The latest figures for the labor market in southern Europe look impressive, as the unemployment rate in Italy fell to 8.3% in March, according to Handelsblatt. This is the lowest level since 2010. At the same time, the employment rate is just under 60%, a new record. In Spain, the number of workers subject to social security contributions now exceeds the pre-pandemic level. In April, for the first time, there were 20 million employees – more than ever.
The job boom in Madrid and Rome is surprise in war zone Ukraine and world disrupted supply chains. In addition, both countries were hit by a particularly severe economic downturn during the pandemic: In Spain, gross domestic product shrank by 12% in 2020, while in Italy the minus was around 9%. Although both economies recovered last year, they are still a long way from reaching pre-crisis levels.
A second look at the data shows that the latest data from the labor market should also be treated with caution: In Italy, for example, more than three million people now work in temporary jobs – another new record. Since the pandemic began in March 2020, the national statistical institute Istat has counted 535,000 new employees. The 97% of them have fixed-term contracts.
The number of low-wage earners increased by 400,000 during the coronary crisis to about three million Italians. The definition includes bachelors earning less than € 11,500 a year or families with two children having a household income of less than € 26,000.
Andrea Garnero, an economist at the Organization for Security and Co-operation in Europe (OSCE), says: “In these times of uncertainty, where there is a shortage of goods and raw materials, it is not uncommon for companies to rely on temporary contracts.”
In addition, he says, fixed-term contracts are limited to three years. However, he is only conditionally optimistic. Because there is an explanation for the record employment rate: “This is not about excellent labor market performance, but mainly because of demographics.” More people have recently retired than new workers have joined the workforce. The workforce base has thus shrunk by 600,000 in three years.
Overall, Garnero sees the weakness of the Italian economy in the fact that it consists of “a large number of low value-added services”, especially in sectors such as tourism or agriculture. At the same time, many companies can not find skilled workers, because the workers are very poorly trained.
The fact that the labor market in Spain collapsed much less during the pandemic than in previous crises is mainly due to the generous rule for short-term workers. Short-term workers were not counted in the unemployment statistics and companies could easily bring them back during the recovery instead of looking for new workers in the market.
The rule expired in late March – without having a “negative impact on the functioning of the labor market”, explained Social Affairs Minister José Luis Escrivá.
Spain: New jobs mainly in administration
However, a large proportion of new jobs come from public administration. In the two years of the pandemic, more workers were needed, especially in the health sector and in schools.
Spain’s unemployment rate fell below the level of 2019 last year. However, at 13.7% at present, it is the highest in the EU and twice the EU average.
Juan Carlos Martínez Lázaro from the IE Business School in Madrid considers that part of the explanation for the fact that economic growth lags behind the recovery of the labor market is due to the still pending recovery of tourism. This accounted for twelve percent of Spain’s pre-pandemic economic output.
The results of a labor market reform are also positive: since February, the proportion of temporary jobs has dropped significantly. The reform, which made interim contracts much more difficult, was part of the terms Madrid had agreed with the EU on the disbursement of new aid money from the European Reconstruction Fund.
Temporary jobs account for a quarter of all contracts in Spain to date. In April – the first month in which the reform took full effect – fixed-term contracts more than tripled from the previous year, while the number of fixed-term contracts fell by 37%.
Source: Capital
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