Is education the solution to high youth unemployment in Spain?

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January 2013 Juan Ibaez Martin

Is education the solution to high youth

unemployment in Spain?

INTRODUCTION

The present global financial crisis that started with the crash of the housing market in the US in 2007

and the subsequent collapse of such large financial institutions like Lehman Brothers in 2008 paved

the way to an unprecedented succession of bank bailouts by governments across the Western World

in what has arguably emerged as the worst economic crisis since the 1930's Great Depression.

Despite the fact that most of the attention has focused on the economy and a lot of resources have

been directed towards keeping afloat the financial institutions (that caused the economic global crisis

in the first place), this is not just a crisis of the banking system or the housing market. This current

financial recession has produced a serious spiral of unemployment increases that has a human

dimension attached to it; that is, the emotional, economic and personal cost to millions of workers

that have become unemployed as a direct consequence of the present crisis.

In Spain alone, according to recent unemployment figures released in April 2012 by the Spanish

Statistics Institute (INE) unemployment rates continued to increase for the general population up to

24.4%, reaching a new high since the start of the financial crisis and a staggering 52.2% for youth

unemployment. Contrasted with 6.9% prime age population unemployment and 18.2% youth

unemployment back in 2007 just before the collapse of the housing market, it would be an

understatement to claim that Spain has got a problem with unemployment and particularly with

youth unemployment that has been increasing at an alarming rate and with no end on sight.

The causes for the significant higher youth unemployment in Spain before the financial crisis were

certainly varied and complex to fully understand but numerous articles recently published in Spain

(defiantly ignoring the magnitude that the impact of the economic crisis has had on unemploymentfigures) don't hesitate to direct their focus of attention towards youth failure to pursue an academic

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alternative pointing out to the fact that Spain has one of the highest rates of school drop outs in the

EU (Villagomez 2009 p4).

National institutions in Spain have not just been slow in their response to tackle the issue of high

youth unemployment but have been directly criticising young people for "their lack of focus and

commitment" (Higgings 2011 p5) whereas international organisations such as the International

Labour Organization (ILO) have been focusing their attention on Spanish youth unemployment as a

rather "structural issue with the labour market, requiring reform" (Higgings 2011 p5)

At the European level, since the onset of the financial crisis, youth unemployment raised from 15%

to over 21% in 2010 which was predictably going to affect young people worse during an economiccrisis. However, governments have stubbornly been directing their resources towards the banking

and financial aspects of the recession whilst young people have been losing out on benefits and

services, particularly in regards to economic resources that were initially destined to help young

people integrate in society through community projects and youth organisations (Porcaro, 2010 p9).

Furthermore, the consequences of youth unemployment go beyond the economic impact that the loss

of income tax can have for the national economy, it can dramatically affect young people's prospects

of being employable in the future and lead to social exclusion (with or without qualifications). But

according to Ramirez-Guerrero, there is a further negative aspect to youth unemployment because it

tends to mainly prey on the least educated and economically disadvantaged youth further fuelling the

problem of social exclusion amongst the poorest sections of the population (Ramirez 2002 p6).

However, whereas I advocate for the expansion of vocational and academic education in Spain, I do

not claim that education is the solution to the problem of youth unemployment as the Spanish

government and many academics alike would tend to argue. Recent studies claim not just that there

is an "excess" of University graduates in Spain for whom there are no available jobs but also, those

who find employment are normally overqualified for the jobs they perform, further displacing those

young workers from a more unprivileged background that would have traditionally taken on those

positions. As the offer of available young workers increases and the job market decreases,

companies raise their standards requiring higher qualified employees. thus displacing those without

qualifications.1

1 Thurow (1975) according to Garcia 2011 p8

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In the above sense, being qualified in Spain raises the prospects of being employable as statistics

seem to illustrate and the government points out to this fact as evidence that education is the solution

to the problem but as we will find out this is an oversimplification of the causes for the high levels of

youth unemployment in Spain.

Notwithstanding the fact that the economic environment of a country is a very important determinant

in relation to youth unemployment rates (Gomez-Salvador, 2008, p6), little consideration if any is

given by the government to the crucial structural problem of the Spanish economic model, that is,

the particular intensive labour sectors of Spain's economy which being heavily reliant on

construction, tourism and agriculture not only attracts unskilled workers but also feeds theunderground economy as it makes it easier to ignore national administrative rules (Reinery

2003:p13).

For the ILO the problem of youth unemployment stems from the government's failure to enact the

relevant policies and legislation in order to change the Spanish economic model. The

implementation of such policies should be aimed at providing the economy with high skilled jobs for

an increasingly educated youth that often end up in low skilled jobs or emigrating abroad where their

skills are truly required.

