Santiago Niño Becerra is a professor of economics at Ramon Llul University in Barcelona. He has written many articles, essays and books about the financial crisis in Spain. In fact, he predicted the disaster in 2006 when he announced “high-debts will cause a crash in 2010 similar to the one of 1929”. Cosmopolita Scotland has spoken to the professor about the evolution and characteristics of the Spanish economy in the past 50 years, as well as about job insecurity (1) and its links to the migration process and the stability of the country.
Noelia Martínez Castellanos
I arrived in Edinburgh more than 9 years ago. At that time no one mentioned the word crisis. But some of us decided to leave the country to escape from a job market that we already found insecure and unstable (2) . I am from a rural area in the city of Leon, in the North-West of Spain, where unemployment has always been a problem. Since I remember, people have had to migrate to bigger cities like Madrid, Barcelona, Bilbao or Gijon in search of opportunities. In the past years, I have heard a lot about instability, crisis and economic exile. Then, I have asked myself, what happen with those who left the country before the crash, because they were fed up with the culture of precariousness? I have been lucky to be able to interview economist Santiago Niño Becerra who has explained the historical facts that have resulted in one of the most unstable labour markets in Europe.
Was there instability before the crisis?
The economic boom that took place in Spain in the past 60 years was very much associated to the construction industry (3), both private and public.
Workers have always been economically well-protected in Spain since Franco’s dictatorship: it has always been easy to fire someone, but very expensive: 45 days per year worked (now 20). However, this protection has always been accompanied by a very low average salary and high rates of underemployment.
On average, job quality has historically been very low in Spain because of the characteristics of its GDP structure in addition to low added value with an abundance of permanent, full-time employment.
When the crisis started, instability went through the roof (4). Now, that permanent, full-time employment is being replaced by temporary, part-time contracts, with salaries that are clearly insufficient. An example of what I am saying can be seen in the electoral programme of the political party called Ciudadanos. They suggest establishing financial aid and help for poorly paid workers.
On average, job quality has historically been very low in Spain because of the nature of its GDP structure
When did the Spanish labour market start to be more flexible?
The first stage of the labour reform Act that reduce the legal conditions started in 2010. After that, labour costs decreased and contracts became more and more insecure.
It is important to highlight that the first phase was introduced by a Socialist Government (Partido Socialista). The following two were implemented by a conservative government run by Partido Popular. This shows that the political bias (5) does not matter, the aim is reducing labour costs.
Political bias does not matter, the aim is reducing labour costs.
What has been the role of the black economy in Spain?
The level of underground economy in Spain is high: between 17%-24% according to different estimates. But I think the number of people who worked for the black economy and appeared as ‘unemployed’ in the statistics is not very high because the Economically Active Population Survey (EPA in Spanish), one of the best measurement of the employment reality in Europe, did not ask survey respondents in they worked legally or illegally. In any case, it exists.
There are also people who are legally contracted less hours than the ones they actually do. These people are registered as employed. Spain does not taking into account underemployment, which is around 12% of the working population.
Black economy has not decreased since the crisis. There have been activities that have joined this part of the economy to avoid paying taxes. It is estimated that there is around 0.9 million of people employed in the underground economy, 1.9 million underemployed, and 5 million of people unemployed.
This worsens the situation and brings insecurity because the job offers are much lower than the demand. This is a trend that is going to continue because the only way to solve unemployment is under employing the workers or forcing them to get a job in the black economy. It is like being caught in a loop (6).
Which aspects of the black economy contributed to the decline of the labour market before the crisis?
In Spain job offers have always been lower than demand. This has forced workers to either migrate or accept poor working conditions. This has increased steadily because of the structure of the Spanish economy.
It is true that some of the economic activities were developed in the black market to increase the profit margins. However, some companies chose the underground economy because it was their only chance to survive; that means that tax evasion was their only margin. In Spain, tax fraud is around 6.5% to 9% of the GDP.
During the economic boom instability was not perceived as such because salaries were usually higher and, in general, access to credit was easier. But during the crisis, salaries have fallen and so has the black economy because there aren’t any controls over it.
