Over highlighted by Mankiw et al. (2013), the fact

Over the past decade,
countries within the European Union (EU) have seen a fair increase in the rise
of long-term unemployment (LTU), with the countries Spain and Greece experiencing
the greater portion of this in 2017 as shown in Figure 1. According to the
World Bank (2017) and OCED (2016), unemployment is considered to be the portion
of the work labour force that is without a job but yet readily available for a
job as it arises and also personally seek one within the last four weeks. While
taking into consideration that most unemployment observed at any specific time
is considered to be long-term as highlighted by Mankiw et al. (2013), the fact remains
that many EU economies are seeing a growth in unemployment while others see
only a slight decrease, and this cannot be simply ignored. Using Spain as the
country of main focus within this assignment because of its readily available
data on the economy’s performance and widespread and misuse of its Active
Labour Market Polices (ALMPs). It is shown that most of their LTU are that leaning
to the structural type and as such the government’s ALMPs need to be carefully
examined, tailored and enforced, in order to help lower this unemployment. As a
member of the Organization for Economic Cooperation and Development (OECD)
since December 14th 1960, Spain has the ability to tap into the
resources form the OCED on ALMPs that has been promoted and adopted by many
other international agencies within the OCED. The OCED main objective in
accordance to the ALMPs in Spain, is to utilize its wealth of information and
resources to aid them in stimulating prosperity and combating poverty through
economic growth and financial stability (OCED, 2017a). Currently, some ALMPs
that Spain adopt are Start-up Incentives, Direct Job Creation, Training,
Employment Incentives, Supported Employment and Labour Market Services (LMS)
also shown in Figure 2. This report will examine literature on the labour
market components, policies and its effectiveness, followed by giving
recommendations to the enhancement of its ALMPs and finally, a conclusion of
the factors examined within the report.

Figure 1: Total % of Unemployment of a
decade for six OCED countries (World Bank, 2017)

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2 – Literature Review on Spain’s Labour Market Components, Policies and

Causes of LTU in Spain

The term definition
of LTU varies from country to country and from different authorities governing
or monitoring LTU. According to the OCED (2017b) and Eurostat (2017), in
reference to guidelines of the International Labour Organization (ILO), it is
referred to as persons that have been out of employment for twelve months or
more, between the age of fifteen to seventy-four and have actively sought employment
within the last four weeks. LTU is a main measurement used to assess a
country’s ALMPs. According to EC (2017), the core driver of LTU is the labour
market’s inability to provide jobs for persons within a society due to a many
number of factors including recessions, structural changes in the economies
development, lack of education, the increasing number of unskilled persons,
lack of government support to persons of lesser social privileges, persons
living within poverty driven areas as well as the increasing number of migrants’
due to over flexible immigration laws in Spain. While LTU cover a larger
percentage of Spain’s population in comparison with other OECD countries, they
mainly affect certain groups of people which we’d now examine.

Groups Affected by LTU in Spain

Within the
Spanish labour market, addressing the situation of LTU is a major focus as it constitutes
to a large number of people which slows the recovery of the economy after
crisis. The effect of this crisis doesn’t only result in increased poverty and
social risks, but also results in a change in the ‘traditional composition of
population risk’ (Homs, 2017). There are two main vulnerable groups of LTU
which are observed and address by Spain’s ALMPs. The first of these two groups
are youths that are under twenty-five years which are considered to be the new
active population and have suffered major household income falls. The youth
population has the highest poverty risk being 26.7 per cent to 40.3 per cent as
highlighted by Homs (2017) in his journal as per the request of the European
Parliament Committee on Employment and Social Affairs. The youths considered
here are those that generally have a lower education level, with employment
opportunities being tougher on them considering their education and training
standpoint, and the negative social impacts placed on their lives by the more
achieving society.

