Analysis of the employment market
Mertxe Larrañaga Sarriegi
Applied Economics I
UPV/EHU
Nowadays everyone’s major concern is unemployment; or at least this is what the surveys tell us and, taking a look at the figures, this is no surprise. The great economic recession that we are experiencing will have really harmful effects on the employment market, both the formal and informal market, in addition to jobs that are done outside this market. In summary, it has represented major losses in formal employment, which is clearly demonstrated by the rise in unemployment figures. On the contrary, as far as informal employment is concerned, in times of crisis this type of employment tends to rise, particularly due to the fact that certain activities move beyond the formal economy to the underground economy in an attempt to lower costs, although if the downturn continues then these jobs will also begin to disappear. Finally, the number of hours worked outside the employment market is rising, as market hours are closely linked to hours worked outside it: when hard times come, many families’ incomes drop and as they try and maintain the same standard of living, the number of hours worked by the family unit often rises.
This crisis has, to a large extent, been a financial crisis, but as it has begun to affect the real economy, it has become an employment crisis and its clearest effect has been an exceptional rise in unemployment. However, in addition to this rise, it has caused other damage in the employment market. Economic downturns generally lead to an increase in precariousness and worsening of work conditions and, as far as we can see, this will be no exception.
When the financial crisis reached production companies, through lack of credit, damage caused in the construction sectors and industry (particularly the car industry) has been particularly severe. These sectors are strongly male-biased; for example, more than 90% of workers in construction are men. For this reason, the unemployment rate among men has risen more than for women, and despite the fact that female unemployment has historically exceeded male, this difference is currently almost nonexistent. In the Basque Country, the difference between male and female unemployment rates was 2 points in 2007, but by 2009 it was just 1.3 points. Before the credit crunch came along, the difference was positive in all territories, meaning that the female rate was higher than the male rate, and over these two years, the situation has changed. In Gipuzkoa we might say that the difference has disappeared; it has fallen in Navarre; and in the remaining territories it has been cancelled out although as the rates are higher, these changes have not been particularly detrimental for women. The territory with the most significant differences is the North Basque Country, both before the crisis and in 2009. By looking at this difference in how unemployment has evolved, we can see that men and women have different jobs; this means that the current division of labour that usually affects women negatively (for example, female jobs are generally less prestigious and worse paid), has managed to protect women from unemployment to a certain extent. In any event, unemployed women are in a worse situation than unemployed men, given that they have less protection and this difference is demonstrated by job market differences, to a great extent for the worse.
At any rate, looking at the differences in the rises and the closing gap for unemployment percentages, we should not forget that there are less women in the market and that differences still exist between activity rates for men and women: in the Basque Country, the male employment rate is 65.65% and the female rate is 47.8%, giving an activity rate difference of 16 points. Anyway, it seems that the difference is getting progressively smaller, as it stood at 19 points just two years before in 2007. This occupation difference highlights major contrasts between territories, with one exception: the difference in all territories falls between 14 and 17 points, with the exception of the North Basque Country, whose activity difference is only 8 points. In times of crisis two phenomena may occur relating to female activity: on the one hand, jobs are lost and as occurs with men, if unemployment continues, a certain number of women might lose heart and leave the job market; but simultaneously it can happen that, spurred on by the bad situation, some women (particularly any that were outside the job market before the downturn) rejoin the job market when their children grow up. This is what seems to have happened in the United States and it is possible that the same thing will happen here although there is no data to confirm it.
Continuing with unemployment, we are concerned by what has happened to young people. In 2007, the unemployment rate in the Basque Country among young people aged 16 to 24 was under 10%, whilst it currently exceeds 20%. Territory by territory, the highest rise has come in Araba and in Gipuzkoa (increasing almost 300%) and the lowest in the North Basque Country (only rising 7%); although it is true that the unemployment rate in the North Basque Country was very high before the economic downturn (17%), the highest of all the territories. At the time, the unemployment rate for young people in the North Basque Country was double that of the Basque Country as a whole, but it is currently under average. Furthermore, when looking at young people we have had to take into account that there has been a considerable rise in the number of young people that continue studying in this school year and this data will probably be closely linked to the previous data.
Naturally, if the employment crisis hits the secondary sector particularly hard, it is normal that the weight of service jobs will increase and data corroborates that this has happened, at least in the South Basque Country. Over the last year and a half, the weight of service jobs overall has risen three points in Navarre (reaching up to 60%), and four points in the CAV (reaching 68%). In the service area, the branch that has witnessed the greatest rise, both in Navarre and in the CAV, is Professional, scientific and technical activities. In any case, there are different trends within the secondary sector in these two territories. So, in the CAV the four points gained by the services are balanced out by the two points lost by each of the construction and industrial sectors. In Navarre, on the other hand, it can be seen that the three points gained by the services are the three lost by construction as Industry has not lost any occupation weight. When services are highlighted, we have to remember that the service sector is the only feminised sector, given that over half its workers are women: in Navarre and in the CAV this stands at 58% and in the North Basque Country, 52%.
