Global Econ-Insights #5: Spanish Success
Thus far, each issue of this publication has been solely focused on the economic downfalls of foreign countries. Recession, inequality, growth inhibition—all have restricted the financial success of nations across the globe. But now, it is time to adopt a more optimistic approach to the economic state of the world—and find examples that represent the best ways of mitigating fiscal repercussions. In this issue, we look towards the recent drop in Spain’s unemployment rate.
As of January 2025, Spain’s unemployment rate has fallen to the lowest that it’s been since 2008. Keep in mind that this was the same year during which the U.S. itself was greatly suffering from an economic recession. However, 17 years later, it seems that Spain’s financial evolution has been of a much more distinguished nature than most other Western countries. According to the National Statistics Institute, the unemployment rate has recently fallen to 10.61% from 11.21% in the previous quarter, whereas in 2008 it was 10.36%, despite economics forecasting that it would fall to 11.1% this year. When it comes to specific measures of employment, it is important to recognize that Spain has added a whopping 468,000 new jobs to its labor force just this year alone. This puts Spain on track to achieve a 2.5% increase in GDP this year in a manner of economic growth that no other large European country has ever done in recent history. In fact, Spain’s fiscal acceleration has resulted in France and Germany inhibiting their own progress.
When analyzing examples of such blatant economic success like this one, it is crucial that we deduce which industries are relevant. In the case of Spain, more than 90% of the new employment in its labor market has been in services, causing a large boom in the tourism industry. The ultimate impact of this rampant increase in Spanish tourism has been a significant reduction in income inequality across the country, causing great damage to the existing effects of inflationary shocks. These findings come from CaixaBank Research, which has tracked the evolution of wage inequality in Spain over time. During the pandemic, wage inequality in Spain was significantly increasing, However, in the post-pandemic era, Spain’s wage inequality has traveled in the complete opposite direction, serving as a platform for adding new employees to the workforce and plummeting the unemployment rates. In the time that Spain has countered its own rampant inequality, such an inequitable division of labor has only become amplified in the U.S., Germany, and France, proving that Spain has been primarily alone in its newly successful economic endeavors.
However, while Spain has indeed demonstrated great economic progress and made it easier to imagine a lucrative future in store for itself, it still needs to work on its integration of foreign workers into the makings of its labor market. Doing so will be the key to advancing Spain as a country from its current state of anticipation to a peak economic breakthrough. At the moment, 78% of foreigners in Spain are of working age as opposed to just 63% of the natives, yet foreign workers account for only 16% of the labor force, with particularly only 3.2 million of workers being foreigners. 8% of foreign workers have unverified contracts whereas only 1.7% of native workers do. This once again goes to show and prove how foreign workers are put at a great disadvantage in the Spanish labor force and that even though the country itself may currently be maximizing its economic efficiency, it still has much to improve on in terms of its economic equality.