The situation in Spain
The analysis of social needs linked to the labour market through a system of basic indicators, in accordance with the criteria defined in the methodological appendix, raises three different sub-dimensions (or challenges) that cover the essential aspects of what is to be measured: firstly, whether people can find a job; secondly, whether the jobs they can find have appropriate working conditions; and thirdly, whether the hourly wage that the job provides is enough to provide a decent standard of living.
The information gathered using the proposed indicators leaves little doubt about the significant problems that exist in Spain in all areas of the labour market. Practically all of the indicators have worsened since the recession began, despite the progress achieved in the short period since it ended managing to substantially offset the decline recorded during that period.
1. First challenge:
Having access to employment
This challenge is measured using the indicators shown here. The meaning of the figures is explained in the remainder of the section.
The employment well-being of the population is closely linked to the ability of members of the household to find a job. The ease or difficulty of joining the labour market is usually assessed using the unemployment rate (ILO, 2017), the most common definition of which calculates the number of unemployed people as a percentage of the total labour force of the population (those who are looking for a job and are available for work). This rate can also be calculated using a broader group of individuals which includes all those who are of working age (16-64 years). One of the ways in which this differs from the traditional definition is that it takes into account those who are discouraged due to the difficulties of finding a job in recessions.
The need of households to find a job is a much broader concept than the traditional unemployment rate is able to reflect. Firstly, in recent decades developed countries have seen a gradual concentration of unemployment in certain households. This is why access to employment is measured using the percentage of people who live in households in which all those in the labour force are unemployed. The crisis tripled the number of people in this situation in Spain, and even though the recovery has led to an improvement in this indicator, in 2018, still over 6% of households included those able and wanting to work, but who were completely excluded from the labour market.
Secondly, whilst having a job is, without doubt, necessary for any able person of working age, this is especially true for young people who have completed their education and who, without this first job opportunity, will have their professional and economic progression in the labour market hampered. The unemployment rate among young people aged 20 to 29 is seen as a good indicator of the coverage of this need in a key period of the working life. Between 2005 and 2013 this rate tripled, although the economic recovery has had a positive effect: falling from 41% to 24%. All the same, in 2018 almost 1 in 4 young active people aged 20 to 29 was unemployed.
INDIVIDUALS OR HOUSEHOLDS:
Given that the population is organised into households, when focusing the analysis on the unemployment rate, and therefore on individuals, this assumes that the social effect is the same whether that individual lives on their own or lives with a dependent partner and minors. The social impact of unemployment is magnified in society if the well-being of a person depends on those in the labour force they live with having a job. In our analysis we have looked for indicators that offer specific information on this social impact, and we can therefore calculate the number of people in the population whose well-being is directly affected by a member of their household in the labour force being unemployed.
Another key aspect of the labour market becoming more precarious, and which is not reflected in the traditional unemployment rate, is the constant reduction in the work intensity of the labour force of many households, depriving them of the level of employment they would ideally like. This aspect is commonly referred to as “vulnerable employment”, or even “underemployment”. It is common for this type of employment to be linked both to involuntary part-time hours and work contracts for a fewer number of hours than are truly desired.
The information from the Active Population Survey (EPA) on the number of effective working hours and desired hours has been used to calculate the number of people in the population who live in households in which those in the labour force are working, on average, less than 20% of their working potential. The social need of those living in households to reach a minimum number of paid working hours increased significantly during the crisis. Between 2005 and 2013, the number of people living in a household with low work intensity tripled. However, as is the case with the other employment indicators, the recovery of economic growth from 2012 to 2018 has lessened the frequency of this social need, which has decreased from 11.8% to 6.8%.
Vulnerable employment can also be linked, according to the ILO (2017), with employment which does not include social security contributions nor does so in a limited manner, as well as with low-paid jobs which offer wages below the corresponding legal minimum. These aspects of employment vulnerability will be dealt with in challenge 3 of this area, when the challenge of having an adequate salary is addressed.
The significant increase in the unemployment rate during the recession also led to a significant number of people transitioning from being active to inactive, due to the “discouragement effect” caused by the continued lack of success when searching for a job. Despite these people wanting to work, they are not included as unemployed when calculating the traditional unemployment rate, or among those who are in the labour force but have low work intensity.
To overcome these issues, an indicator has been created for inactive people who, while being available to work, say that the reason they are not looking for a job is because they do not think they will find one. The evolution of this indicator is clearly related to the economic cycle, with a strong increase among this group between 2008 and 2012. Data from 2018 show that this indicator has once again decreased, although it is still not at 2005 levels.
Two other relevant factors that reflect the evolution of the population’s need to find jobs are the duration of the periods of unemployment and job insecurity. To measure its social importance, on the one hand, the number of people who live in households in which half or more of their unemployed individuals have been searching for a job for over a year has been calculated, and on the other hand, the number of people who live in households in which all employed people have a temporary contract has also been calculated.
