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In March 2013, the Spanish Government launched an initiative to tackle youth unemployment, saying one of the most worrying aspects of the economic crisis was its impact on young people, although it also defines youth unemployment as a structural problem. The Strategy for Entrepreneurship and Youth Employment 2013–2016 introduces 100 measures to tackle the issue. In 2013, 15 measures will be implemented, and the remaining 85 are expected to be introduced over the next three years.
One of the most worrying aspects of the current economic crisis had been its impact on young people and their efforts to break into the job market. The Government of Spain has acknowledged the seriousness of the situation, but also recognises that youth unemployment is a structural problem.
In March, the government launched its Strategy for Entrepreneurship and Youth Employment 2013–2016 (1.96Mb PDF), which puts forward 100 measures to tackle both the structural aspect and the impact of the economic crisis. It says 15 measures should be in place within 12 months, and the other 85 will be introduced over the next three years.
The Strategy stresses the effects of the economic crisis on young people: it has dramatically increased the unemployment rate among young people aged 15–24 from 18% in 2007 to 54% in 2012. At the same time, long-term unemployment among those aged 15–24 has risen from 13% in 2007 to 34% in 2012. Long-term unemployment is defined as being out of work for 12 months or more.
If people aged between 25 and 29 are taken into consideration, long-term youth unemployment has tripled between 2007 and 2012, reaching 52%. Between 2007 and 2011, the number of young self-employed workers decreased by 50,200. The Strategy’s introduction says that a high proportion (18.5%) of young people come within the EC’s definition of a NEET – those who are not in education, employment or training.
The Spanish government also defines youth unemployment as a structural problem, rooted in causes which go beyond the current economic crisis. This makes its young workers more sensitive to recession, in comparison to those in other EU27 countries.
According to the government, there are eight structural weaknesses which negatively affect entrepreneurship and the paid employment of young people:
Bearing this diagnosis in mind, the Strategy aims to handle both the structural problems of youth unemployment and those that have appeared as a consequence of the economic crisis.
Its main goals are to:
The Strategy contains 100 measures, though only 15 of them are expected to be implemented in the short term. Some specific measures have already been regulated by means of Royal Decree 4/2013.
These measures are subsequently organised to reflect government classification according to their main goals.
The government has introduced a flat rate of social security contributions for young self-employed people. Young self-employed people registering with the Special Self-Employment Regime (RETA) will be able to pay a minimal contribution for common contingencies during the first few months.
During the six months immediately following the date of registration, a young person will be given an 80% reduction in their normal payments. A self-employed person under the age of 30 may pay an approximate contribution of €50 for the first period. For the following six months, a further reduction of 50% will be applied to the minimum base rate.
One year after registration with the RETA regime, men under 30 years of age and women under 35 will benefit from reduced rates and a 30% discount on their contributions over the following 18 months.
The Strategy also aims to help the self-employed by allowing them to claim unemployment benefits while they are starting up their business. Benefits will be paid for nine months to those under 30 who have registered with RETA.
The government has given young people the chance of capitalising unemployment benefits to help them start up their new business. Recipients of unemployment benefit will be able to maximise up to 100% of their benefits in order to make a capital contribution to any type of newly-created business provided that a permanent contractual relationship is established with the business.
A further strand of the initiative is the continuation of unemployment benefits payment after a young person has become self-employed. Those entitled to unemployment benefit may continue to receive it after deregistering with the RETA scheme, provided that five years have not passed since registration as a self-employed worker.
There are also government incentives under the new scheme to encourage young people to hire unemployed people over 45 years of age. Any full-time or part-time open-ended contract offered by the self-employed person under 30 to anyone unemployed and over 45 years of age will receive a 100% reduction in social security contributions for common contingencies for the first year of the contract. This measure will be in force until the unemployment rate drops below 15%.
The Strategy includes the introduction of a single job portal to help people with job searches. The portal will display all vacancies in all public databases, and any private databases that wish to be included.
The Strategy has introduced several new incentives to encourage businesses to take on young people. One of these helps employers taking on part-time workers when they include a training component for someone under 30 who has never been in employment and has work experience of less than three months. The employer will receive a 75% reduction of employer’s Social Security contributions for 12 months. Companies with fewer than 250 employees will get a 100% reduction.
Micro enterprises and self-employed people who take on young people on a permanent basis will receive a 100% reduction in the employer’s Social Security contributions during the first year of the contract.
Employers will be able to hire young workers under the age of 30 with less than three months’ work experience on a temporary basis. This ‘first job contract’ means employers will be able to ignore the ‘causality principle’ included in the temporary contracts for certain young workers.
There are also new incentives attached to work experience contracts. For job-seekers up to the age of 30, the five-year limit from completion of studies will not be applicable in order to be hired under this contract. Temporary agency workers will be able to employ young workers under the training and apprenticeship contract.
Generally, trade unions have been fairly critical of the initiative. The General Workers’ Union (UGT) and the Trade Union Confederation of Workers’ Commissions (CCOO), for instance, stressed in a note that employment among young people would not be created unless the government changed its economic policy. They say policies should be mainly focused on reducing the public deficit. Union objections to the general policy of the government meant they could not reach an agreement on the new strategy.
So far Spain’s biggest employer organisation, the Spanish Confederation of Employers’ Organisations (CEOE), has not reacted to the publication of the Strategy.
The Strategy launched by the government is focused mainly on supply side factors, such as lack of employability, lack of medium-level skills, and early school drop-out. Paradoxically, training and employability measures are not at the core of the Strategy, but are mentioned as vague programmes which should be implemented in the short term. A reduction in the budget for active labour market polices in 2012 (of approximately 20%) will prevent any great expansion of these policies in the following year.
As has been described, the main measures already enacted to encourage young people’s employment are focused on reducing labour costs by offering discounts in social security contributions to employers to stimulate the hiring of the young unemployed. These measures are not expected to have an effect on the structural weakness of youth unemployment defined by the government. Moreover, doubts arise about their potential to reduce unemployment in the short term.
These kinds of employment incentives have been widely used in Spain since the end of the 1990s. They have accounted for the greatest share of expenditure in active labour market policies, but their effectiveness has proved to be rather limited. Bearing this in mind, there is no reason to think that these measures will be effective now.
It is also not clear whether the seriousness of the problem of youth unemployment can be tackled by promoting self-employment during an economic recession.
Finally, it is not clear that the goal of promoting the quality of employment and reducing the rate of temporary contracts among young people can be achieved by further deregulation of temporary contracts.
Pablo Sanz de Miguel, CIREM Foundation