OECD Employment Outlook 2026: Spain
Table of contents
These country notes provide an overview of the labour market situation in each country based on data from OECD Employment Outlook 2026. This edition has a special focus on geographic disparities in jobs and incomes.
The OECD labour market remains resilient, with employment and labour force participation rates at record highs (72.1% and 76.7% in Q1 2026, respectively) and unemployment low by historical standards (4.9% in May). However, there are increasing signs of weakening, including rising unemployment in many countries, slowing employment growth, and easing labour shortages. Due to the new surge in energy prices, real wages are expected to fall in many countries.
The Spanish labour market continued to strengthen in 2026, with the unemployment rate declining to 10.3% in May from 10.6% a year earlier. Despite steady progress, unemployment remains Spain’s main labour market challenge. It is still the highest among the OECD’s largest economies and more than twice the OECD average (4.9%).
Employment has continued its uninterrupted rise since the COVID‑19 crisis, though it still lags most OECD economies. The employment rate for those aged 15 to 64 reached 67.3% in Q1 2026, up 0.7 percentage points (p.p.) from a year earlier, but still 4.8 p.p. below the OECD average. Labour force participation reached a record high of 75.1%, now close to the OECD average (76.7%).
Limited real wage growth remains a significant weakness. Although real wages grew by 2% over the past year, they remain 2% below their Q1 2021 level, placing Spain among the OECD economies where real wages have fallen the most since the COVID‑19 crisis (see figure below). This is despite substantial minimum wage increases that have protected lower-paid workers from inflation, pointing to widespread stagnation across the rest of the workforce. With labour productivity growth having stagnated over the past decade and expected to remain subdued, and in a context of short-term renewed price pressures, real wages are projected to stagnate through 2026 and 2027.
Firms in Spain have become increasingly responsive to changes in the economic environment. The share of firms that do not reduce headcount when facing deteriorating business conditions fell from 8.9% in Q4 2019 to 4.3% in Q1 2026. As a result, Spanish firms have moved from being close to the EU average before the pandemic to among the most responsive in the EU.
Regional disparities in labour market outcomes are large across the OECD. In over half of OECD countries, employment rates across small regions vary by more than 20 p.p. These disparities do not simply reflect differences in who lives where, but also in the economic opportunities that regions have to offer, and they translate directly into disparities in living standards.
In Spain, regional disparities in employment rates are significantly greater than in most OECD economies (see figure below): the gap between regions in the top and bottom quintiles of employment rates stands at 15.5 p.p., compared to an average of 11.4 p.p. across countries where data are available.
People’s chances of finding work are strongly shaped by where they live. In 2024, the unemployment rate in the worst-performing region, Melilla, stood at 28.3%, multiples higher than that of the best-performing one, Gipuzkoa (6.4%).
Since the early 2010s, regional disparities in employment rates have narrowed by 10.4% relative to the national average, in line with most OECD countries. This reflects positive labour market developments in previously low-employment regions.
While workers in Spain do move from low- to high-employment regions, these flows remain too small to meaningfully reduce persistent regional employment gaps. Moreover, movers tend to be better educated and more strongly attached to the labour market. Without policies reducing barriers to mobility specifically for those with weaker employment prospects, inter-regional mobility risks reinforcing existing regional disparities.
Regional employment disparities translate into significant differences in household incomes across Spain. The median disposable income in the capital region, Madrid, is over 1.5 that of the lowest-income one, Almería; much of this gap reflects differences in labour market conditions. People living in low-income regions also have lower chances of moving up the income distribution over time and suffer a greater risk of income stagnation.
Employment protection legislation shapes job security, labour market dualism and firms’ ability to adjust to economic fluctuations and structural change. Updated OECD indicators show large cross-country differences in dismissal regulations and notably restrictions on temporary contracts.
According to the OECD’s updated Employment Protection Legislation (EPL) indicators, Spain ranks in the top third of OECD countries for regulatory protection against individual and collective dismissals, partly reflecting considerably stricter enforcement of unfair dismissal regulations than in most other OECD countries.
Restrictions on the use of temporary contracts have increased since the major labour reform of 2021 and are now among the strictest across OECD countries (see figure below). In force since March 2022, the reform limited temporary contracts to genuinely temporary needs by abolishing the widely used contract for work and services (contrato por obra o servicio), while tightening the conditions under which temporary hires can be justified. It also replaced previous training contracts with shorter ones: the contrato para la obtención de la práctica profesional, capped at one year (down from two under the contract it replaced), and the contrato de formación en alternancia, capped at two years (down from three).
These changes are already starting to reduce Spain’s long-standing labour market dualism, which has historically been among the most pronounced in the OECD. The reform has shifted more hiring onto permanent contracts: the share of employees on fixed-term contracts fell from 24.8% in Q1 2022 to 14.8% in Q1 2026, though it remains well above the share in most OECD countries. Part of this shift, however, reflects a greater use of permanent-seasonal contracts (contrato fijo-discontinuo), which are classified as permanent but can still involve intermittent work, so the effect on earnings stability may be smaller.
Contact
Javier TERRERO (✉ javier.terrero@oecd.org)
Theodora XENOGIANI (✉ theodora.xenogiani@oecd.org)
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The full book is available in English: OECD (2026), OECD Employment Outlook 2026: Geographic Disparities in Jobs and Incomes, OECD Publishing, Paris, https://doi.org/10.1787/7e710f54-en.
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