14
Jun

Spain´s Indignant Youth

Escrito el 14 Junio 2011 por Gayle Allard en Economía española

The indignation of young Spaniards, which captured world attention last month, is the peaceful first step in a youth protest movement that is surprising only in how long it has taken to emerge. Policymakers must sit up and listen across Europe.

The young Spaniards camping out in central Madrid issued a moderate, vague manifesto voicing their indignation with “the political, economic and social panorama that surrounds us; with the corruption of politicians, businessmen, bankers…” They proclaimed a “right to housing, work, culture, health, education, political participation, free personal development, and … to consume the necessary goods for a healthy and happy life.” They protested that “the current functioning of our economic and government system does not address these priorities and is an obstacle for the progress of humanity.”

It is not difficult to understand why young Spaniards are unhappy, at least in the economic realm. Their unemployment rate is one of Europe´s highest at nearly 50%. Those who do find work often spend years in temporary jobs, and are paid much less than their elders (the ratio between earnings for young people and those aged 55-64 in Spain is less than 0.5, the lowest figure in the developed countries). When crisis arrives, young Spaniards are the first to be dismissed. Meanwhile, overinflated housing prices have not declined due in part to bank reluctance to put overvalued property up for sale; and rents remain high due to overregulation of that market. As a result, the best educated generation in Spain´s history finds itself either out of work or unable to earn enough money to become independent. Spain´s youth cannot begin to save, start families, develop professions, travel or even pursue further education without substantial (or total) support from their parents. No wonder they are indignant. The only surprise is that they waited so long to manifest their frustration publicly.

It is not difficult to understand why young Spaniards are unhappy, at least in the economic realm. Their unemployment rate is one of Europe´s highest at nearly 50%. Those who do find work often spend years in temporary jobs, and are paid much less than their elders (the ratio between earnings for young people and those aged 55-64 in Spain is less than 0.5, the lowest figure in the developed countries). When crisis arrives, young Spaniards are the first to be dismissed. Meanwhile, overinflated housing prices have not declined due in part to bank reluctance to put overvalued property up for sale; and rents remain high due to overregulation of that market. As a result, the best educated generation in Spain´s history finds itself either out of work or unable to earn enough money to become independent. Spain´s youth cannot begin to save, start families, develop professions, travel or even pursue further education without substantial (or total) support from their parents. No wonder they are indignant. The only surprise is that they waited so long to manifest their frustration publicly.

The indignation of young Spaniards should not be taken lightly either inside or outside the country, for two very important reasons. First, their dilemma is not unique in Europe. In every EU country except for Germany, youth unemployment rates are at least twice as high as those of their elders. In some countries (e.g., Finland, Italy, Sweden, Luxembourg) they are as much as four times as high. And the proportion of young people on temporary contracts (70% in Spain) reaches 90% and above in many other European countries (in Germany, France, Austria, Belgium, Ireland the proportion is especially high). In many of these countries, laws giving excessive protection to permanent workers lead companies to hire young people only on temporary contracts, often for long periods.
No one intended to harm the youth when they passed these restrictive labor laws in the 1970s and 1980s. The intention was clearly pro-social: to protect workers against profit maximization by large companies and to give families economic security. But over time, overly restrictive laws have created a “labor aristocracy” of protected workers, most of whom are older men, and a group of underprivileged “outsiders” on temporary contract. The companies that find themselves obliged by law or by union power to overprotect and overpay older workers, whose productivity may be low, have only one possible response to preserve their profits: to underprotect and underpay those they can, who are often the youth.

The second reason that the Spanish protest should be taken seriously is almost too obvious to be stated: these youth are the taxpayers of the future. In a Europe where population growth is low everywhere and is even declining in some countries, youth are an increasingly scarce resource. As they move in dwindling numbers up the population pyramid, they will become the tax base that will pay the pensions and social services of an inexorably rising population of elders. How will the complex architecture of a welfare state be sustained, if a shrinking youth population cannot obtain employment, income and security as it makes its way into the taxpaying mainstream? The question is almost frightening.