A trend making the headlines in the Spanish press in recent months focuses on an increasing number

of highly skilled and educated youth leaving Spain to work in the UK, Switzerland and Germany, the

latter having experienced a high demand of workers with engineering and telecommunications

qualifications.

The main aim of this essay is to debunk the misconception that the Spanish youth is uneducated and

hence mainly responsible for the decline of their employment prospects in particular for not pursuing

an academic route and exacerbated by a high incidence of early school leavers. I will explore what

few authors are currently openly claiming, that is, that the problem lies amongst other things, in the

pursuit of a proven failed economic model of the Spanish economy which has been for far too long

disproportionately reliant on tourism, the construction industry and related sectors like the financial

and real estate services which have been undermined after the collapse of the construction industry

in 2008.

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Employment policies in Spain should have supported the creation of quality jobs for an increasingly

well educated youth aimed at the structural transformation of the Spanish economic model away

from sectors based on the convenient (probably for political purposes) medium and short term

economic expansion models offered by the tourism and construction industries.

The insistence by Spanish authorities and academic elites alike that providing young people with

further and higher education should solve the problem of youth unemployment is a perception that is

at best deceptive in the sense that although not entirely wrong does not provide with a satisfactory

answer to the real root of the problem which I will try to illustrate with the relevant research in the

following chapters.

To claim that graduating in Spain advances one's chances to get employment is not entirely

unfounded. Although the research suggests that whilst on the one hand the higher qualified a

candidate is, the higher the chances of being employed are, on the other hand we find out that Spain

cannot provide with adequate jobs to a high proportion of its well educated youth in the labour

market who end up performing unskilled jobs for which they have not been specifically trained.

How can we then reconcile both contradictory claims, on the one hand education as the solution to

high unemployment whereas on the other young people with higher education not being able to

pursue a career for which they have invested many years of formation? There are several answers

one of which can be found in the very definition of youth unemployment itself.

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THE DEFINITION OF YOUTH UNEMPLOYMENT

Unemployment takes into account any person between the ages of 15 and 74 who is actively looking

for work or has been in the previous four weeks and is ready to take an offer within a minimum of

two weeks notice according to the International Labour Organization.

For youth unemployment the age bracket most commonly used is between 15 and 24 which

coincides with the age at which most academic (or vocational) students are pursuing their careers on

a full-time basis and hence not available for work and not part of the labour force which is taken into

account in calculating unemployment figures.

This in turn produces a problem when analysing unemployment figures that are distorted due to the

type of the methodology employed in the calculation of the jobless rate. For instance the way in

which unemployment is measured produces a huge distortion between adult and young

unemployment figures because of the high percentage of young people in full time education.

Bearing this in mind we have two main methodological ways of measuring youth unemployment.

The first one termed "youth unemployment rate" is used in relation to how many young people are

available for work (young people not in full-time education seeking work) and the second being

calculated as the share of young people unemployed in relation to the entire young population

termed as "youth unemployment ratio".

According to figures from Eurostat, the Spanish youth unemployment rate for the last quarter of

2011 was 48.9% whereas the youth unemployment ratio was 19% during the same period2. The

second methodological approach has its advantages as it seems a priori to give a more accurate idea

as to the real extent of the problem. Also the unemployment ratio for youth unemployment is much

lower than the unemployment rate.

Therefore the use of the first methodological approach for the calculation of unemployment figures

is flawed in the sense that it is highly distorted when comparing between adult and young sections of2 http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment_statistics

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the population. This is simply down to the fact that a significant proportion of young people are in

full time education and are not taken into account in the calculation of unemployment rates. One

simple way to eliminate such disparity would be to treat students as part of the active work force.

Higher education students are in a sense active or actively pursuing a career or "working" towards

achieving a qualification. This would also give a more precise idea as to the real amount of the total

unemployed population and help towards producing better comparisons between adult and young

unemployment figures.

Whilst it is not my intention to advocate for or against a specific type of measurement I am just

exposing the deficiencies of the existing ones and I would like to claim that both are equally

deceptive unless the definition of what is known as "worker" is changed to include the approximatethree million people in full time education or training. To illustrate my assertion when looking at the

youth unemployment ratio of 19% we can argue that 81% of the Spanish young population between

the ages of 15 and 24 are active either working or in full time education which can be construed as a

positive fact but it does not provide an accurate idea of how many people are in paid employment in

order to assess the real condition of the youth labour market.

On the other hand, when we talk of 52.2% youth unemployment rate we either tend to get thewrong impression that the other 47.8% of youths are in employment or we are misinformed as to the

real percentage of youths in employment as we are not being made aware of the number of young

people in full time education or training programmes and therefore the real extent of the problem

gets distorted.

What neither of the two methods are able to establish is how many are in "employment" as a

ratio/percentage to the total number of young people in that age bracket between 15 and 24 years of

age. For instance in 2010 according to INE statistics the number of young people from 15 to 24

years of age was 4,860,134 whilst the number of those in formal education was that same year

according to Eurostats 2,911,945 (or 59.91% of them in education).

