Spain | The challenge of productivity and full employment

Spain faces two problems hindering its per capita income convergence toward the EU level: unemployment and low productivity growth.

Key points

• Key points:
• It is no coincidence that these two issues have been the subject of the recent annual conference on the Spanish economy staged by the Bank of Spain, CEMFI, and the UIMP. As acting governor Margarita Delgado pointed out, the lower GDP per employed person in Spain explains seven of the 11 points of difference with the EU’s per capita income, as does the lower employment rate.
• Until now, the Spanish economy has enjoyed a demographic advantage over the EU, which has gone some way to compensate for lower employment and productivity rates. However, this is on the verge of disappearing altogether as the aging process accelerates.
• Despite recent interest rate hikes, the Spanish labor market has shown remarkable post-pandemic resilience and impressive job creation rates, especially among the immigrant population. However, the unemployment rate is still double the EU average.
• The Spanish labor market will be affected by two key factors. The first is technological change, due to robotics, artificial intelligence (AI), and other emerging technologies. The second is the ageing of the population, which will reduce the available labor force, thus placing increasing pressure on social security systems.
• With respect to productivity, Spain has not fared well in response to increased levels of concentration, margins, or earnings to GDP of economies such as the United States, which are used to explain the slowdown in productivity.

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