We should also mention that a high percentage of people have been unemployed for more than a year. At least, this is what is occurring in the South Basque Country: this stands at 20% in Navarre and 30% in the CAV, for both men and women. Additionally long term unemployment is becoming a long term problem. Often, as time goes on, it is more difficult for these workers to find a job, and even when the economy improves, they find it very hard to get back to work. It could be said that they progress with great difficulty through the job-seekers waiting list; they are often overtaken by people who have just joined the job market, leaving them at the bottom of the list.
There can be no doubt that the credit crunch has hit all countries in Europe, but the effect of the job crisis has been considerably different. According to the latest EU-27 data, the unemployment rate in Europe remains at 10%, and in industrialised countries such as Germany it is under 8%. Spain lies at the other extreme: the unemployment rate is 19.3%. What is the reason for these differences? For some, the problem lies in the ‘rigid’ job market, so they formulate proposals to make this market more flexible. We are surprised by this idea that the job market is rigid, when it is more precarious than in any other place. To justify the rigidity, they hold up two types of workers (insiders and outsiders) and state that trade unions only defend the insiders (workers with fixed contracts). According to this model, as job market damage is only suffered by outsiders, the other workers, in addition to conserving their privileges, are a considerable obstacle to making the market more flexible. As we see it, the cause of current unemployment lies elsewhere, and behind such high rises we can perceive production’s dependency on the construction sector, as well as the high proportion of temporary employment, given that it is easy and cheap to sack these workers. These two topics are also closely linked, as temporary employment has enormous influence, for example in the construction sector.
On the other hand, whilst unemployment is rising, the crisis also influences the quality of employment, although not positively of course. Normally, precariousness also rises in times of crisis and the indicators that are used to measure it are, on the whole, part time jobs, temporary jobs and sub-employment. As many of the people who are currently unemployed joined the job queue from a temporary contract, the weight of temp jobs has dropped and this drop has been exceptionally clear in the South Basque Country (it has fallen 17 points in the CAV and 12 points in Navarre): before the economic downturn, more than 35% of all workers were temporary and instead this currently stands at 20% in the CAV and 24% in Navarre. Regarding part-time employment, data demonstrates that this type of work is mainly done by women: in Navarre 23% of women are employed in part time jobs and 4% of men; in CAV, on the other hand, these percentages are 26% and 4%; and in the North Basque Country 33% and 7%. The weighting of temporary employment remains practically unchanged in the economic downturn, but it can be seen that discomfort among this type of worker has grown more acute: there has been a considerable increase in the number of workers that have not been able to find a full time job, with a rise of around 10 points. The number of employees that feel under-valued has grown constantly since the crisis began and the reasons why workers might feel under-employed include inappropriate jobs, low working hours or very low wages.
In this context and in order to stimulate the economy and provide incentives for employment, many governments have decided to raise public spending, following the Keynes guidelines, but they have mainly built physical infrastructures, probably aiming to compensate for the decline in the private construction sector. Also, following this decision we find the idea that the construction sector, in addition to generating a lot of jobs, is a promoting sector; this means that there is the hope that if the construction sector can recover, the other sectors will also improve. In our opinion, on this matter we should ask ourselves a series of very simple questions, such as: Who stands to benefit from these infrastructures? What type of growth is boosted in this way? Is this type of model stable? What type of jobs are created and for who? We are sure that there are many other types of needs in society, such as care jobs. This type of social services, apart from generating a lot of jobs, is more closely related to wellbeing and people’s standard of living, probably much more than many public works that we see around us.
Looking to the future, if we want to encourage employment, we will probably have to implant another type of employment policy. To confront the problems of unemployment, the best thing would be to increase the number of jobs, but it seems that it this is not going to happen, at least not in the short term. In this respect, Paul Krugman, for example, recommends looking towards the policy followed in Germany. What has Germany done to control the unemployment rate? Among other aspects, it has taken measures to distribute employment, and companies have been awarded incentives to reduce working hours thereby reducing the number of people who are let go. Naturally, this represents a reduction in salary but people keep their jobs, although much more precariously. Furthermore, we should not forget that, although the most serious consequence of unemployment is a lack of salary, the unemployed person, and to a lesser extent the people around them, also suffer other negative effects, many of them psychological (loss of self-esteem, etc.) and also physical, such as worsening health and an increase in illnesses. It seems that this type of non economic damage is not dealt with by everyone in the same way, as psychological effects tend to appear more in men, which is probably intimately linked to stereotypes plus the difficulty that men find to occupy their time.