By finding out the youth unemployment rate for that same year we can find out how many young

people really were in work. As that was 40% for youth unemployment we can ascertain that out of

4,860,134 young people only 1,948,189 were available for work3 (deducting people on full time

3 This does not take into account the inactive population (not unemployed) who are neither inemployment or education.

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education) and out of this figure we can assert that 40% is equivalent to 779275 people unemployed.

We can now work out how many are in employment: 1,948,189 - 779,275 = 1168914. Now we are

one step away to find out the real ratio of employment in relation to the young population. For

instance, if we know that out of 4,860,134 young people only 1,168,914 are in paid employment

(notwithstanding the fact of whether you are in full time education or not), this seems a better

indicator of the condition of the job market. The results expressed as a ratio show that there was only

one youngster for every four with a paid job in Spain in 2010 (1 in 5 according to my calculations

with a 52% unemployment rate). Looking at it in a different way we can assert that there was a 25%

"employment ratio" (this is a far more concerning reality that our official method for measuring

youth unemployment would portray). On the other hand the unemployment ratio for the same period

would equal 16% (according to my own calculations). The latest is confusing because it gives adistorted impression when we don't take into account (or don't know) the number of students in the

equation.

What all this proves is the fact that the omission of data regarding the numbers of full time students

tends to disguise the extent of the problem and the condition of the employment market. When

working with youth unemployment official

data, the crucial aspect to bear in mind is the

amount of full time people in education or

training that gives us the real sense or extent

of the problem of youth unemployment.

On final illustration to the point I am making,

when comparing youth unemployment across

European countries we are not comparing like

for like as the number of people in education

and/or training in each particular country of

students will determine the real extent of the

problem. For instance, Greek and Spanish

youth unemployment rates were very similar

in 2011 according to picture 1.

Fig 1. Source: Financial Times Online 2012

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What would determine to a great extent the shape of the labour market would be the difference in the

percentage of students for each country, that is, if the percentage of students in Spain is far higher

than in Greece that would determine that youth unemployment is far worse in Spain than in Greece

in contrast to what the official data seems to portray.

It follows that the definition of unemployment will inevitably affect the way policy makers will

tackle the problem of unemployment. To illustrate this I would like to introduce the concept of

employment creation versus unemployment reduction. It is clear that what I mean by employment

creation is the positive creation of jobs through investment or incentives. However employment

reduction does not necessarily entails the creation of jobs but various other means rather than the real

creation of jobs like for instance a simple change in the definition of unemployment or the shiftingof youths from one category to another like for instance, from unemployed to full time

education/training or by keeping them under the same category for the longer possible period of time

like the reduction of the rate of drop outs in compulsory primary and secondary education. In this

sense I would like to assert that the promotion of education and or training courses by exploiting the

loopholes of what the definition of unemployment has to offer can be used as an effective tool in the

reduction of unemployment.

Having said that I do not claim that the promotion of education is not to be pursued, quite the

contrary I believe this is a necessity that undoubtedly improves the chances of social mobility but

should not be used by political leaders to exclude their responsibilities towards the creation and or

promotion of suitable jobs to provide for the substantial increase in a higher qualified workforce.

No doubt that if the present economic model of the Spanish economy cannot provide sufficient jobs

for the unemployed youth the other alternative left is to support and promote education regardless of

future job prospects at least within the national borders. That explains the authorities vested interest

in promoting higher education regardless of job availability within the Spanish national borders.

The problem with job availability for young people is not a new problem in Spain, in the last three

decades the barrier of 40% youth unemployment rate has been reached in as many times, therefore,

the problem with which the Spanish youth are confronted is not a new issue nor arises out of this

crisis or in the context of how well or bad the education system has been performing. The main

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problems associated with youth employment or the lack of it are according to Felgueroso (2012) the

high incidence of school drop outs, over-qualification and employment insecurity.

The persistency of the above mentioned problems have continued through too many decades despite

of the fact that there has been a two-fold decline in the participation of young population in the

labour market. First, through a higher proportion of young people remaining longer in education

(Russel 2001 p2) and secondly due to their long-term demographic decline as illustrated below on

figure 2. For instance, the total young population between the ages of 16 to 19 is a third less than it

was at the beginning of the 90's and a fourth less between the ages of 20 to 24 for the same period.

Fig 2. Source: Projections of population of INE elaborated by Felgueroso 2012 :4

The fact that youth unemployment has been so persistently high despite of the decrease of the young

population and the increase of education seems to point out towards a failure to provide youth with

the appropriate and adequate opportunities to join the labour market. One of my main criticisms is

based on the fact that only 25% of University graduates are working in positions requiring the level

of education they have attained (Felgueroso 2012 p7). This fact should lead us to question what

other alternatives there are beyond promoting higher education and whether such promotion by itself

is the answer to reducing the high levels of unemployment.

