The relative position of Spanish society with regards to the European countries in the indicators of having a job, appropriate working conditions and adequate salary, forces us to reflect on the potential and deficiencies of public policies aimed at achieving the three studied challenges. It is difficult, however, to summarise the performance of the public sector regarding the coverage of these social needs using a set of indicators. Traditionally, the definition of these indicators has taken as the main reference the common distinction between active and passive employment policies, with the former intended to promote employability and recruitment through employment and training services, and the latter designed to provide coverage for the lack of income for unemployed people through monetary benefits.
The European Union, through the Europe 2020 Strategy, which is the reference framework for the coordination of Member State employment policies, has attempted to define a consistent system of indicators on which public policies can be based. These indicators are designed as a basic information system for monitoring the results of each country. Among them are specific targets for increasing the employment rate, improving education levels, reducing school dropouts and decreasing poverty. They are, however, too general to be able to link public intervention with the results described in the previous sections.
In the absence of a sufficiently agreed system of indicators with which to assess the reach of the policies developed to cover the social needs related to the three proposed challenges, in this section some of the traditional indicators will be analysed, but adapted to the realities that have been described. To this end, the aforementioned distinction between active and passive policies could be useful, in addition to the policy of setting minimum wages since this is the main means of intervention to guarantee an adequate salary.
1. Spending on employment policies
The analysis of the data on spending on employment policies as a proportion of GDP in European Union countries reveals some distinctive features about Spain. The first is that Spain is one of the countries with the highest spending as a proportion of GDP, both before the crisis began, when unemployment was at levels close to the EU average, and once it ended, when the unemployment rate in Spain continued being considerably higher than the average, despite the reduction registered during the period of recovery. The fact that relative expenditure in 2017 was practically the same as in 2008 (2.3% of GDP) is of note.
The second feature is the comparatively greater weight of monetary benefits. These account for more than 80% of the total expenditure, compared to active policies which in European statistics include employment and training services, staff turnover measures, employment incentives, protected employment, the direct creation of jobs and incentives for start-ups. Spain is in the quartile of countries spending least on these latter measures, together with Cyprus and Romania. This feature was already present before the crisis; only Belgium, Greece, Cyprus, Latvia, Malta and Estonia exceeded Spain’s use of passive policies as a percentage of the total.
HOW DO OTHER COUNTRIES PROTECT THEMSELVES FROM LABOUR MARKET RISKS?
The emphasis in Spain on passive employment policies and the focusing of efforts on protecting against labour market risks through the use of unemployment benefits contrasts with the methods seen in other countries. Some countries have opted to introduce salary supplements (low income benefits) to improve the incentives for labour participation and to ensure that workers with the lowest wages obtain an adequate salary. A very common plan in countries with the best results for this system consists of a first phase where the beneficiary receives a percentage of the complementary benefit; a second phase where they receive the complete benefit, and a third where, after having obtained an adequate salary, a progressive discount percentage is applied until the benefit is removed. These low income benefits, highly developed in the Anglo Saxon world, have hardly been applied in Spain.
Although these methods seem to have contributed to reducing inequality and raising the income of beneficiaries in the countries where they have been implemented most, they also present certain problems. They could create disincentives for some workers, such as those who have salaries slightly higher than the figure set to receive the benefit, and could especially have an effect contrary to the desired result if they are used by employers to reduce wage costs. Studies that have assessed individual responses to these methods show a certain consensus that, in countries such as the United States and the United Kingdom, with labour market characteristics that cannot be directly extrapolated to the situation in Spain, they favour the transition from inactivity to employment, but do not seem to have generated increases in the hours worked by those already employed. Some studies also reveal potential disincentives to labour participation for secondary household income receivers.
Spain’s position among the countries with the highest levels of spending on employment policies should not be taken as indicative of greater unemployment risk coverage. The aforementioned fact of having an unemployment rate which is significantly higher than the average leads, almost automatically, to higher spending levels. An appropriate interpretation of the figures therefore requires standardising the aggregate indicator taking into account the number of unemployed people.
The available figures including this type of adjustment show a significant decline in the rankings for Spain, which falls to the mid-point of the rankings in what could be considered a Mediterranean group within the European Union, with noticeably lower levels of spending compared to the Central European and Nordic countries and Ireland (comparable figures for the United Kingdom are only available up to 2008). Particularly striking is the change in the case of active employment policies in Spain when using this criterion, with a level of spending providing a very low protective intensity compared to the European context, of €815 per year per person searching for a job. This is in contrast to the higher levels seen in countries with a lower GDP per capita, such as Latvia (€935), Portugal (€1,041), Poland (€1,100), Czech Republic (€1,500), Hungary (€2,550), and the very different figures for the Nordic countries (€3,150 in Finland, €5,280 in Sweden and €6,190 in Denmark), which are the strong leaders in terms of this type of policy on the European continent.