The crisis has caused a significant increase in the population who live in households with long-term unemployment. In 2012, one in five Spanish people lived with a person who did not have a job and had been searching for one for over a year. This percentage decreased between 2012 and 2018, but it still remains at a high level compared to the situation prior to the crisis.
In regard to insecurity, measured as all members of the household who work having a temporary contract, the recession had a significant effect in pushing those with this type of contract into unemployment, as has already been demonstrated by several specific reports on the Spanish labour market (Labour Observatory, FEDEA). This also led to a drop in the number of workers with a temporary contract in certain households. In 2012, only 9% of workers lived in households in which all the employed individuals had a temporary contract. The recovery of economic activity has again led to the generalised use of fixed-term contracts, with the indicator increasing from 6.3% in 2013 to 10.1% in 2018.
The Spanish National Institute of Statistics (INE), just like Eurostat, defines employed people as those aged 16 or over who during the week in question have had paid employment or have carried out a self-employed activity. Work of a sporadic or occasional nature that entails at least one hour in exchange for a wage or any other type of remuneration, in cash or in kind, is included in the definition of work.
The unemployment rates in Spain are high compared to those in other EU countries, even in expansion periods, and they increase to drastically higher levels during recessions.
The last recession increased the unemployment rate in our country (as was the case with Greece) much more than in the other countries of the EU, especially for young people.
2. Second challenge:
Having appropriate working conditions
This challenge is measured using the indicators shown here. The meaning of the figures is explained in the remainder of the section.
A second key aspect of the needs of the population in relation to the labour market is the quality of the jobs that workers have managed to find. It involves measuring whether the jobs found come with appropriate working conditions. Measuring the quality of a job is no easy task due to the various dimensions involved in any given job. Generally, studies on this subject take into account both salary and the intrinsic quality of the job depending on autonomy or social status, the quality of the contract as regards stability and professional development possibilities, as well as the physical risks and to what extent it allows a balance between personal and family life (Muñoz de Bustillo et al., 2011).
The indicators for this challenge focus on several key aspects of the quality of a job (except for physical risks), and include the appropriateness of the worker’s skills for the position they hold, an essential aspect that must be taken into account for the design and improvement of staff training policies in the case of over-qualification, and boosting professional development in the opposite case.
The results on the working conditions of the jobs indicate that the recession caused an increase in the skills mismatch with the position held. Almost half of workers (43% in 2015) say that they hold a position for which they have too much or too little training. The percentage increased by four percentage points during the first phase of the crisis, between 2005 and 2010. More than three quarters of these workers are over-qualified, while the opposite applies for one quarter.
The crisis also contributed to an increase in the number of employed people suffering from uncertainty regarding the working timetable. The corresponding indicator increased gradually between 2000 and 2010, from 9% to 16%, but decreased to 11.8% in 2015, to a level below the figure for 2005. The frequency of working night shifts or bank holidays follows the evolution of the economic cycle, increasing when the economy grows and decreasing when economic activity contracts. However, the indicator decreased between 2000 and 2005, despite the economic growth.
Finally, the last indicator for this second challenge is focused on the subjective perception of workers regarding the working conditions of their position. This indicator is clearly affected by how people in work perceive their well-being when unemployment increases as significantly as it did in Spain. It is clear to see that, although around 20% of employees are dissatisfied or very dissatisfied with the working conditions of their job, this percentage dropped to 17% in 2010, when unemployment rose to very high levels, and increased again in 2015 when the recession started to subside.
3. Third challenge:
Having an adequate salary
This challenge is measured using the indicators we show here. The meaning of the figures is explained in the remainder of the section.
The third challenge associated with the needs of the population in relation to the labour market is that the salary that the position provides is enough to have a decent standard of living in the society in question, so that it allows all members of the household to avoid poverty and at the same time reduces the uncertainty that comes with income insecurity
This challenge includes three different aspects that operate within any concept of household income from employment and which must be differentiated: hourly wage, number of working hours and concentration in certain households of people employed with a low hourly wage and few working hours.
To identify the first of these aspects (hourly wage), we calculate the number of employed people in the labour force whose hourly wage is below 2/3 of the median wage. It is therefore a relative threshold which is constructed based on the salary distribution and which will change with increases or decreases in the unemployment rate which tend to affect the lower part of the distribution more.
The results of the wage conditions indicate that, in any phase of the economic cycle, approximately one out of every eight employed people in Spain has a low hourly wage (below 2/3 of the median wage). In the expansion phase of the cycle, when the unemployment rate was decreasing (between 2002 and 2006), the number of workers with low salaries also decreased from 16.7% to 12.3%. In contrast, during the recession the frequency of low salaries remained practically constant, between 12.3% and 12.9% of workers, which indicates that the adjustment came by way of a reduction in the number of employed workers and the number of working hours of employed people. In other words, despite the median hourly wage rising by 13% (from 8.4 to 9.5 euros) between 2006 and 2010, the number of people employed with low hourly wages remained at around one in eight during that period.