The second of
the two groups are that of persons over the age of fifty-five. This is due to
the fact that persons over fifty-five but not yet retired would find it more
difficult to gain employment in this later stage of life to support their
well-being. At this age and above, they also become dependent on social
protection schemes in order to avoid entry into the poverty line and social
segregation. In each case, person affected by LTU become much less attractive
to employers making it much more difficult to reenter into the employment

ALMPs and conditions under which operate in Spain’s LTU

ALMPs by
definition are government programs that intervene in the labour market to lower
the unemployment and LTU rate in an economy by providing employment
opportunities for job seekers and promoting job matching for these job seekers
(EC, 2017 and ILO, 2017).

ALMPs are
considered to be a very important factor of social policy making within one’s
economy, however, as with most policies developed, there will be an opposition as
these polices are politically driven. Political determinant are factors that
can influence the proper adaptation of these ALMPs. It is argued by many that
while the ALMPs adds benefits to those seemingly of lesser privilege and lower
education, it in turn deprives the people that have invested their time and
money into bettering themselves from advancing faster in life. This is because
ALMPs aims to promote employability, and in doing so, bring many new persons to
the job market which causes limitation of access to further employment and
restrictions on higher wages as the company labour force is expanded to
facilitate these policies. For Spain, as shown in Figure 2 below, some of the
ALMPs employed are (1) Start-up incentives, known locally as Youth Guarantee, (2)
Direct job creation in the public sector, (3) Supported employment whereby the
government covers part of the employee’s salary, (4) Employment incentives
whereby companies are encouraged to hire persons from a certain group of people
and in turn received benefits such as tax reductions, (5) Skills development
training whereby persons are trained in a specific field to match employment
need, and (6) Labour market service which provides access to job searching

Figure 2: Active
labour market policy expenditure by type of action, Spain-EU28 taken from Homs

For the purpose
of this analysis, we’d be focusing on what is considered to be the three main
ALMPs for Spain which are start-up incentives grouped with employment
incentives, skill development training and labour market services as these are
ones that most capital investment is spent on.


Start-up and Employment Incentives – Youth

In March 2013,
an initiative referred to as Strategy for Entrepreneurship and Youth Employment
was employed for the period 2013-16. The programme facilitated the promotion
and development of individuals, and operated under conditions targeting men
under the age of thirty, women under the age of thirty-five and accommodation
for disabled person by an additional five years added to the age ceiling in
each gender. This strategy included one hundred measures, where fifteen are
early-impact measure and eighty-five are medium to long-term. The early-impact
measure included (1) training programmes leading to certification with
employment commitments, (2) promotion of entrepreneurship and self-employment
with an eighty per cent reduction during the first six months in the minimum
contribution for common contingencies, (3) aid to setting up a business with
credit (financial qualifications), protection (return to receiving unemployment
benefit if their company doesn’t flourish after five years), and the ‘know how
to’ set up your business by creating offices geared to guiding persons through
the business setup process and operations, (4) incentives for hiring, where
person unemployed for twelve months or more are given a job in the public
sector and trained part-time under the Skills Development Training programme.
This would generally facilitate over one million young people. The eighty-five
measures included actions to improve the structural issues of employability
through education, training, foreign language skills, entrepreneurship, communication
technologies and extended features of the same early-impact measure as
highlighted by Spain’s Minister of Employment and Social Security Fátima Báñez
García in his 2013 parliament presentation. These polices were further extended
in January 2017 for the period 2017-20 however without any sort of updates to
the measures previously highlighted (Homs, 2017).

Looking at the
performance of this ALMP, based on data provided by OECD, from June 2017, there
were 664,279 applicants registered on systems which was considerably short of
the estimated target of at least one million people. On the bright side, the
number of unemployed participants involved reflected a growth from 2.3 per cent
to 17.3 per cent which statistically speaking is a good advancement. More
companies have also opted to join the cause as they benefit from reductions in
their social security contributions when hiring participants that completed the
on-the-job training. In July 2017, a pay supplement under the umbrella of
‘Shock Plan for Youth Employment’ was also established, providing trainees with
a fix salary of €430 for a period of eighteen months which is greatly
attracting much more participants making the programme more fruitful and
justifiable to the government. Data statistics by the OCED and supported by the
European Commission (EC) also show that thirty per cent of the total new
participants have been integrated into the job market as of 2016 which is a
reasonable step towards eradicating LTU.

