD countries.
That is, jobs require either very low or very high levels of education.
At the same, the supply of low-educated workers exceeds demand.
These workers are also the most at risk of becoming long-term unemployed, as was the case when the construction industry collapsed during the financial crisis.
The government will need to support their skills development in order to help avert future shocks and structural challenges, such as the challenges related to the automation of their tasks or labour market changes caused by the green transformation of the economy.
This should include up-skilling and re-skilling programmes as well as active employment programs providing job-search assistance and career guidance.
Spending on active labour market policies in Spain remains low by international standards.
Currently, only 35% of Spanish adults undertake training every year, compared to 40% on average across the OECD.
This is a figure that needs to increase across the OECD and in Spain. In the context of significant structural transformations of our economies, a commitment to lifelong learning is more important than ever.
We encourage Spain to continue the Vocational Education and Training system reform introduced last year, which facilitates participation in adult learning and promotes personalised upskilling or reskilling pathways.
At the other end of the spectrum, many Spanish workers are overqualified for their jobs.
This is the result of a skills mismatch between the career fields chosen by tertiary students and the qualifications required in the labour market.
Strengthening career orientation services for secondary school students would help to address these issues.
Finally, clarifying the cost and reducing the uncertainty for Spanish firms related to the termination of permanent contracts.
We expect that providing more clarity and certainty to firms will encourage them to hire more workers.
In closing, we welcome Spain’s commitment to improve labour market conditions.
This policy ambition needs to continue also with a commitment to monitor and ensure the reforms achieve their intended results – and to make further adjustments where that is needed.
The OECD stands ready to continue to support those efforts.