Presentation by Jesús Ferreiro (University of the Basque Country) on the occasion of the 20th LMO meeting on 6 June 2011 in Madrid, Spain

1. The situation of youth employment in Spain JESÚS FERREIRO Department of Applied Economics V University of the Basque Country Conference “Youth Employment” European and Social Committee – Consejo Económico y Social Madrid, June 6, 2011

2. MAIN FEATURES OF YOUTH EMPLOYMENT IN SPAIN Between 2007q3 and 2011q1 youth employment has fallen in 1,050,000 people (44.5% of total employment destruction in Spain) Youth unemployment rate is above 45%, 26 p.p. higher than those above 25 years old 2

3. Highyouthunemploymentrates are anstructuralfeature of Spanishlabourmarket, skyrocketing in recessions 3

4. Unemployment rate is specially high amongst the youngest workers: 65% (54.8% for workers 16-24 years; 19.1% for workers +25) 4

5. REASONS OF THE BAD PERFORMANCE OF YOUTH EMPLOYMENT IN SPAIN Institutionaldesign of Spanishlabourmarket: theexcessive use of fixed-termemploymentcontracts leads toanadjustmentviaquantities: temporarycontracts as a buffer toadjustemploymenttolabour-aggregatedemand shocks Employmentadjustmentisconcentrated in workerswiththelowestfiringcosts (bothpermanent and fixed-termemploymentcontracts) and/orthelowestproductivity (usuallyyoungworkers in both cases) Skillsmismatch Socio-cultural elements: bias in payrollsadjustmenttowardsworkerswithoutfamilyburdens 5

6. Temporary employment Temporaryemployment has anextraordinaryimportance in youngemployment 6

7. 94% of destruction of salaried employment has taken place in temporary employmentTemporary employment in young people fell in 687,000 people (42% of the destruction of total temporary employment) 7

8. The burden of the employment adjustment has concentrated in two categories of workers:- temporary workers over 25 years old- young workers, regardless their employment contract 8

9. Skills mismatch High schooling failure leads to a low qualification of young workers Percentage of people that have taken secondary education: 65% (OECD: 80%, EU-19: 82%) Percentage of people that have not completed secondary education and have not taken any kind of professional training: 31.2% (lowest: Basque Country: 16%; highest: Andalucia 37.5%, and Balearic Islands 40.8%) But at the sime time a phenomenom of over-qualification (a problem for a demand of low productivity jobs) Percentage of people between 25-34 years old that have taken university education: 39% (OECD: 35%, EU-19: 34%) 9

10. 10 Unemploymentrates are higherforlow-skilledyoungworkers

11. Solutions to the problem of youth (un)employment Recovery of economicactivity Reform of thelabourmarket: eliminatingtheexcessive use of fixed-termemploymentcontracts (reducingthenumber of modalities of fixed-termemploymentcontracts) elimination of thedifferences of firingscostsbetweenpermanent and fixed-termcontracts: (universalization of thepermanentcontractwith 33 days of firingcosts) Reduction of skillsmismatch: Educationsystemlevel: reduction of schoolingfailure, skillsupgrading, promotion of professional training reducingthe share of peopletakingtertiaryeducation Workplacelevel: promotion of on-the-job training Mixedlevel: promotion of part-time employment 11