Spain's most nagging and seemingly intractable economic problem has been the persistence of high unemployment. The industry shakeout of the 1975-85 period, declining job opportunities in agriculture, and the virtual drying up of the need for Spanish workers in Western Europe led to an unemployment rate that, throughout the 1980s, rarely went below 20 percent, the highest rate in Europe. Overall employment between 1976 and 1985 declined by almost 25 percent. The sharp slowdown in labor demand, following the first oil shock, coincided with the growing exodus from rural areas. The decline in industrial employment was due not only to production cutbacks in a number of key sectors, but also to prior widespread overmanning and to the abruptly urgent need to address deteriorating economic conditions by stressing higher productivity and lower unit labor costs. The ensuing slowdown in real wage growth did not moderate before 1980. As a result, real wages surpassed productivity between 1976 and 1979 by 22 percent.

Though government programs, such as the strengthened Employment Promotion Programs, led to the hiring of more than 1 million people in 1987--more than double the average of about 450,000 per year between 1979 and 1984--they did not appreciably alter the level of joblessness. With almost 3 million people unemployed in 1988, the official unemployment level of 20.5 percent was almost double the OECD average. Record numbers of new job openings were created in the buoyant economy of 1987, and total employment increased by 3 percent, but the new jobs barely kept pace with the growth of the labor force. Undoubtedly, the unemployment rate would have been much higher were it not for the relatively low level of participation of women in the labor force. The unemployment rate for women in the labor force was about one-third higher than that for men.

Youth unemployment was particularly high. The under-25 agegroup accounted for nearly 55 percent of all unemployment, a factor that contributed to juvenile delinquency and street crime. Thus the increasing participation of young people and women in the work force contributed to a persistence of high unemployment in the booming economy of the late 1980s because of the relatively low rates of employment among both groups. Another reason was that, although the economy was growing, part of the expansion was due to improved equipment, and not to increased employment. Industrial production, for example, rose by 4.7 percent in 1987, but industrial employment grew only by 2.5 percent. Nonetheless, these official unemployment rates were believed to be too high, for they did not take account of those persons believed to be working in the underground economy.

Data as of December 1988