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EDUCATION AS THE SOLUTION TO YOUTH

UNEMPLOYMENT

Statistically it is well proven that the prospects of being employed increase in direct correlation to

the level of studies achieved. Therefore it is understandable that education should be promoted as a

key factor determining the type of job opportunities and choices available to those who pursue their

academic or vocational training. As figure 3 shows the correlation between level of studies and job

prospects in Spain is clear and has been quite consistent for the last few years since 2005.

According to Felgueroso (2012), out of the nearly 1.8 million unemployed under the age of 30

haven't managed to complete their studies beyond the secondary compulsory education. Bearing in

mind that unemployment rates are significantly lower for those having completed secondary and

higher education with just over 25% and 20% respectively it seems natural to emphasise the fact that

education enhances job opportunities. For that reason, the Spanish authorities like many others have

been so preoccupied with the well functioning of the education system.

In 1990 the Spanish government introduced a new law (LOGSE) to extend compulsory education

from age 14 to 16. Until then

only primary education was

compulsory. Secondary

education was extended from

three to four years and was

divided into compulsory (ESO)

and post-compulsory each

stage consisting of two

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academic years. This gradually came into full effect by 1999 when the old system was totally

replaced.

Fig 3. Source: Felgueroso 2012 :5

The results of the implementation of the new law not only meant that ESO became compulsory for

the first time but it also encouraged higher numbers of enrolments into the second stage of

secondary education.

As a direct consequence the distribution of the Spanish population by level of studies saw a

significant increase. In 2008 the number of people with ESO or above represented 68%, a figure

10% higher than only eight years earlier (Barranco 2010 p 33). During the same period 3% had

opted to progress through the post-compulsory stage of secondary education or higher.

The main problem that the education system faces and there is indisputable consensus on this point

is the high incidence of school leavers amongst the youth in comparison with most European

countries. From 2000 until the beginning of the financial crisis in 2008 the percentage of ESO drop

outs had increased by 2.8% (Barranco 2010 p34).

Fig 4. Source: Garcia 2011 : 5

Figure 4 above shows how little progress there has been in order to increase the percentage of young

students completing secondary education in comparison with most European countries. According to

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Barranco, as the great majority of students that complete ESO tend to finish the post-compulsory

stage of secondary education, by tackling the problem of the drop out incidence during ESO, he

claims that the number of young people continuing in education would increase.

Whereas the drop out figures can be alarming at around 30% since the mid 90s according to

Felguero (2012 p5), on the other hand, many researches fail to point out that Spain has reached the

requirements established by the European Strategy 2020 with a 40% of its population between 30

and 34 years of age having completed higher education studies.

Further, the percentage of youngsters between the ages of 18 and 23 that studied first and second

year University degrees had been increasing up to 2.1% during the 8 years prior to the onset of theglobal financial crisis (Barranco 2010). Further, the number of University graduates between the

ages of 25 and 34 have reached 39.2% (Garcia 2011 p7) , 5.1% more than the average of the EU15.

However we keep hearing the criticism addressed towards the youth for their lack of commitment

and the government failure to keep under 10% the drop out figures in line with the requirements of

the European Strategy 2020 (of those between 18 and 24 years of age) Felguero 2012.

Felguero goes on to argue not just that there is a problem with early school leavers but completely

ignores the tremendous improvement there has been in relation to the significant increase in young

Spanish graduates and claims that the deficiency in the level of education amongst young people

explains the considerable limitations in the growth of employment in a great variety of sectors in

particular those of intensive knowledge sectors and technical and professional occupations (2012

p6).

That assertion is in stark contradiction to the reality of the thousands of young Spanish graduates

experiencing an exodus towards other European countries like Germany that has experienced a high

demand of workers with engineering and telecommunications qualifications. In a recent article

published in the Economist, Cesar Castel, the director of operations for Adecco in Spain claimed that

This generation of young people who are leaving are our best qualified ever...It is a huge loss of

investment for Spain. On average it cost us 60,000 euros to train each engineer, and they are

leaving.4.

4 http://www.economist.com/blogs/freeexchange/2012/04/labour-markets-0

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Further according to the same journal the German booming industrial towns are looking towards

Spain and other southern European crisis-stricken countries in search for highly qualified young

workers who simply cannot get employment.

So where do we get the idea of education as the basis for the increase on job prospects? There is a

proven correlation between employability and the individual degree of education as a determinant

factor in his/her prospects of finding a job, especially in difficult times like the present crisis.

