Spain
A strong, resilient and inclusive recovery from the COVID-19 crisis requires improving productivity growth, by boosting digitalisation, innovation, and investment in intangible capital, as well as creating high-quality jobs, by addressing structural problems in labour markets. The pandemic’s implications reinforced long-standing vulnerabilities of the Spanish economy: a labour market characterised by high unemployment, insufficient skills, large regional variation and a large share of workers on non-regular contracts.
Economy: Percentage gap with respect to the population-weighted average of the highest 18 OECD countries in terms of GDP per capita (in constant 2015 PPPs).
Inequality: The Gini coefficient for disposable income measures the extent to which the distribution of disposable income among households deviates from perfect equal distribution. A value of zero represents perfect equality and a value of 100 extreme inequality.
Environment: Greenhouse gas (GHG) emissions include emissions or removals from land-use, land-use change and forestry (LULUCF). A high exposure to air pollution refers to above 10 μg/m3 of PM2.5.
Source: Economy: OECD, National Accounts, Productivity and Labour Force Statistics Databases; Inequality: OECD, Income Distribution Database and World Bank, World Development Indicators Database; Environment: OECD, Environment Database and United Nations Framework Convention on Climate Change (UNFCCC) Database.
Creating job opportunities and helping workers take advantage of them
Regional regulatory differences pose barriers to achieving a truly single market and slow down firm growth, hindering productivity and job creation. The top policy priority should be removing such barriers to firm growth, notably by the implementation of the Market Unity Law, and increasing awareness about the law among firms. To this end, cooperation and coordination across different levels of government have to improve, which will also help with swift absorption of the EU Next Generation Funds to support the recovery. Out-of-court restructuring proceedings, especially for small and medium-sized enterprises, should be introduced to facilitate restructuring.
Spain is lagging on the uptake and use of digital technologies. Higher innovation capacity can be built by strengthening the ex-post evaluation of innovation policies and taking them into account for the renewal of grants. Further increasing coordination of regional and national innovation policies, for example by strengthening the role of the R&D Public Policy Network, will avoid duplication of activities. To boost basic research quality, universities’ competitive funding based on performance should increase. This can help to align their strategies to labour market needs, in particular ICT skills. Partnerships between firms and research institutes can enhance the innovation capacity of SMEs. Implementing fully the newly developed plans to digitise the public administration will also help in this respect.
The changing nature of work, including due to the COVID-19 crisis, higher-quality jobs and faster productivity growth require a skilled labour force. However, skill proficiency is low and skill mismatch is high in Spain. High rates of early school drop-out and grade repetition need to be reduced to improve basic skills (Panel A). A modernisation of vocational education and training can contribute to aligning education to labour market needs and reducing existing skill mismatches. Key areas to be addressed are improvements in the university education and on-the-job training of teachers, and effective implementation of the 2020 Modernisation Plan for Vocational Training, in particular by promoting cooperation with firms to help identify skill needs as well as place vocational education students in firms.
Non-standard (e.g. temporary) and low-skilled workers have been affected disproportionately by the COVID-19 crisis as they tend to be more concentrated in the worse-hit sectors (tourism, hospitality) and in certain parts of the country (Panel B). Reforms to boost job creation need to be accompanied by improvements in the efficiency of active labour market policies and, once the recovery is firmly in place, by measures to reduce the use of temporary contracts. Increasing the allocation of active labour market policies spending towards training and raising the quality of training and its connection to the labour market by increasing the coordinating role of public employment services with employers and training providers is key. Lack of integrated support for jobseekers lowers the effectiveness of social and labour market policies, so a single contact point for social and employment services should be introduced. Developing public job training programmes targeted to low-skilled and older workers for specific purposes, such as promoting ICT skills, can enable the upskilling of workers.
In the medium term, a more effective tax system could lower inequalities, curb pollution and emissions and provide financing for reforms in labour markets, education and innovation. However, any tax increases should be implemented only once the recovery is firmly underway, and may need to be accompanied by targeted, time-limited compensatory measures for the most vulnerable households.
Recent progress on structural reforms
Following a wide-ranging agenda of important structural reforms between 2012 and 2015, successive minority governments have slowed down the pace of reform. However, in response to the COVID-19 crisis, a number of measures have been taken, including those to improve digitalisation in education and the resources of public employment services. In addition, the introduction of the minimum income guarantee scheme was brought forward to May 2020 to address imminent crisis-related challenges. The National Recovery Plan 2021-23, based on the use of the Next Generation EU Funds, outlines an ambitious reform agenda.