Spain's fake unemployment rates

The recent unemployment rate hike in Spain in the last month of August led the Minister of Labour to announce that Spain would end the recruitment of foreigners, to have jobs filled with Spanish manpower, and thus reduce unemployment.

The solution proposed by the Minister is action on jobs demand. In order to reduce unemployment, it is necessary to reduce the number of job seekers (act on the demand) or stimulate economic activity to generate more jobs (acting on jobs supply), although of course it is normal to act on both the demand and the supply.

Regarding demand, there are ways of acting on it. The proposal of the Minister is not preposterous, but it ignores a key factor influencing demand: unemployment benefits. This allowance is an incentive not to work: Why bother to accept a job offer that involves effort and sacrifice, if one can stay quietly at home claiming unemployment, even if receiving somewhat lower revenues than those paid for a tedious job? . This reasoning is promoted by unemployment benefits.

Aid for unemployed workers is necessary when they lose their job, but the Spanish model of unemployment aids (as in other countries) is shameful. It is inconceivable that public aid is offered for long periods of time (more than 6 months), with a monthly subsidy higher than they pay of some jobs in the labour market. In its current form, it is nothing but an incentive to stop working and sit down to rest. Indeed, many people feel they are entitled to collect “their” subsidy after working for a sufficient amount of time to accrue unemployment benefits, because this aid comes from taxes they have paid out of their payroll during their period of work. Likewise, there are many cases of workers who want to leave their jobs voluntarily, but reach an agreement with their boss to pretend a fake layoff, so that they can collect unemployment aid. An absolute lack of control allows such fraud of law to abound in the system.

It is necessary to make a study to determine how many people are actually unemployed (those who really can not find any work) and how many are voluntarily unemployed (those who do not want to accept job offers). I venture that the unemployment rate would be reduced by at least 50% should we take into account only the truly unemployed. Of course, such a study is almost impossible to carry out: How many of these forgers of layoffs, or how many of these companies who fake the layoffs will confess?

We must radically change the unemployment subsidy system, restricting it to a period of aid of about three months, gradually reducing the monthly aid amount, and cancelling it completely when the job seeker rejects a job offer. Everyone is free to accept the job they want or even to be picky about it, but the Government should not help if the person prefers to wait for another better job opportunity (whether this means better paid, more comfortable work, or whatever the job seeker may deem “better”). The Government should help only those who need help, rather than helping anyone who will welcome some aid. In this manner, unemployment allowance would fulfil its role of emergency aid to those who need it, saving money and focusing Government’s resources on real needs, avoiding the present waste of money in unemployment aid for loads of people who pretend to need it.

The Ministry of Labour is right in trying to take action on the demand for jobs, but it is more urgent to act by removing incentives to not work (unemployment aid) than to limit hiring of foreigners.

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