1. Assessment and recommendations

The COVID-19 crisis is creating a shock in the Basque labour market, interrupting the prolonged economic recovery that has taken place since the 2008 crisis. Prior to COVID-19, unemployment had continued to decrease in the region, falling below 10% in 2019 – lower than the Spanish average of 14% but double the OECD average of around 5%. In March 2020, employment protection measures helped limit an initial surge in redundancies due to lockdown measures to limit the spread of the virus.

Although a minority of jobs can be carried out remotely, the Basque Country benefits from a relatively high share of jobs that can be carried out through telework compared to most Spanish regions. 32% of jobs can be carried out remotely compared to below 30% in most regions of Spain. Contrary to the 2008 downturn, COVID-19 puts employment in sectors linked to tourism and trade at particular risk.

The COVID-19 crisis is likely to accelerate job automation as firms may replace human labour with cost-saving robots. Already before COVID-19, automation and digitalisation where changing jobs in a number of ways. Some jobs are likely to be destroyed as technology completely replaces the need for human labour. Other jobs will significantly change in terms of the task composition required to succeed in that job. OECD estimates highlight that about 14% of jobs across OECD countries are at high risk of automation, whereas 32% are likely to significantly change going forward. For the Basque Country, those figures are higher: 22% of jobs may be at high risk of automation, with another 33% that may be at significant risk of automation. In total, this means that 205 000 jobs are at high risk of automation, with an additional 293 000 at risk of significant change.

Automation, however, presents new opportunities for the Basque Country, and the government is leveraging its tradition of industrial policy to integrate technology in its industrial base. Indeed, the region’s newest industrial and innovation strategies – from an Industria 4.0 industrialisation strategy to a Smart Specialisation Strategy (RIS3) focused on advanced manufacturing – will encourage Basque firms to integrate new technologies into their production processes to improve their competitive position.

Evidence from this OECD study reveals that middle and low skill occupations related to the region’s industrial manufacturing sector are particularly at risk of automation. Among the highest risk occupations, 38 600 stationary plant and machine operator positions are at high and significant risk, along with 37 900 metal, machinery and related trades workers and 32 700 drivers and mobile plant operators (Table 1.1). Multiple service occupations are also at high or significant risk. In particular, these include low and middle skill jobs involving routine tasks such as cleaning or washing, cleaners and helpers, personal care workers and sales workers, representing respectively 42 000, 25 400 and 36 000 jobs. Given the need for increasing sanitary measures, there could be an accelerated use of robots within these occupational categories to mitigate health risks.

The adoption of new technologies in the workplace has paralleled job losses in the region’s manufacturing industry. The industrial sector lost 64 000 jobs between 2008 and 2015, before recovering partly in the years prior to COVID-19. Between 2008 and 2018, the Basque Country tended to create jobs in occupations both at high and low risk of automation. The region created over 12 300 stationary plant and machine operator positions and over 19 000 metal, machinery and related trades workers since 2008, occupations at high risk of automation. The Basque Country, meanwhile, lost 20 300 cleaners and helper positions and 23 800 building and related trades workers. Worker re-training for high risk occupations can be levered into an opportunity to raise labour productivity hand-in-hand with social cohesion.

After the 2008 crisis, the region also tended to lose high-skill service-related jobs at lower risk of automation, such as business and administration associate professionals, business and administration professionals and legal, social and cultural professionals, losing approximately 14 800, 7 500 and 840 jobs respectively. These losses indicate the region may be struggling to move into higher skilled occupations that may be more resilient to automation outside of its industrial base. This may also constitute a missed opportunity given the region’s high level of educational attainment.

The quality of employment has also decreased in the Basque Country. As in the rest of Spain, involuntary part-time work and temporary contracts have grown, while wages for many groups have stagnated. Indeed, 92% of contracts signed in 2019 in the region were temporary. Meanwhile, the number of people working but at risk of poverty rose in Spain throughout the recovery, suggesting that a share of new jobs may not pay a living wage. These trends have particularly degraded the working conditions of lower skilled workers. At the national level, the Spanish government put in place the Plan director por un trabajo digno, a policy involving labour inspections and big data to curb the abuse of temporary, part-time and precarious contracts.

