On Tuesday, after weeks of internal fighting, the government approved reform of unemployment benefits. Finally, the rule is a hybrid of proposals from the Labor and Economy Ministries, which generally provide for an improvement in the size of the benefit and its coverage, which is reduced and which can be compatible with employment for 180 days. The month-long wait that until now had to pass between exhausting unemployment benefits and receiving those benefits is also eliminated.

Ministers’ approval of the new rule coincided with the presentation of the Bank of Spain’s latest forecast report, so economists were unable to assess the changes contained in it in detail. But what the watchdog is clear is that increasing this subsidy, which barely 800,000 people in Spain receive, will not in itself improve the country’s unemployment rate, as Nadia Calviño’s ministry insists, and therefore should not be reformed. passive employment policies, but in general, in addition to active employment policies.

If ambitious, broad-based and structural reform were proposed in this regard, the Bank assures that unemployment rate may decline from current 12% up to 6.5%, on par with the rest of the great European powers. Reducing Spain’s unemployment rate, which is currently the highest in the entire European Union, is theoretically a government priority and much of the country’s progress depends on it, as other reforms such as pension reform will not increase employment. . But even though this is a priority, there are no major changes planned to the Legislature’s employment data. Consequently, the watchdog forecasts the unemployment rate to be 11.3% in 2025, the final year covered by the report’s horizon.

“Structural measures are needed, which must be ambitious and coordinated.”

Angel Gavilan, Bank of Spain

“There is no simple solution to a problem that the Spanish economy has been struggling with for decades,” Angel Gavilan, director of economics and statistics at the Bank of Spain, said on Tuesday. “To solve this [el problema]structural measures are needed, which must also be ambitious and coordinated. And looking at active and passive policies together is a fundamental element because incomes must be protected, but sufficient incentives must be created for the unemployed to return to the labor market,” he said.

How to change active and passive policies

Active employment policies are those that actively seek to promote the reintegration of unemployed people into the labor market, for example: educationnotice boards or sending job offers suitable for the profile of an unemployed person. On the other hand, passive policies are policies aimed at protecting the unemployed while they are out of work, such as unemployment benefits and unemployment benefits, which have been discussed within the government in recent weeks.

The Bank of Spain believes the government is failing on both fronts: both when it comes to protecting the unemployed and improving their job opportunities. “There is room for improvement in Spanish policy,” said the director of the Statistics Office. For example, your report includes a graph showing that Spain has the lowest unemployment benefits of the entire EU they are second only to Malta, Slovakia and Croatia. “The passive policy system in Spain has a lower coverage rate than in other neighboring countries. For example, in Germany, 50% of the unemployed have unemployment benefits, compared to 20% in Spain,” Gavilan recalled.

Spain is the fourth country in the EU that spends the least on training the unemployed.

On the side stimulation of employment, There is still room for improvement as Spain is also the fourth EU country that spends the least on education after Slovakia, Lithuania and Latvia. It does not reach 500 euros per unemployed person, compared with almost 8,000 in Luxembourg, 7,000 in Austria or more than 4,000 in Germany and Finland. That is, in other eurozone countries, the unemployed are trained much better so that they can improve their employability and get out of unemployment faster.

On the other hand, Greece and Spain are the countries with the fewest requirements for receiving benefits if the worker is unemployed. In others, their perception is much more related to demonstrating readiness for work, and the conditions under which a job offer can be rejected are more limited, while in Spain there is hardly any conditionality that, if reinforced, could encourage a return . Job.

Unemployment benefits reform

While the watchdog did not weigh in on the reform that was endorsed during its press conference, it did provide some insight into how unemployment benefits should be reformed. The Bank of Spain’s ideas generally seem to support labor reform, with its economists recalling that there is clear evidence of the need to consider changes in benefit duration or in its size or reduction of paths, without reducing the level of protection.

“This year’s annual report states that the reduction in the duration of benefits, but increase in initial amount The models showed that households did not lose protection, but rather returned to the labor market,” Gavilan said. It was the reform of the ministry that ultimately led to a downward path, although overall the amount increases, as well as the months in which it is accrued.

They also recalled the importance of not creating mechanical disincentives when returning to the labor market. In this sense, the new rule includes a benefits and employment compatibility period of 180 days, which is significantly more than the 45 days Labor initially proposed. But, again, first of all they insisted on the need coordinate some measures and others achieve a faster return to employment: “There is no point in having a bunch of policies that don’t speak to each other and are contradictory.” This is what often happens with benefits aimed at protecting the unemployed rather than putting them back into work, such as IMV.