During the economic boom financial instability was not perceived as such because salaries were usually higher
Finally, how have the different governments, since the start of democracy, reacted to the consequences of the black economy?
The black market is an intrinsic characteristic of the Spanish economy: it didn’t start during the crisis. It has always been there, just like in the rest of Mediterranean countries or Latin America.
This is very much related to the structural limitations of the Spanish economy and the legal impunity that the biggest fortunes have historically had in Spain. Before the Civil War a landowner could pay less tax than all of the peasants and farmers who worked for him.
As a result, black economy and tax evasion were used as an element for defence. Democracy hasn’t helped to improve this situation. However, tax burden has increased relating to incomes, but not over companies profits, specially capital.
In my last book, “La Economía: una historia muy personal” (“Economy: a Very Personal Story”), I analyze a sentence that Pedro Solbes, Former Minister of Economy and Finance from 2004 to 2009, said in the Senate on 15 July 2004, when Spain was in the middle of its economic boom: “The idea of taxing capital can be really attractive, but, what are we going to do if they leave [corporations]?
The black market is an intrinsic characteristic of the Spanish economy: it wasn’t born during the crisis.
Learn more about Santiago Niño-Becerra:
- Santiago Niño-Becerra collaborate with several media and programmes such as La Ventana de la Cadena SER and La Carta de la Bolsa.
- In his last book, “La economía: Una historia muy personal”, he analyses the economic and historical process that has built today’s society.
Use of English for Spanish Speakers
(1) Job insecurity:
- Definition: it is a condition wherein employees lack the assurance that their jobs will remain stable from day to day, week to week, or year to year. Depending on the discipline and political leanings of authors, job insecurity can be referenced in a variety of ways (definition by www.workfamily.sas.upenn.edu)
- Example: “Contract-based employment has instilled job insecurity among labourers ”
- Translation: precariedad laboral
- Comment: Although the terms precariousness and precarity exist in English these are not commonly used when talking about the job market. English speakers, specially media, use terms such as job insecurity, poor working conditions or unstable jobs.
- Definition: not stable; unsteady; liable to change or fluctuate quickly; irregular.
- Example: “But some of us decided to leave the country to escape from a job market that we already found insecure and unstable”
- Translation: inestable, cambiante, variable
- Comment: this word is what we call a false friend for Spanish speakers who tend to translate the adjetive inestable wrongly as
instable,instead of unstable. The prefix changes for the name: instability.
(3) Construction industry:
- Definition: Sector of national economy engaged in preparation of land and construction, alteration, and repair of buildings, structures, and other real property (definition by www.businessdictionary.com)
- Example: “The economic boom that took place in Spain in the past 60 years was very much associated to the construction industry […]”
- Translation: industria del ladrillo, sector de la construcción.
- Comment: you can also say construction sector. Building industry/sector is incorrect.
(4) Went through the roof
- Definition: [for prices] to become very high; to become very angry.
- Example: “When the crisis started, instability went through the roof”
- Translation: dispararse, incrementar (en precio).
(5) Political bias:
- Definition: having or showing a bias means having or showing an unfair tendency to believe that some people, ideas, etc., are better than others. In this case the text talks about political ideas or political parties (definition by www.merriam-webster.com)
- Example: “This shows that the political bias (4) does not matter, the aim is reducing labour costs”
- Translation: In this context is used to translate color político (tendencia política)
- Comment: Although some politicians like Nigel Farage use colours to refer to political parties (red for labour; blue for conservative), the term bias is more commonly used in English.
(6) Being caught in a loop:
- Definition: to get in a situation in which there is no way-out and in which the same things keep repeating themselves over and over again following the same order or process.
- Example: “This is a trend that is going to continue because the only way to solve unemployment is under employing the workers or forcing them to get a job in the black economy. It is like being caught in a loop“
- Translation: entrar en un bucle, en una espiral.
- Comment: this is an idiom composed by the verb ‘to be’ + caught in a loop/stuck in a loop.