Madrid, Rome The latest labor market data from southern Europe seems impressive: Italy’s unemployment rate fell to 8.3 percent in March. This is the lowest level since 2010. At the same time, the employment rate is almost 60 percent, a new record. In Spain, the number of employees subject to social security contributions now exceeds the level before the pandemic. In April there were 20 million employees for the first time – more than ever before.
The job boom in Madrid and Rome comes as a surprise given the war in Ukraine and globally disrupted supply chains. On top of that, both countries were hit by a particularly severe economic slump during the pandemic: In Spain, gross domestic product shrank by twelve percent in 2020, in Italy the minus was around nine percent. Although both economies recovered last year, the pre-crisis level is far from being reached.
A second look at the numbers shows that the latest labor market data should also be taken with a pinch of salt: In Italy, for example, more than three million people now have temporary jobs – that too is a new record. Since the beginning of the pandemic in March 2020, the national statistics institute Istat has counted 535,000 new employees. 97 percent of them have fixed-term contracts.
The number of low-income earners increased by 400,000 to around three million Italians during the Covid crisis. The definition includes singles who earn less than 11,500 euros per year or families with two children who have a household income of less than 26,000 euros.
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Italy: Low added value and too few skilled workers
Andrea Garnero, economist at the Organization for Security and Co-operation in Europe (OSCE), says: “In these times of uncertainty, where goods and raw materials are lacking, it is not so far-fetched that companies rely on temporary contracts.”
Most of the jobs that have emerged in Italy in the past two years are temporary.
(Photo: Bloomberg)
In addition, the fixed-term contracts are limited to three years. Nevertheless, he is only partially optimistic. Because there is also an explanation for the record rate of people in employment: “It’s not an exceptional performance of the labor market, but mainly due to demographics.” Recently, more people retired than new workers were added. In this way, the workforce has shrunk by 600,000 within three years.
Overall, Garnero sees the weakness of the Italian economy in that it consists “largely of low value-added services”, especially in sectors such as tourism or agriculture. At the same time, many companies are unable to find skilled workers because the employees are not well trained.
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The fact that the labor market in Spain collapsed significantly less during the pandemic than in previous crises is mainly due to a generous short-time work rule. The short-time workers did not count in the unemployment statistics, the companies could easily bring them back during the upswing instead of having to look for new employees on the market.
The regulation expired at the end of March – without it having had “negative effects 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 the new jobs come from public administration. In the two years of the pandemic, more employees were needed, especially in the healthcare sector and in schools.
Before the pandemic, tourism accounted for twelve percent of economic output in Spain.
(Photo: IMAGO/ZUMA Wire)
Spain’s unemployment rate fell below the 2019 level last year. At 13.7 percent, however, it is the highest in the EU and is twice as high as the EU average.
Juan Carlos Martínez Lázaro of the business school IE in Madrid sees part of the explanation for economic growth lagging behind the recovery in the labor market in the yet to come recovery in tourism. Before the pandemic, this accounted for twelve percent of economic output in Spain.
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The effects of a labor market reform are also positive: the proportion of temporary jobs has fallen significantly since February. The reform, which made fixed-term contracts significantly more difficult, was part of the conditions that Madrid had agreed with the EU for the payment of new aid from the European recovery fund.
Temporary jobs have so far accounted for a quarter of all contracts in Spain. In April — the first month the reform took full effect — permanent contracts more than tripled year-on-year, while temporary contracts fell 37 percent.
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