To better identify the importance of the number of working hours in the challenge of achieving an adequate salary, we have created another indicator with the same philosophy as the last, but which uses monthly wages instead of hourly wages. This indicator is closely linked to another from the first challenge in this chapter and which measures the weight of underemployment due to the insufficiency of hours. This indicator recorded a significant rise in the number of employed people who were underemployed between 2005 and 2013, and a slight recovery between 2013 and 2018. We can now see that the percentage of employed people in the labour market whose gross monthly wage is below 2/3 of the median wage increased significantly between 2006 and 2014 (rising from 19% to 22.3%). This confirms that the rise in the number of workers with employment difficulties during the recession is more related to a decrease in the number of working hours than with a decrease in the hourly wage. It is also important to note that the presence of this phenomenon was greater in 2014 than it had been in the entire preceding decade.
TYPES OF SALARIES
Nominal wage and real wage: The nominal wage is the amount of money that an employee receives as compensation for their work. The real wage is the nominal wage adjusted for prices (in other words, adjusted for CPI).
Median wage and average wage: Median wage is that which divides the number of workers into two equal parts: those that have a higher wage and those that have a lower wage than that amount. The average wage is the sum of all the wages in a country, divided by the total number of workers.
THE EVOLUTION OF SALARIES: ANNUAL SALARIES AND HOURLY WAGES
Lastly, to globally assess the challenge of having an adequate salary, it is necessary to take into account how employed people with low salaries or few working hours are distributed across households. If they are concentrated in certain households, the income from work will not allow them to escape poverty (particularly if members of the household do not receive other complementary monetary income, such as unemployment benefits or pensions).
The indicator of in-work poverty takes into account both employment-related income as well as the distribution of employed people in households and calculates the number of employed people who live in households in which the family income is below the poverty line. The results indicate that in Spain, in 2016, just over one in seven employed people lived in poor households, a percentage which increased by two points during the recession: from 13.7% in 2006 to 15.7% in 2014.
Another relevant dimension of labour well-being is to what extent the employed person can expect that their job or income will be stable in the future. One possible approach to this need for future salary stability is to analyse the recent salary changes experienced by employees, which can be done by measuring the number of people who, being employed for two consecutive years, have experienced a reduction of at least 20% in their net annual salary.
The results indicate that in 2010 and 2014, one in six employees had experienced a salary decrease of over 20% in the last year, although this percentage fell to a little less than one in seven between 2014 and 2016, which shows a pronounced sensitivity to the rhythm of economic growth.
WHAT IS AN ADEQUATE SALARY? HOW HAS THE MINIMUM WAGE EVOLVED? HOW DO WE COMPARE TO THE EU?
Salary and employment gender gap
In the Spanish labour market, the differences between men and women have traditionally revealed themselves in a continued gap in employment and unemployment rates in favour of men, this is more marked with (often unwanted) part-time work and temporary contracts among female employees, as well as the salary discrimination faced by women and a significant segregation of women into jobs that pay less (Cebrián and Moreno, 2008; Gradín et al., 2010; Bárcena-Martín and Moro-Egido, 2013; Del Río and Alonso-Villar, 2014).
Figure "Employment gender gap: difference between the percentage of men and the percentage of women with a job" shows how the differences in the employment rates of men and women in Spain have gradually decreased between 2005 and 2013. Since then, the employment gap by gender has remained below 13 per cent. It is a similar level to the European average and significantly lower than in other Mediterranean countries such as Italy or Greece, similar to the United Kingdom and Ireland, but above the Nordic countries such as Sweden and Denmark, which have the lowest levels with an employment gender gap of around 5 per cent.
Figure "Non-adjusted salary gap: Difference between the average salaries of men and women, indicated as a percentage of the salary of men" compares the hourly wage gap between men and women. It must be taken into account that the figures have not been adjusted for other characteristics of the workers other than gender, so they also include differences in educational levels and average age. Calculated in this way, in Spain women earned 15% less than men in 2014, placing it within the EU-28 average. This is a good position compared to other European countries and the trend points to future improvement.
As Cantó et al. (2016) note when analysing the evolution of the risk of Spanish women living in poor households, in families with no income (extreme poverty) and in the households most excluded from employment (where all those in the labour force are unemployed), the gender gap trends in all these dimensions are not homogeneous by age bracket. Therefore, for example, the reduction in the gender gap between people who are at risk of poverty is largely related to a relative improvement in the economic situation of women over the age of 65 who receive pensions, in other words, income outside the economic cycle. However, the gap between the poverty risk of the youngest women and that of men of similar socio-economic characteristics has not decreased.
Therefore, the changes that the crisis caused to the poverty risk by gender are closely tied to changes in the distribution of income of women over the age of 65. In contrast, changes in the economic well-being of women who are active or of working age in Spain due to the crisis have come from an equalisation (downward) of the equivalent income level of women and men, while the recession has had very little effect on the differences in the poverty risk gap for the youngest women.