Whereas the tendency has been to glorify the sort of opportunities that a good education has to offer

and on the contrary the demonisation of leaving the education system before completion of ESO and

the subsequent difficulties encountered by an uneducated youth during the transition into the labourmarket, it is my contention that a good education is likewise rendered ineffective without the

adequate investment into the creation of high skilled jobs rather than the encouragement of low

skilled jobs in sectors that have proven to be not just a failure but a short term fix for the Spanish

economy like the construction or the still over developed tourism sectors.

My criticism is based on the following two grounds, First that the unemployment rate for graduates

is too high in Spain and second that for those fortunate (or unfortunate) ones that find employment,

tend to end up more often than not, suffering the consequences of being under-employed, under-paid

and/or wasting away many of the skills they had trained for.

Fig 6. below shows the percentage of young people unemployed up to the age of 30 increased since

the onset of the financial crisis in 2007 from 30% to almost 40% up to 2010, however it is also very

relevant to note that for those that manage to join the labour market only slightly over 25% do so in

jobs for which they have specifically trained or are "adjusted" to borrow from Felgueroso 2012.

Further we can also observe that this

is not a new phenomenon and has

kept constant for a number of years

even before the beginning of the

financial crisis which tends to show

an endemic problem within the

Spanish job market and pointing

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heavily towards causes like the model of the Spanish economy rather than to the lack of highly

skilled workers.

Fig 5. Source: Felgueroso : 7

These findings are also confirmed at the European level, since it has been claimed that from 1995

until 2007 the probability of educated youth being employed had increased in relation to the level of

education achieved. However, on the other hand and in agreement with the findings in the Spanish

case it is also the case that there has been a deterioration in the "relative labour market position of

young high-skilled persons in some euro area countries" (Gomez 2008: 5)

Some studies seem to point towards an over-education phenomenon in Europe. This claim states that

"the number of skilled jobs has not increased as quickly as the supply of educated workers and that

high-skilled workers must either accept jobs for which they are over-qualified or face

unemployment" (Gomez 2008: 24). The view seems to fit the results of my research and the statistics

in the Spanish case, However I would add that one of the advantages of being well educated is that

of being better prepared to relocate or emigrate with a higher degree of ease and hence the well

educated workers do not necessarily have to accept unemployment or under-employment in the

domestic job market.

Turning back to fig 5, it could be argued that the figures relating to those under-employed graduates

which account for over 35% of the total amount, could be attributed to a disparity between the type

of degrees pursued and the specific demand for those skills from the job market. That would have to

lead us into what type of qualifications are required by the Spanish labour market or we could begin

by exploring what type of jobs are on offer that require any type of higher qualifications or whether

the Spanish labour market is providing with the sufficient high skilled jobs.

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OTHER REASONS FOR YOUTH

UNEMPLOYMENT I: THE ECONOMIC MODEL

The global financial crisis has only accentuated a domestic problem with the Spanish economy

which was heavily reliant on the construction and housing sectors. According to Escudero et

Kathiwada (2011) the construction and real estate sectors accounted for more than a third of the total

increase in jobs during the expansionary period in the decade spanning from 1996 to 2006. The

Spanish GDP grew twice as fast as the EU-15 average with unemployment falling from 22% in 1996

to 8.5% in 2006.

I blame the unemployment crisis in Spain to the unbalanced economic growth which was further

fuelled by the financial and housing market over reliance in search for short-term gains. According

to Escudero et Kathiwada 2011:

"...many of the jobs created during the expansionary period where low skilled:

despite significant improvements in educational attainment, close to 15 per cent of

jobs in Spain were in low-skilled or elementary occupations, compared with less than

10 per cent in most of the neighbouring EU countries"

(Escudero et Kathiwada 2011: 1)

Escudero et Kathiwada argue that the challenge for the Spanish economy is to make a structural

transformation towards a more balanced economy based

on "new dynamic firms and quality jobs commensurate

with the prevailing skills levels, especially among

qualified young graduates" (Ibid p2)

One of the main reasons for the significant increase of

youth unemployment rates is clearly the collapse of the

construction sector which accounted for most

employment losses since the beginning of the financial

crisis as fig 6 shows.

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Fig 6. Source: Wolf and Mora 2011 : 6.

In 2006 the share of the construction sector represented a 12.1% of the total GDP and had

experienced an increase of 5% in just a decade. This sector compared with other European countries

was as a proportion to the economy almost double (Escudero et Kathiwada 2011: 14). In the EU15

the construction service represented only 6.2% of the GDP in 2006 (Ibid).

But the increase in the construction sector was driven by the housing bubble and the increase of

117% in house prices over the same decade which helped the expansion of the real estate and

financial service sectors as well.