2. The coverage of unemployment benefits and the effect on poverty
One of the most important indicators of the coverage of unemployment is the percentage of unemployed people who receive a monetary benefit. A few years ago, the Ministry of Labour defined a new coverage rate indicator, expressed as the ratio between the total number of people receiving unemployment benefit and the sum of the unemployed people registered with work experience and those receiving the temporary agricultural workers benefit (as this group used to be excluded from the calculation).
The coverage rate has registered significant changes in recent decades. In the 1980s, a progressive upward trend began, reaching the highest levels in the first third of the following decade. From that moment the process was reversed, with a sharp drop in the rate, which then remained stable at around 60% of the unemployed labour force. This reduction in the volume of population covered can be explained, mainly, by the implementation of several reforms. Legislative changes in the early 1990s entailed a restructuring of the people who could receive benefits, boosting the healthcare element of the benefit while establishing more restrictive conditions for receiving the contributory benefit, resulting in a loss of the protective intensity of the system.
In the following years, the tone of the reforms was even more restrictive, with new criteria that toughened the conditions of access, decreased the amounts and shortened the time during which they could be received. All this led to significant decreases in the number of beneficiaries, which took the rate of coverage to levels close to 60% at the beginning of the century. In the following years, the intense growth in employment during the phase of prosperity and the lower pressure on social protection spending caused a continuous increase in the coverage offered by the system, which reached its maximum values (close to 80% of the unemployed) right at the beginning of the economic crisis.
The subsequent evolution is highly unfavourable. After 2010, a new coverage reduction process began, just when the intensity of the economic crisis and job destruction made this type of protection more necessary. Between 2010 and 2014 the coverage rate dropped from over 78% to 55%, while in that same period unemployment went on to affect more than one in four of the labour force. The drastic rise in the number of unemployed people caused by the crisis overwhelmed the potential of a system whose only ability to offer coverage for the new needs generated by the change in the stage of the cycle had been eroded through different previous reforms. Today, the coverage rate (56% in 2017) is close to the record minimum for the last two decades.
As both the percentage of unemployed people covered by these benefits and the amounts received have been decreasing, it is foreseeable that their ability to mitigate the issues of low income in households with high unemployment will also have decreased. However, the sudden fall of income among the unemployed, which in turn has increased their dependence on government payments, should have resulted in the relative weight of these benefits growing during the crisis.
A common way of measuring this effect is to compare the available income of households to the income they would have had if these benefits had not existed, an effect that can be simulated by deducting the amount of the available income corresponding to benefits. It must not be forgotten however, that this procedure implies acceptance that households do not change their behaviour when they have the chance of receiving benefits. The absence of benefits could lead to the acceptance of lowpaid jobs, or to the taking up of labour activity by others in the labour force in the household, so the real effect of these benefits on poverty could be overestimated.
The available data show that in Nordic countries unemployment benefits have a greater effect on poverty. Two other general features of the comparison of results between European countries are that in the vast majority of EU Member States this reducing effect has increased since the beginning of the crisis, and that there does not seem to be a link between having a higher unemployment rate and benefits having a greater impact on poverty. Spain ranks among the top ten countries in terms of unemployment benefits having a greater reducing effect on poverty. This position at the top of the rankings is mainly accounted for by the greater proportion of household income accounted for by these benefits compared to other countries. This is due to the greater level of unemployment in Spain and the little variation seen in the poverty reduction indicator despite the drastic fall in the income of households with longer periods of unemployment, which should have translated into a greater impact of these benefits.
3. The evolution of the purchasing power of the minimum wage
The last indicator to measure the effect of public intervention on the social needs detailed in the previous sections is the real minimum wage as the main means of regulation, as well as the determination of the types of entry, to recruitment systems, and exit from redundancy costs for the labour market.
The changes in the purchasing power of the minimum wage (MW), as described in the analysis of the effect of low-paid jobs, are a measure of the concern public decision makers have about setting an adequate income floor to cover the basic needs of those who have paid employment. However, in practice, only a few workers are directly affected by changes in the MW. For some authors though, the effects of the MW could be greater than those limited to the affected workers, since its effect could extend to the salaries agreed in collective bargaining agreements. In addition, as was emphasised in the previous analysis, many workers receive insufficient pay, not only because of the salary but also because of the reduced number of working hours.
All the same, figures show that the evolution of the MW adjusted for the CPI has not been stable. From the middle of the past decade until the first years of the crisis, the trend was clearly upwards, with an improvement in the MW in real terms. During the crisis, this trend was reversed, registering a certain fall until 2012 and a very flat profile until 2017, the moment when an important process of change began, with nominal increases of 8% in 2017 and 4% in 2018. The value of the MW in this last year however, in terms of purchasing power parity, continues to be well below that of the countries with the highest income in the European Union. It is between 50 and 60% of the value for the United Kingdom, France, Germany, Belgium, the Netherlands and Ireland.
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