Tuesday, March 05, 2013

The Spanish unemployment mystery (part 1)

The three most obvious features of the chart of Spanish unemployment rates since 1985 are: a). the 2012 figure that draws so much attention is not really news. It's not even a record., b). the historical minimum is a bit over 8 percent in 2007 - a crisis number in almost any other industrialized economy, and c). to our knowledge, the fabric of Spanish society did not disintegrate into fascist, monarchist, socialist, communist or even anarcho-syndicalist chaos in 1994.

What the statistics do attest to are: a). a non-binary distinction between work and unemployment in the country's fairly large mass of temporeros and jornaleros. These precariously (and willingly so in many cases) employed will be inclined to pick the negative when asked if they are working or not, b). that Spain's unemployment insurance system is regularly treated as a basic guaranteed income rather than as what it is intended to be. This is a kind way of saying that cheating is uncontrolled and that every person who is doing so is also answering 'no' to the LFS surveyor.

The picture on the left, although result of a number of moving parts, gives an indication as to the extremes these attitudes reach. It shows the euro value of the increase in GDP per person increase in employment from 1995 to 2008. The simple interpretation is that people who were already working admitted to that in public, so to say. Our guess is that this is related to the increase in firm size - particularly if related to construction - that brought many small builders or plumbers and their staff on to the income tax and social security radar.

The incredibly rapid rate of job losses in 2009 we suspect is caused by the opposite effect. Lower wages, part time work and a generalized downsizing being subsidized by unemployment insurance.

Coincidentally, this just in....



Enrigsa said...

I always remember when I asked my lecturers in university: If someone want to cheat Seguridad Social, why would people answer "yes" in the unemployment survey?
Basically the response was: Because this survey is anonymous.
This is a proof of how academic people are always thinking inside the box.
Of course, I do not affirm that the black market is bigger or smaller, it is simply to show the constraints of the unemployment statistics (useful, but be careful)

Charles Butler said...

The data is horribly dirty. It's probably useful comparing time periods within the same country, but cross-country comparisons are a complete waste of time and energy.

And yes, the economics profession could do with a fundamental revision of the raw data data which they use. Enormous task.