While the above
are clear advantages of this particular ALMP in Spain, they are not without
their disadvantages. Disadvantages of the aforementioned includes, (1) substitution
effects within firms, (2) persons that were without a job for at least twelve
months are less favourable to employers, (3) the misuse of authority to
facilitate certain persons, and (4), it’s a bit too restricted in that the
applicant must have family responsibilities and already exhausted all other
alternative assistance benefits. Another disadvantage is also the access limitation
of the programme reach as many need to be properly decentralized.


Skill Development Training

This skill
development training is necessary as unemployment spells become longer and as
the economy is restructuring, thus without these, a lot of affected persons
would become obsolete in their area of expertise as the need for certain skills
become eradicated. Based on surveys conducted on Spain’s economy by the EC
(2017), the result of training shows the largest positive long-term effects on
resolving LTU, however, is quite expensive. It is without a doubt that the
development training addresses key setbacks in Spain, which function for the
larger percentage of lower educated and unskilled personnel that add to the overall
LTU per cent, as opposed to the incentives under the Youth Guarantee programme.
This ALMP has been used in Spain together with information from the OECD ‘Skills
for Jobs Database’ to make assessments on what training is needed. For example,
the need to offer the currently ongoing ICT training was started based on an
OECD survey that indicated twenty-three per cent of persons within Spain lack
sufficient computer skills training (OECD, 2017c).

While we have
seen the benefits of the overall scheme of performance, according to González
Gago (2017), using data provided by M. Jasen on their 2016 publication “The
challenge of insertion of long-term unemployed”, it can be found in specific
regional areas where the programme is administered, that one in every eight
low-skilled persons registered under the programme from January 2015 actually
receive their training within a three-month turnaround period and one in every
twenty low-skilled very long-term unemployed person would actually receive
training, thus creating large gaps that requires the governments attention in
enhancing this ALMP to be more effective.


Labour market services

The objective of
this type of ALMP is not to promote labour-market reentry, but to promote
better job matching, i.e. connecting job seekers with jobs. They also play and
important role beyond the scope which they are intended for once utilized on an
individualized tailored approach. As for Spain, the labour market services
provide not only job search assistance, but also counselling, career guidance
services and motivation services that can be used by participants to further
enhance themselves which in turn can aid them in securing long-term employment
after any probation period and help target the development of ‘high-demand’
skills. On the note of counselling, motivation and career guidance, these
strategies have been also employed by Ireland where one guidance officer is
provided to every 500 students, and in Finland and Germany where these officers
target indecisive school leavers, unemployed people and those wanting to change
career paths to prevent unemployment from rising (OECD, 2003). Career guidance
websites are also being used by Spain, which is an idea also implemented by
Italy (Figure 3), England (Figure 4) and France (Figure 5). These guidance and
provisions have raised the level of awareness and people enrolling in this AMLP,
however, again isn’t operating nearly close to its truly potential, as based on
data provided by OECD (2017c), just twenty-three per cent of the persons in
Spain using the system believe they are receiving beneficial advice. Similar
figures appeared for France with twenty per cent, England with twenty-three per
cent and Italy with twenty-six per cent (OECD, 2017c).

For job search
assistance, they are used under the condition that the individual using the
service have undergone some level of education and training on their own or
with one of the ALMP services. Spain’s Public Employment Service (PES) (National
and Regional) under this ALMP plays an integral role in the success of this
programme as they are responsible for managing and overseeing the entire job
seeking assistance with applicants. The PES, when meeting with persons would perform
an assessment of that person and then determine if they should provide the job
matching assistance, or to first enroll the person within one of the skills
development training programme. González Gago (2017), using data provided by
OCED, show that while the use of the PES has not been as widespread and
effective as hoped for, statics indicate that twenty-three per cent of
participants found employment and sixteen per cent got the opportunity
(interviews) towards employment.