It was clear that the over reliance on the construction sector and the increase of household debt due

to higher mortgage prices meant that the Spanish economy became very vulnerable to a possible

collapse and when finally credit stopped flowing by the mid 2007 the construction sector

subsequently came to a halt. The spill-over effects into other sectors are seldom taken into account

because they are difficult to measure, what I mean by that is that the direct increase of

unemployment rates in other sectors was a direct consequence of the collapse of the building

industry. How much of the economy was reliant on the construction sector would be a research of its

own but suffice to say that many jobs were lost in other sectors as a direct consequence on the over

reliance on the construction sector.

When the building industry came to a halt not just brick layers lost their jobs but services offered by

electricians, plumbers,

window fitters, carpet

fitters, and so on. Further,

across sectors, the

manufacturing industries

that had increased their

business due to a higher

demand from the

construction boom began todry up as well,

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Fig 7. Source: Escudero 2011 : 22.

from windows to doors and ceramic production to pipes and electric cables, the effects were felt far

beyond the building industry.

To further illustrate this fact we can see on fig 7 how the second most affected sector in the Spanish

economy after the construction sector is the manufacturing industry. However, the financial and real

estate sectors did only decrease a mere 1.8% in the three years leading to 2010. (Ibid)

According to Escudero et Kathiwada (2011 : 21), the impact of unemployment on men was also far

more significant as the construction and manufacturing sectors in Spain are male dominated

industries with a representation of 90% and 70% respectively. In Fig 7 the share of the construction

job losses was 52.3% average from the first quarter of 2009 to the first quarter of 2011 (ibid) and the

total loss in the manufacturing industry represented around a third of the total job losses in the same

period.

The problem with the economic Spanish model is not a new one. However it usually takes a

catastrophic event for authorities to make a serious attempt to change any given situation and this

was the case when in November 2009 the Spanish government proposed a new strategy called the

Law on Sustainable Economy which is the government's response to years of a failed economic

model based on not just the construction, financial or real estate sectors but also the over sized

tourism industry that has been keeping the Spanish economy afloat for so many decades.

The new proposal came into effect on the 6th of March 2011 defines the new growth model for the

Spanish economy based on innovation, technology and efficient public administration amongst

others. Of the new proposals it is quite interesting to see the sudden interest into investing in

Research and Development or R&D after years of poor funding whilst the economy was still

booming. However the time has come when the investments have to be made in spite of the fact that

the country is suffering from one of the most serious structural adjustment programmes in its history.

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OTHER REASONS FOR YOUTH

UNEMPLOYMENT II: A STRUCTURAL

PROBLEM. COMPARISON WITH GERMANY

With Spanish youth unemployment figures being the highest in the Euro zone and German

being of the lowest in Europe we could begin by drawing some comparisons in order to

help us understand some of the reasons for such disparity in unemployment rates.

With a 7.8% youth unemployment rate5 Germany is one of the countries with the best

employment rates in Europe and part of it has been attributed to their dual system of

apprenticeships.

The apprenticeship system that has been so successful in Germany has its origins in the

Middle Ages like in most European countries but by contrast to other nations in Europe it

has particularly thrived in an economy whose model has persevered with manufacturing

and the industry sector which in turn is heavily reliant on exports.

This system is defined dual because young people are trained in both vocational public

schools on the one hand on a part time basis and on the other they spend around two thirds

of their time in private companies where they learn practical instruction by supervisors.

These apprenticeship programmes last from two to three and a half years after which

trainees have to take an examination set up by the chambers of industry, commerce or trade

after which many qualify to continue working for the same companies that have trainedthem and invested in their apprenticeship.

One important aspect of the dual system is that apprentices are paid for their training by the

very same private companies training them and this is a crucial fact that first encourages

trainees to fully complete their programme whilst it also encourages those companies that

have trained them to recruit the very same apprentices they have turned into potential

highly skilled employees feeding them directly into their industry. Such investment makes

5 Eurostat 2012

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sense in light of fact that the initial investment by private companies pays off by recruiting

from the ranks of their own workshops.

By comparison, in Spain the government spends relatively less than most other advanced

economies in training programmes. Further, the success rate in finding work after

completion of such programmes was around 70% in 2008 (Escudero 2011 p 122). This

could be due to the fact that more is needed to ensure that the content of the courses are in

tune with the real skills and knowledge required by firms (ibid). The only way we can

achieve a more adaptable system is to engage companies in the direct training of young

people but this would be difficult in a labour market which is characterised by a decrease in

job creation and also where the relative demand for skilled labour force is considerablysmaller than in Germany due to a completely different model of the Spanish economy.

At this point I would like to make the following assertion, that is, we can only compare like

for like and Spain and Germany differ greatly in their economic models and hence trying to

compare both systems will not make any sense unless we bear that in mind. What I mean

by that is that Germany has an economy based on industrial production and heavily reliant

on exports, whereas the Spanish economy as afore mentioned has been over reliant on the

housing market and the tourism industries and therefore it would be unrealistic trying to

emulate a system that recruits young people in order to give them the necessary skills in a

very skilled based industry like the German whilst as I have mentioned before, the Spanish

economic model does not foment the training of young people because its job market has

been encouraging low skilled employees in the construction and hospitality sectors of the

economy.