The Basque Country has multiple assets it can mobilise to face the risks associated with the future of work, particularly as an integrated part of its recovery plan from the COVID-19 crisis. In particular, the region’s public employment service, Lanbide, has developed a volley of tools to collect data on skills developments. Leaning on its world-renowned experience with industry clusters and industrial policy, the Basque Country has also developed a volley of strategic plans to steer the way innovation and technology enters production. These experiences set the base for new strategies to engage with employers on innovative workplace strategies that use the region’s high skills as a driver for an inclusive recovery.

The Basque public employment service (PES), Lanbide, has adopted its services in light of COVID-19 by prioritising social needs arising from the crisis. Lanbide provided income supplements to recipients of temporary unemployment benefits, while it also began administering the Ingreso Minimo Vital, a minimum social revenue launched by the Spanish government during the lockdown. Lanbide’s crisis role is an opportunity to tailor its policies to the recovery, as new cohorts of unemployed people enter its programmes, and the PES is faced with a digitalising labour market.

Across the OECD, the role of new technologies in job searches, labour market transitions and work itself is raising challenges. Automation is supressing and changing the skills required to work in certain occupations, calling for employment services to handle more complex job transitions. Digitalisation, meanwhile, is facilitating the development of new forms of work, such as platform and remote work. Indeed, in 2019, the Basque government introduced a bill with points aiming to reinforce Lanbide’s digital services to adapt to these changes (Anteproyecto de Ley/2019 del Sistema Vasco de Empleo y de Lanbide-Servicio Vasco de Empleo).

Lanbide is a critical actor to support the recovery from COVID-19. The Basque Country’s spending on labour market policies represents around 1.3 % of its GDP, a similar proportion to countries such as Germany, Italy and Denmark. Specifically, the Basque Country spends approximately 41% of its labour market public spending on active labour market measures, while 59% is spent on benefits and other supports. Spending on Lanbide programmes nearly halved between 2012 and 2013 before recovering, which may have harmed their delivery during crisis.

Lanbide has grown its staff from 550 employed full time equivalents in 2011 to 920 in 2019 to support its expanding role. Lanbides strategy consists of providing a generalist mentor service, which registers job seekers and navigates them through employment and activation possibilities. This allows for strong initial support, before turning to Lanbide’s specialised entities and partners to guide job seekers into training or other services. Lanbide administers 65 activation and job stimulation measures, such as work practices or employer incentives. Most programmes in 2019 were targeted on the inclusion of young people and women, with 11 programmes for each target group. This attention on youth and women will help Lanbide as new cohorts of young people and women, who tend to suffer from precarious contracts, bear the brunt of the COVID-19 downturn.

Lanbide is responsible for administering and disbursing the welfare benefit Renta de Garantia de Ingresos (RGI) which provides income assistance to individuals and families in need. It also aims to help those able to work into employment. In 2019, Lanbide administered EUR 489 million in RGI to more than 52 000 people. In 2018, RGI recipients received 42% of the vocational guidance service offered as part of Lanbide services to job seekers and took part in 17% of the offered trainings. Through RGI, Lanbide will be able to provide a strong safety net as the region faces the ongoing consequences of the COVID-19 crisis.

The RGI is a pillar of the Basque welfare system and a local strength in a changing world of work: the guaranteed income measure has helped reduce poverty in the region and its links with activation measures have helped accompany people into training. Nonetheless, more job seekers could benefit from job activation measures. For instance, only 23% of RGI recipients able to work were assisted into jobs in 2019. This may be due to Lanbide’s high caseload of RGI recipients, which Lanbide management estimate requires four times as much time as a non-RGI case. Using this estimate, Lanbide activation staff have 427 cases per staff member, a high caseload compared to OECD countries dedicating comparable budgets on PES. This caseload proportion may prevent staff from devoting sufficient time to activation, as well as other passive measures, causing non take-up of policies. Indeed, the PES is only used as a mediator to offer or find jobs by between 30% to 48 % of jobseekers unemployed for less than six months, and by between 33% to 50% of long-term unemployed in the region.

To mitigate low outreach, the reform bill for employment services includes the possibility of integrating a greater number of labour market agencies in Lanbide’s programmes to lighten responsibilities related to RGI, while also furthering Lanbide’s digital strategy. Indeed, in multiple OECD countries, PES are using digital tools to track and guide their clients’ careers and be able to connect to databases of other partners like training institutes or social workers from other parts of government.

