In Spain, soaring jobless rate of youth

But since he was laid off from his construction job two years ago, he has been living on unemployment benefits.

Now Penas finds himself part of a lost generation in Spain, where unemployment among people ages 16 to 24 is 42.9 per cent, the highest in Europe, and more than double the overall rate.

“I went to work because the money was good, the lifestyle was good and I really wanted to get out of school,” Penas, 25, said as he waited on a long line snaking down the block from an employment office in suburban Madrid. “I totally regret it now,” Penas said, who has a 5-year-old daughter by a former girlfriend who is also out of work.

Spain is the extreme, but the experience of younger workers here reflects similar problems in the United States, as well as other European countries still struggling to emerge from the recession. In the last 12 months, the jobless rate in the United States among workers ages 16 to 24 has risen to 19.1 per cent from 13.9 per cent. Economists expect the rate to remain high even as the overall jobless rate in the United States — now 10 per cent — begins to shrink.

That is because the sectors that employ young people in the greatest numbers — fast food, construction, retail — are expected to take the longest to recover. In the United States, workers on the first rungs of the job market run the risk of lower earnings even after the recovery gets going, said Paul Osterman, a professor at the Sloan School of Management at MIT who also teaches at the Institute de Empresa business school in Madrid.

Young Spanish workers, like their counterparts in the rest of Europe, face other obstacles like union rules, long-term contracts and legal protections that shelter older workers and discourage new hiring, Osterman said. “There is a cohort of people who are condemned to a permanently stagnant career path in Spain,” he said. “It’s very worrisome.”

People like Penas, with few skills, bleak prospects and little desire to go back to university alongside younger students, are the most vulnerable. “There has been a loss of human capital,” said ASI Director of Economics Jose Antonio Herce. “It will take a long time for this cohort to be absorbed.”

Spain may be the worst example, but it is not alone, “Young people are the last in the queue when it comes to finding permanent jobs,” said Anne Sonnet, a senior economist with the Organisation for Economic Cooperation and Development. “Even with university degrees, there are many barriers to young people.”

Adding to Spain’s woes, its government is unable to inject more stimulus and offer further support for job creation while its economy languishes as one of the weakest in Europe. The outlook on Spanish sovereign debt was recently downgraded, and the government is moving to raise taxes and cut spending.

The country’s budget deficit, which hit 11 per cent of gross domestic product this year, is supposed to be within the 3 per cent threshold enshrined in the treaty that established the euro. The European Union wants Spain and other European countries relying on the euro to return to that range by 2013. “Spain is under tremendous pressure from the E.U. and the bond markets,” Osterman said. “They are in a very difficult box.”

To be sure, Spain has traditionally suffered from relatively high unemployment, and at 19.3 per cent, its overall rate is double the 9.8 per cent average for the European Union.
But the sharp increase among young people is particularly problematic. It has jumped from 17.5 per cent three years ago at the height of the boom to the current 42.9 per cent.

At this level, Spain stands out from other troubled European countries. In Greece, for example, the youth unemployment rate is 25 per cent, while Ireland’s is 28.4 per cent and Italy’s is 26.9 per cent.

Spain is even worse off than countries in Eastern European where youth unemployment has traditionally been high. In Slovakia, for example, unemployment among young people is 27.9 per cent. In Poland, youth unemployment is 21.2 per cent, down from over 35 per cent a few years ago.

In part, Spain is paying the price for its efforts to make it easier to put young people to work. In recent years, a disproportionate share of Spanish youth were employed on temporary contracts. So they were the easiest to lay off when the economy sank, said Alfonso Prieto, deputy director general of employment studies at the Ministry of Labor and Social Affairs.

During the most prosperous years, a culture of temporary work developed, Prieto and others explained. Young workers like Penas became known as “mil euristas,” for the 1,000 euros, or $1,438, a month they typically earned. Once looked down upon as temporary, entry-level positions, the few remaining mil eurista jobs are now highly sought, Herce, the economic consultant, said.

Besides drawing young Spanish workers out of school, the growth years lured young immigrants by the millions. Many of them are out of work as well. Katy Mejia, for example, moved here seven years ago from Ecuador with her parents, having just finished high school at age 16. She later married a Spaniard and worked in restaurants and bars in downtown Madrid.

“Jobs were plentiful,” Mejia said, “You could pick and choose.”

Today, she is jobless, and her husband is working four hours a day driving a delivery van, forcing them to move in with her family.” It’s difficult to go back to living with your parents when you are married,” she said. Although low-skilled workers are the hardest hit, Prieto said, professionals are also suffering. Vanessa Larrosa, who was recently laid off as a veterinarian, lives around the corner from the unemployment office in Santa Eugenia on the outskirts of Madrid. She was used to seeing a line forming in the dark each morning, as peopled huddled in blankets.

“But I personally never expected to be here,” Larrosa said. “ I’d like to continue to work as a vet, but I’d be happy with anything.”

Spain is spending roughly 30 billion euros ($43 billion) a year on unemployment benefits, but the money is doing little to prepare younger workers for the future. Herce said that Spain needed to invest more heavily in vocational education and retraining, and require the jobless to improve their skills. That is what Carlos Herras, 26, is counting on. He is taking a course in renewable energy and hopes to find a job installing solar panels. But at this stage, he too would be happy with almost anything.

“I started working so young,” he said, ticking off jobs beginning at 14 in a bar, then a hotel and finally in the construction industry until last January. “I am optimistic. I may not find a job that I want, but I’ll find a job.”