A good way to illustrate this point emanates from 2007 figures showing that the majority of

apprenticeships in Germany were in the industrial occupations with a 59% followed by

28% in the craft occupations both requiring medium to highly skilled workforce whereas

only 3% and 2% were related to agriculture and public services sectors respectively.

(Vogler-Ludwig 2009 p2)

Notwithstanding the above fact, it is important to identify the differences between the two

models in order to understand what needs to change and whether the Spanish government

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could have done better in order to protect the jobs of hundreds of thousands of people for

which there is no hope in sight.

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INVESTMENT IN R&D TO RE-STRUCTURE THE

SPANISH ECONOMY AND CREATE JOBS FOR

THE EDUCATED YOUTH

Adopting the German dual system in Spain does not seem a viable model to drive youth

unemployment figures down and hence we need to look at ways to depart from a model that

foments and provides with low skill jobs and in this line the European Commission has

recently produced a document entitled "Europe 2020 Flagship Initiative innovation Union"

which claims it aims at creating millions of jobs across Europe by investing in new

technologies and research in order to replace the jobs that have already been lost during the

present crisis.

The strategy is aimed (according to the European Commission) at providing highly

qualified workers with the careers and jobs in highly skilled areas of research like

aerospace, telecommunications, energy and environmental technologies that not just makes

it sufficiently attractive to keep the talented workforce within European borders but also

will encourage economic growth that has come to a halt since the beginning of the financial

crisis.

There is a proven correlation between employment figures and investment in research and

development (R&D) across European countries. The European Commission published a

report in 2011 entitled Innovation Union Competitiveness where it details the amount of

investment destined by European Union members towards R&D and we find an interesting

pattern. The larger the investment in R&D seems to translate in lower unemployment rates.

According to the report countries like Germany and Denmark are above the EU average in

regards to R&D investment (European Commission 2011 p49) whereas countries like

Spain, Greece and Portugal are found in the lower end of the table below the EU average

(ibid). This seems to show a correlation with youth unemployment as Germany and

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Denmark have some of the lowest unemployment rates in Europe whilst on the other hand

Greece, Portugal and Spain top the table in unemployment rates in the Euro zone.

However does R&D investment really decreases unemployment or are there other variables

that we might have to consider in order to understand this correlation. If we are to find an

answer to this question we need to remember that we are not comparing like for like when

we examine the various European economies as I have mentioned above. The reason can be

due to the fact that the German and Danish economies are stronger in sectors that can

require greater investment in R&D rather than R&D being the precursor to economic

growth. For instance, I mean that an economy that is heavily reliant on tourism for instance

might not be suited for the same degree of R&D investments, whereas conversely aneconomy based on manufacturing and new technologies could well be more suited for a

greater degree of investment.

According to Bogliacino 2010 p8 the sectors of the economy that have received greater

investment in R&D are chemicals, office machinery and manufacture of electronic

equipment amongst others whilst in the area of services is almost non applicable. This can

explain why investing in R&D might not be a realistic solution in economies which are

based on the service industries rather than manufacturing ones.

The solution to the problem of unemployment will be not so much investing in R&D as

much as it is in creating jobs in new technologies like Computing, electronics,

telecommunications, energy and environmental technologies that require R&D investment

for their future competitiveness in a global market. Therefore R&D do not seem to create

the needed jobs but jobs that require R&D ensure that innovative ideas can fuel further

growth and job creation.

For that reason the main downfall of the Spanish economy is that is not suitable for further

growth unless it creates new industries away from the service sectors and invests in the new

sectors that require the surplus of newly qualified graduates that cannot find work within

the national borders.

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It is for that reason that I believe that although the European Commission has established a

road map for the development of such high skilled jobs within the European Union, it does

not necessarily mean that the Europe 2020 Strategy agreed by Member States in 2010

(European Commission 2010 p1) will succeed in the periphery countries whereas it could

well be that countries like Germany and Denmark might take full advantage of the initiative

and incentives to further develop and attract highly qualified young people from the rest of

the high unemployment rate states of the European South.

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CONCLUSION

Since the onset of the global financial crisis, unemployment has been on the increase in almost every

European advanced economy. Its most devastating consequences have been clearly felt amongst the

young population across many European nations specially in Spain with the highest youth

unemployment rate in the Euro area. The prospects are not improving in particular due to the

implementation of the austerity measures in all major economies as the consequence of the

socialisation of the debts incurred by many of the biggest global financial institutions. This has

resulted in the accentuation of the problem of youth unemployment as governments in need of

money cannot or are not willing to support the millions of young people that have no access to

employment and are becoming what has been dubbed as the lost generation in Spain and some other

countries.