The protest of the young Spaniards is not frivolous because it has emerged peacefully and thoughtfully out of a young population that has been largely shut out of the country´s active economic life. And the response of its elders must not be dismissive because eventually their very livelihood will depend on whether these same young people are able to join the labor force and live active, prosperous and fruitful lives.

What can be done in the economic sphere to address the indignation of the protesters? First, rigid labor markets should be reformed to eliminate the difference between the treatment of older (permanent) and younger (temporary) workers. It is not acceptable for older workers to squeeze more productive youth out of the job market because their permanent contracts make it impossible to replace them or ask them for higher productivity and wage restraint. Nor is it acceptable that firms losing money on these workers compensate for those losses with precarious, underpaid young employees. Spain, and many other European countries, need a single type of contract with a reasonable severance payment that rises with seniority, so that workers are not separated into two groups with different treatment simply by virtue of their type of contract.

Second, the unions´ role in public life needs to be reformed so that their power corresponds to the individuals that they actually represent. In Spain, nearly 11 million people are either unable to find work or have a temporary job. Another 1-4 million work “informally” under inferior conditions. No workers´ organization or political party represents this quarter of Spain´s population. Is a new “union” needed for these voiceless individuals, which is given equal representation with those that currently exist? Can the union role be depoliticized and brought closer to the needs of the typical firm and the average worker? These changes would give young people a larger voice in public life.
Of course, much of what Spain´s protesters are indignant about lies outside the purely economic sphere. But if the employment dilemmas of the young generation of Spain could be addressed, their indignation would likely diminish. Those dilemmas are shared by many youth in Europe who will become the economic foundation of tomorrow´s public services. Many of them, rather than protesting, have begun to migrate elsewhere, in the first phase of could become a future “brain drain” for Europe. Public policy must begin to address the needs of this generation, if it hopes to have taxpayers willing and able to finance the welfare state of the future.

Comentarios

Jesús R. 14 Junio 2011 - 12:53

¿unemployment rate is one of Europe´s highest at nearly 50%?

Será “nearly 20%”, ¿no?

foo 14 Junio 2011 - 13:09

I guess that you’ve notices already that what you call the ‘underpaid young’ can perfectly be a professional up to 40 years old with kids to rise.

To get a better picture, it would be nice to have an estimation of the ‘young’ who simply don’t will to work…

Nice post otherwise. Thanks.

goyo 14 Junio 2011 - 16:57

in my opinion, this people dont represent the Spanish youth, I can understand
their anger, but I can not understand the maners.
Besides .which is their proposal, I think what they are asking for is simply imposible
I really think that they are part of a radical left wing movement.
anyway thank you for the post
GOYO from Segovia Spain .

Marcello Leonard Mazza 15 Junio 2011 - 15:06

There is an easier way to describe this indignation:
– Spain is a very rich country by any World standard
– The Housing bubble of the past 10 years has been a great party that has made a big chunk of the population “wealthy” on paper by using real estate as an investment asset.
– The party is over, the indignant Panish youth (some 40 years old with children) were not invited and are supposed to pay the bill (in the form of the huge debt that has been created and it is impossible as it is impossible to generate enough income to pay either the principal or even only the interest.

Your post proposes labour market reform as a possible solution.
I beg to disagree. Thatbia not even 1% of what needs to be done.
Some suggestions:
– we have millions of empty housing units thatmay give Spanish workforce an edge in mobility. Force very high taxes on empty housing units.
– exempt the payment of any social security ir tax on the next 1 million workers that get hired for a few years. The government deficit will bit be made any worse.

I can thinknof hundreds of measures that could be implemented. For God’s sake, the Government MUST DO SOMETHING To get the economy moving again not just sit back and enjoy it’s position as wealthy politicians.

What I am seeing makes me rhinknthat this movement will become progressively more desperate and even violent if the haves of Spain keep on trying to pass the bill of their excessive partying and hangover on to the young have nots.

Httm://leonardmazza.wordpress.com

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