Since the accession to the European Community, the labour market in Spain has been characterized by a high rate in the creation of new jobs during the years of greatest economic expansion, compared with the reduction of employment after the third consecutive year of economic deceleration. During the second half of the 1980's, the rate of new job creation was extremely high in Spain and unemployment figures fell appreciably, in spite of a marked increase in the size of the active population. From 1986 to 1990, the period of greatest economic growth, almost two million new jobs were created close to 398,000 net jobs per year on average, which amounts to an average employment growth rate of 3% per year, or, in other words, over 1,000 new jobs per day. Owing to this job creation rate, and in spite of the increase in active population, the unemployment rate fell by almost 6%, from 22% in the fourth quarter of 1985 to 16.1% in the fourth quarter of 1990. This drop in the unemployment rate would have been ever greater if the sharp increase in the number of persons seeking work had not occurred. More than 1,100,000 people entered the labour market during this period, 896,000 of whom were women.

Due to this increase, the participation rate -the relation between total population and activity population- rose from 48.8% to 49.7%, and the rate of activity among women rose from 29.6% to 33.5%, although this latter continues to be well below the European Community average.

This period of strong job creation was compatible with a sharp rise in wages, both in nominal and real terms, and which has not been accompanied by a corresponding increase in productivity, leading in turn to an appreciable increase in unit labour costs. All this, when tied to the existence of a strong peseta, provoked a gradual loss of competitiviness in Spanish production. During the 1986-1990 five-year period, the average wage increase was 7.4, compared to an average inflation rate of 6.5%.

During the 1991-1992 two-year period, production grew by 1.75% in real terms while employment decreased by an annual average of 0.85%. Wages increased by an average of 8.5%, which indicates a fall in job creation that does not correspond to the drop in production but rather to the increasing expense of the work factor and its substitution by capital. In the expansive phase of the economy, when strong dmand permitted companies to convert higher costs into higher prices without reducing sales, wage increases were inflationary but did not produce unemployment. However, during those years of lower demand, it becomes difficult for businesses to translate higher costs into higher prices, and this hence results in a attempt to reduce cost increases by reductions in personnel.

High wage claims in 1990 (an 8.8% increase per workers) did not have an immediate impact in the reduction of employment. This was experienced later on, owing to the idea of work as an almost fixed production factor. However, since high wage demands continued into 1991 and 1992, companies began, albeit belatedly, to reduce the size of their staff.

The rate of unemployment, the ratio between active population and those without work, was 20.6% -or some 3,047,100 persons- in the last quarter of 1992, according to the survey of active population. This figure is considerably higher than the average unemployment rate of the European Community, which for the same period was slightly above 10%

It is to be expected that the labour unions, sensitive to the less favourable economic climate, and conscious of the impact of their claims on the labour market, will be moderating their wage demands in 1993, 1994 and next year.

The unemployment that is endemic in the Spanish economy has had less drastic social consequences than might be expected at first, primarily because unemployment benefits coverage has increased notably, from a net rate of coverage of 38.8% in 1983 to 84.4% in 1992. Secondly, the jobless rate among youth and women is generally higher than among men, and finally, although it is difficult to quantify, effective unemployment is appreciably lower than the rate given in the statistics.

The importance of a development of wage increases in line with those recorded in the rest of the European Community has been reiterated by the Government very often, and to provide an example, it has set a wage increase of 2% for public sector employees for 1993, and no increase in 1994.

LAST FIGURES (September 1994) ABOUT THE LABOUR MARKET IN SPAIN:

     - active population:    15,485,800
     - employed population:  11,787,500
     - participation rate:           48.99%
     - unemployed population: 3,698,499
     - unemployment rate:            22.40%