As the crisis deepens and unemployment rises the ruling classes begin to direct the blame towards

the youth for the predicament they find themselves in and point to the fact that education is the

solution to an unwilling youth that is not sufficiently trained to be able to join the labour market. But

this is not the case, at least not the real solution to a deeper problem.

Whereas there is a correlation between levels of youth unemployment and education this is proven to

be directly linked, amongst other things, to the fact that by incrementing the amount of young people

in full time education, unemployment figures decrease due to the increase of youth inactivity. This

explains part of the increasing interest in the government of the day to deal with such a short sighted

solution to a long term problem like the one we are actually confronting.

Further, the encouragement and promotion of academic education is helping to reduce youth

unemployment in ways that we ought to seriously consider and that although not necessarily

negative in the context of the European Union could be so in relation to the particular interests of

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individual countries like Spain. That is, the significant emigration of graduates leaving the country in

search of skilled jobs and in particular to destinations like Germany where the demand for such

graduates has precisely been on the increase during the present crisis. However, is this what the

Spanish authorities have intended for the Spanish youth? In the short term youth unemployment

rates will fall but at the high cost of a brain drain that will have longer term consequences to the

Spanish economy.

The Spanish government might argue that as a member of the European Union it sees no problem

with the free movement of employees across borders, however we need to consider that those

qualified young people emigrating from Spain voted for a government that does not want to assume

their responsibility in trying to provide them with jobs by playing the European card. But the fact ofthe matter is that even playing the European card is not sufficient justification in a European Union

where there is a clear democratic deficit and where those young workers emigrating to Germany

have not even have a right to vote in the national elections and to whom the German Government is

not directly accountable.

I don't personally envisage a short term improvement but rather a long and painful deterioration of

the job market for various reasons non of which can be blamed on a lazy nor uneducated youth.

First, because the economic model promoted by Spain was based on industries that have precisely

been mostly affected by the crisis and in particular the construction and tourism sectors of the

economy which required low skill jobs. Second because in order to recover Spain would have to

devalue their currency in order to lure investment and tourists back in the country which is not a

possibility in the present European Union context. Third the Spanish economy is no longer under the

full control of the national authorities and the plans to provide the youth with skilled jobs in new

industries does not necessarily entails the creation of jobs in Spain but could well mean that

European youngsters will be obliged to leave their countries of origin to where Brussels decides to

create those skilled jobs. Fourth and finally, for as long as we condone the socialisation of debts of

the too big to fail whilst at the same time pressing for neo-liberal measures through privatisation and

the dismantling of employment law protections in regards to dismissals, redundancy payments and

the constant lowering of wages in the public sector, it is clear that the will of the government is well

balanced against the interests of the working classes.

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BIBLIOGRAPHY

Bogliacino F and Vivarelli M., 2010 "The job creation effect of R&D Expenditures"

Discussion Paper Series, IZA DP No. 4728.

European Commission, 2010 "Europe 2020 Flagship Initiative Innovation Union"

Brussels 6/10/2010 COM(2010) 546 final

European Commission, 2011 "Innovation Union Competitiveness Report 2011"

Analysis Part 1: Investment and Performance in R&D - Investing in the Future.

Escudero, V and Khatiwada S. 2011. "Studies on growth with equity: Spain Quality

jobs for a new economy", International Labour Organization and the International

Institute for Labour Studies.

Felgueroso, F. 2012. "El empleo juvenil en Espaa: Un problema estructural" Circulo

Civico de Opinion.

Garcia, J. R. 2011. "Desempleo juvenil en Espaa: causas y soluciones", in BBVA

Research, Documentos de Trabajo, Nmero 11/30

Gomez-Salvador, R. and Leiner-Killinger, N. 2008. "An Analysis of Youth

Unemployment in the Euro Area", European Central Bank, Occasional Paper Series

No 89.

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Petrongolo, B. and San-Segundo, M. 1998. "Staying on at School at Sixteen: The

Impact of Labor Market Conditions in Spain", Department of Economics,

Universidad Carlos III de Madrid, Working Paper 98-69.

Porcaro, G. 2011. "Youth Employment in Europe: A Call for Change", European

Youth Forum.

Ramirez-Guerrero, J. 2002. "El Desempleo Juvenil, Un Problema Estructural y

Global: El Papel de las Organizaciones de la Sociedad Civil", Estudios y Reflexiones

No.2

Wolfl, A. and J.S. Mora-Sanguinetti, 2011, "Reforming the Labour Market in Spain",

OECD Economics Department Working Papers, No. 845, OECD Publishing.

http://dx.doi.org/10.1787/5kghtchh277h-en

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Is education the solution to high youth unemployment in Spain?