Total employment in the OECD returned to pre-crisis levels at the end of 2021 and continued to grow in the first months of 2022. The OECD unemployment rate gradually fell from its peak of 8.8% in April 2020 to a level of 4.9% in July 2022, slightly below the 5.3% value recorded in December 2019. However, the labour market recovery has been uneven across countries and sectors and is still incomplete, while its sustainability is challenged by the economic fallout of Russia’s unprovoked, unjustified and illegal war of aggression against Ukraine. The unemployment rate in Spain has fallen from its peak of 16.4% (September 2020) to 12.6% in July 2022. This current rate is below its pre-crisis rate (13.9% in December 2019), as shown in Figure 1. The job retention scheme (ERTE), has contributed to limit the rise of unemployment.

  • The Spanish labour market recovered strongly in 2021, with a strong bouncing back of the tourism sector and the more widespread need to refill temporarily closed positions after lifting COVID-19 restrictions, which is also continuing in 2022. However, there may be headwinds stemming from the Russian unprovoked aggression against Ukraine, which has raised energy prices and increased uncertainty, deteriorating business confidence and potentially slowing down manufacturing and the services sector.

  • Despite this recovery, unemployment levels remain structurally high in Spain, and the labour market continues to be particularly challenging for young people. Employment rates of young people are below pre-crisis levels (1.5 percentage points lower in the first quarter of 2022 compared to the last quarter of 2019), mostly accounted for by employment losses in low-pay service industries such as accommodation and food, administration, retail and transportation.

Vacancies surged to record highs in many countries and reports of labour shortages rose significantly in many industries and countries. Despite this, nominal wage growth remains well below the high inflation induced by the commodity price hikes spurred by the war in Ukraine. The decline in real wages is expected to continue over the course of 2022, as inflation is projected to remain well above the level expected when wage rates for 2022 were negotiated.

  • The strength of the labour market led to the emergence of labour shortages in the tourism, agriculture, construction and technology sectors. This contributed to rising nominal wages in 2021, but in the context of accelerating inflation this was not enough to protect purchasing power. Indeed, real wage growth in Spain fell sharply in 2021, and is projected to continue falling by 4.4% in 2022 (Figure 2). This represents one of the strongest declines in real wages observed among countries for which data are available, and a substantial squeeze of the purchasing power of workers, notably those paid at the minimum wage (SMI) as Spanish consumer prices are rising at historical highs.

Russia’s war against Ukraine has brought new challenges. It has contributed to the highest inflation in decades, notably through price increases for energy and commodities. Low-income households, who spend a large share of their tight budgets on energy and food, are particularly affected. On average, for the OECD countries for which data are available, households in the bottom income quintile spend 50% more of their consumption budget on food and energy than those in the top income quintile. Targeted support, which often takes the form of transfers, involves lower fiscal costs, expands demand less at a time of high inflation and is better in line with the green transition.

  • Similarly to other OECD countries, Spanish Government is trying to cushion the high inflation by containing the rise in electricity prices through electricity tax cuts (non-targeted price support measures). To target low-income households, Spain has also implemented a bonus to support poorer households pay for their energy bills, averaging around EUR 90 per month per household.


Stefano SCARPETTA ( [email protected])

Silvia GARCIA-MANDICO ( [email protected])

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