Now Spain is facing with labour market reforms. Madrid’s labour market reforms are unlikely to contribute to improved economic performance, despite recent claims An old spectre is returning. Spain’s labour market reforms are the basis of the country’s improved economic performance. By limiting possible wage claims and negotiating flexible working conditions, companies in the car industry and beyond have become more competitive and boosted their exports.
Spain’s unemployment rate now is 27,2%, and not falling particularly rapidly. Comparing with the previous year april unemployment rate raised by almost 3 %. The current account deficit is falling, less as a result of increased exports and more because imports fell dramatically as domestic demand collapsed in the wake of the housing and financial crisis. It is unclear if growth will pick up enough in the short run to avoid a rise in the debt-GDP ratio. Meanwhile official figures in France also showed a fresh record high in unemployment. Some 3.2 million people are now searching work in the eurozone’s second-largest economy.
The total number of unemployed people in Spain has now passed the six million, although the rate of the increase has slowed. Spain’s labor costs have been falling, because businesses are taking advantage of their new found freedom “fire” and “hire.”
The key reason, of course, why even the tiniest shimmer of light has to be greeted with jubilation is that wages are always seen as the problem – even in a financial catastrophe-induced economic crisis. For policy-makers, austerity is ultimately self-defeating: current accounts are outcomes, not policy tools, and competitiveness is difficult to target, consisting, as it does, of price and quality relative to what others do.
Workers and skills may have to be matched more closely – may be good grounds to reform labour with the demand for them.Spain may have a particularly nasty dual labour market – with well-protected insiders and weak, usually unemployed, outsiders – which requires adjustment so that more unstable work will lead to stable jobs.
But it is naive to think labour market reforms will lead to growth, or even to falling unemployment – except, perhaps, in a very narrow margin. Aggregate unemployment falls, all other things being equal, when economic growth outstrips productivity growth. And with productivity rising fast (possibly, or probably, as a result of the crisis, which may have weeded out the very weak companies, thus pushing up average productivity), and growth limping behind, that is not going to happen soon.
By Andrea Blažević, Antea Božić, Kristina Piene and Agita Sarkane
http://www.guardian.co.uk/commentisfree/2013/feb/17/spain-labour-reforms-wont-bring-growth accessed on 27.04.2013
http://www.bbc.co.uk/news/business-22290422 accessed on 27.04.2013
http://www.tradingeconomics.com/spain/unemployment-rate accessed on 27.04.2013