Country for old men

Spain embarks on dispirited recovery

Spain can at last look forward to growing again in 2014. But even as the economy slowly recovers, it won't feel like it. The single scariest statistic in Spain - the 26 per cent unemployment rate - will barely budge. Without further action, it will take Spain decades to reach pre-crisis levels of employment.

Few will find jobs in 2014. The Organisation for Economic Co-operation and Development (OECD) says there has been a small increase in the number of permanent contracts since the labour reform of 2012. But the temporary workers are still about a quarter of the workforce. Only 7.6 per cent of the jobs created in November used permanent contracts. Temporary workers are four times as likely to get fired as those on permanent contracts, according to think tank FEDEA. The government recently reduced the number of types of contracts, but without proper incentives to opt for permanent ones, the proportion of temporary workers will stay stubbornly high.

Spain suffers from a high structural unemployment rate that won't disappear even if the economy grows beyond next year's estimates of less than one per cent. Assuming the economy grows an annual 1.9 per cent, it would take nearly 20 years for the unemployment rate to revert to 2007 levels (seven per cent), according to PWC. Even in a scenario where growth is at 2.3 per cent, unemployment wouldn't drop below 10 per cent before 2024.

These are just guesses, but they are disturbing considering that the denominator - active population - is also shrinking. Spain had one of the highest rates of migrant outflows in 2012, along with Ireland, Greece and Portugal. True, the majority of those leavings were immigrants. But the national statistics institute predicts Spain will lose 2.6 million people, or 5.6 per cent of the population, over the next decade if these trends continue. The largest loss will be in young people.

Emigration of Spain's skilled workers in itself isn't necessarily bad for Spain, provided they come back. Emigrants acquire valuable skills abroad, including languages, and they build up experience in faster-growing countries. Diasporas can help exporters at home. But a prolonged brain drain will weaken the country. Few will return home if job opportunities remain scant. The Spanish government will have to laser-focus on job creation next year.