Close work with employers may help Lanbide administer labour market policies more effectively. Services to employers are given a high strategic priority within Lanbide in order to create perspectives for future labour market developments. To better connect labour market needs with job seekers, vocational education and training can offer more short-term trainings directly linked to concrete job or skills, a role that can be facilitated by a PES. Lanbide is also taking major steps to improve accreditation of skills and experiences, although more could be done to recognise transversal and soft skills and increase job readiness, particularly for low skill job seekers.

The recovery from the COVID-19 crisis is an opportunity to better use skills in the region. The skills demanded by jobs are changing in the Basque Country. Job polarisation has accelerated in the region since the 2008 crisis. Middle skill jobs have decreased by over 6.4 percentage points, while low skill and high skill grew by 1.6 and 4.8 percentage points respectively since 2000, following general trends in Spain. Automation is likely to drive middle skill job loss in the region, while changes in wage-setting may have contributed to the creation of low skill jobs. Most of these middle-skill jobs are shifting into high-skill job creation, though pay and working conditions are not keeping pace.

Upskilling also reflects the Basque workforces high educational attainment rates relative to the OECD and Spanish averages. The share of the Basque population with tertiary education has grown steadily in the last two decades, increasing from 32% in 2000 to nearly 50% of the population in 2018.

A survey by Confebask, the Basque employer federation, notes that firms in the region declare difficulties hiring. According to this survey, 48% of Basque companies surveyed declared difficulties hiring in 2016, a number that rose to 71% in 2018. Although this suggests a degree of skills mismatch, it also reflects low job quality, as the region’s highly educated workforce may not find jobs that utilises its skills, allows for career development and provides attractive wages and working conditions.

Indeed, 33.5% of people are over-qualified for their job in the Basque Country versus 16.8% across the OECD and 14.7% in the EU. Confebask firms surveyed declared lack of training/specialisation and lack of experience, along with lack of interest and wages, as the top reasons for hiring difficulties. In this way, there is a greater role for both companies to better adapt to the high level of skills of Basque workers and for the training and activation policies to better articulate with job demand. In the same vein, Basque planning strategies could help stimulate job creation in jobs requiring the higher level qualifications of the workforce. This could include stimulating job creation in higher-skill service jobs.

The region’s renewed social dialogue round table, the Mesa de Diálogo Social, can support workers to adapt their skills and for firms to strengthen the quality of jobs. In particular, the region is moving towards a social pact for the future of work, including an agreement to prevent layoffs due to automation by anticipating skills needs. The roundtable is also creating new labour market initiatives, such as labour market observatories for occupational health and safety or skills. Such joint initiatives between employer and worker representatives lay the basis for new labour market tools to drive an inclusive digital transition.

Adult learning also constitutes a growing opportunity to support workers adapt skills and for firms to strengthen the quality of jobs. As COVID-19 causes an unprecedented shock to the region’s labour market while causing durable downturns in certain sectors and occupations, adult learning can be a key way to ensure workers integrate new skills. Prior to COVID-19, under 21% of SME employees received training in the Basque Country, while over 39% of workers in larger firms can benefit from training.

In this way, the region can bring to bear important strengths, ranging from Lanbide’s array of labour market policies, to a Vocational Education and Training (VET) system of excellence. Indeed, the region’s vocational training institutions benefit from a high profile within the Department of Education, and can lean on close links with the region’s enterprises and innovation strategy. For instance, the Tknika centre, tied to the VET Department, connects vocational training centres to Basque firms and universities to help centres adopt applied research and innovation. The region’s VET has also emphasised ties with employers and brought forth more opportunities for international exchange. As part of this proximity to employers, the region’s VET system has increased the use of dual education, helping many Basque students integrate the labour market following training.

Employers can play a leadership role in this change in training culture and skills use in the Basque Country. Meanwhile, other actors in the region can help accompany and incite companies to strengthen their work practices. As most firms in the Basque Country are SMEs with less human resource capacities, they may struggle to define their skills needs and best use the competences of their employees. Research suggests that employers that innovate in their work organisation – by using strategies such as High Performance Work Practices (HPWP) –can improve productivity while supporting job satisfaction. Improving access to training in the workplace can be an important element of a competitiveness and job quality strategy.

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