Figure 3:
Italy’s career guidance website: https://eduscopio.it

Figure 4:
England’s career guidance website: https://nationalcareersservice.direct.gov.uk


Figure 5:
France’s career guidance website: https://www.pole-emploi.fr/region/ile-de-france/index.html

3 – Recommendation on The Enhancement of Effective ALMPs

policies and procedures directly dealing with and lowering the LTU are
operation, it has not reflected much on the respective increase in unemployment
due to the fact of a reduction in the active population which had been mainly
dominated by the youths and older folks, i.e. persons under twenty-five and
persons over fifty-five years respectively (Homs, 2017). With this in view,
activation strategies based on offering income provision and endorsing labour
market reentry for LTU have grown very important and significant in decreasing LTU.
While Spain observe and operate quite a few policies to help curb the LTU, they
are not without its shortcoming and needs a bit of refining to achieve better
results. The following are recommendations under the highlighted ALMPs for


Proper monitoring and evaluation of ALMPs – The
government of Spain should invest in fully monitoring and evaluating the
outputs of the ALMPs as there are no record of the true success output of these
policies enforced (Ramjitsingh, 2017). This is done in the UK and France where
its programmes Jobseeker’s Allowance Skill Conditionality, and Investissements
d’Avenir respectively, undergo evaluation to determine what works, what doesn’t
and what new features should be implemented (OECD, 2017c).

Raising the awareness of the ALMPs – while many
ALMPs are designed to get people back into the job market, very little about
the actual jobs available are promoted thus, there is nothing to really attract
persons to get on board.

Coupling ALMPs with PLMPs – For ALMPs to work
well, this should be coupled with PLMPs as people tend to always want
incentives (mainly financially) in order to participate.

Better implementation and monitoring of PES and
its Human Resources – many people are still unaware of the PES and many believe
that it does little for them. Seminars should be held on raising the awareness
and need of utilization of these services. While there’s staff to administer
PES, there’s never any evaluation done on the people involved in these
government position and as such many of the workers spend time on their own
administrative task than actually supporting the clients, thus the PES service
should be outsourced to the private sector.

Better targeting of unemployed and unskilled
individuals – while it is good that some measures are in place to assist the
needy, a greater initiative needs to be taken to get people in hard to reach
areas of the country as most of the AMLPs are only actioned in the metropolitan
areas of each region within the nation.

Adopting focus specific skill training programme
– taking a look at Germany, they use two programmes, one which focuses
specifically on improving qualifications for the unemployed called Bundesprogramm
zum Abbau der Langzeitarbeitslosigkeit and the other called Social
Participation on the Labour Market (Soziale Teilhabe am Arbeitsmarkt) that
focus on just employability and social involvement as many unemployed are
socially handicapped.

Invest more in the ALMPs – based on Yin, Caldera
Sánchez and Garcia-Perea (2017), using data provided by the OECD, Spain invest
considerably less than the average investment per unemployed individuals than
any other OECD country. Their average investment as a ratio to GDP per capita
is 3.9 per cent versus OECD 14.3 per cent using last provided 2013 stats, thus
much more is need to be invested behind their people.


4 – The Conclusion

Employing information from the ILO, OECD, EC and
European Parliament, Spain’s labour market recovery over the last four years have
still be quite sluggish in light of all ALMPs being utilized, due to the fact
that the percentage of the population is rising much faster than the percentage
of people these policies are assisting year after year. While there are some
great ALMPs being engaged and commissioned, it is not without flaws and setback
that can easily be address and fixed to establish a better operational and
effective policy to combat the ripples of unemployment within the Spanish
labour market. Understanding the Spanish culture and the of needs of the people
have proven to be very important within their society as the programme
developed should always be suited for the people in order for them to respond
well to it. The recommendations mentioned under the section 3 above could
surely lend hand to Spain’s ALMPs and thus taking them one step forward to have
their employment level rise above its current status below pre-crisis levels.