The job market is going through a unique moment. The unemployment rate in the Eurozone is at historically low levels and in the case of Spain, although these levels are still far away, we can say that it is at the lowest level in the last 50 years, without no sign of major imbalances. It is true that in 2007-2008, the unemployment rate was 8%, but then the economy was distorted by a huge credit and housing bubble (an extremely labor-intensive sector) which has artificially reduced the unemployment rate. Today, employment is at its peak and the unemployment rate is at a low level (for Spain), with no bubble in sight. It seems that the labor market could enter a new era in the Eurozone (perhaps even in the West) and in our country, ushering in an all-out war for jobs that could last longer than it seems.
Because this apparently positive scenario for employment revealed an unprecedented challenge: the lack of labor, which has transformed the balance of power in labor relations. This also coincided with an intense inflationary cycle which, to some extent, was passed on through wages. Companies embarked on a race to the upside, believing that this “overheating” of the labor market was only a response to a temporary situation. But this diagnosis could not be more wrong.
The usual reference to talk about the lack of labor is that of vacant positions, especially when expressed in relation between the percentage of jobs to be filled and the strike in the famous Beveridge curve. A “classic” indicator of the economic cycle (less unemployment and more vacancies in expansion phases and vice versa in recession phases) which however recorded abnormal behavior after the pandemic. And we have large economies like Germany flirting with recession while registering minimum unemployment and maximum job vacancies, while others, like Spain, with double-digit unemployment and low of vacant positions which can only be described as “rickety” They lead the growth of the euro zone. Still, resignations in Spain are reaching historic highs, which also suggests that the labor market is entering a new era.
Faced with doubts as to whether this responds to a statistical problem or to the existence of factors that conventional measures are not capable of detecting, many analysts point out that the labor market, like any other, It’s a game of supply and demand.: and the companies looking for workers are just as important as the characteristics of the people willing (or not) to answer that call. And here we have to talk about the available manpower.
“Work” is synonymous with labor force and active population: the sum of people who have a job and those who do not have one, but who are actively looking for one (i.e. the unemployed). But even though working life may begin at age 16 and extend into retirement (and beyond), the truth is that in economic terms not everything is considered equally productive: Many people under 25 have still fully entered the workforce because they are continuing their education, while those over 55 are beginning to consider retirement. rather than looking to change jobs, and they even advance their retirement if they are unemployed, because they have fewer opportunities than other workers. For this reason, the available labor reference focuses on people located between the two age groups, those called in English ‘prime-age workers‘. And its weight on the labor market is decreasing.
In this sense, Spain constitutes a striking case. Despite the highest unemployment rate in the euro zone and the lowest job vacancy rate, companies in key sectors of the economy report a shortage of workers. Chow is this possible? Things become clearer if we note that the weight of “prime” labor on the labor market has fallen by almost nine points since its peak in 2012. In other words, the recovery of he employment after the financial crisis was achieved with increasingly “older” potential workers. .
This despite having more assets due to the arrival of immigrant workersbut also because the children of the wave at the beginning of the century, Spanish by birth, joined the job market. Without forgetting of course the growing weight of women in the working population. These positive effects were compromised by a demographic change underestimated by companies and economic policies that followed outdated recipes without taking the demographic “time bomb” seriously enough. This explains why, with an unemployment rate of 11.7%, we are talking about a lack of labor: there are sectors which are simply losing their potential workers. for not having been able to adapt to this evolution.
But this miscalculation only revealed its full intensity with the pandemic, which accelerated the process of rebalancing powers in the labor market, not only in Spain, but throughout the euro zone. And this has led to economic consequences that are impossible to ignore, especially in countries like Germany, where the demand for workers far exceeds the available supply. That’s to say : there are more vacancies than unemployed.
Patrick Artuschief economist of Natixisexplained these changes in a very graphic and forceful way at the European level in a note to its clients: “From the late 1990s until 2016, the labor market in the Eurozone was led by businesses, which had greater bargaining power than businesses. employees, which allowed them to maintain low salary increases and a high share of revenue generated by value added at each stage. This period was characterized by a constant increase in the share of profits (gross operating surplus) in GDP, measured on the income side. However, labor income has suffered a steady relative reduction which has alarmed workers, unions and also economists.
“But since 2017, and especially since Covid, we have witnessed the emergence of a labor market driven by employees, with strong salary increases and employees catching up with inflation after a delay in salary adjustment at prices. This trend is due to demographics (decrease in the working age population) and falling productivity, which keeps the labor market very tight. “This change in the functioning of the labor market means that wage inflation in the euro zone will remain significantly higher than in the past,” believes Artus.
Artus proposes three lines or axes that support his theory: An increasingly low unemployment rate; significant recruitment difficulties which increase even during periods of economic slowdown; and the increase in the employment rate, combined with stagnant productivity. The latter is essential for Artus. The worker has become so important in the process that employers continue to hire out of necessity and fear of being left without workers, even if productivity does not increase. This, in the medium and long term, if this new era comes to fruition, will lead to an increasing share of the pie going to workers at the expense of capital (the profits of business owners).
The fact is that all Eurozone markets have seen workforce declines.prime», even with more intensity than Spain which, as we have seen, countered the blow thanks to immigration (first and second generation). But the current rate of decline is the same as in the rest of the countries.. And we must not forget that among “first-class” workers, there are more unemployed than among the other “contenders” in a war for talent that seems inevitable in Europe.
Even though our country depends on immigration, especially Latin American To maintain its advantage, job opportunities are fewer in a market with an unemployment rate of 11.7% than in a market where it stands at 6.1% and, in addition, it has a volume of positions vacancies much more important. Something that makes the cultural or linguistic question less relevant.
Why is this happening? From the Bank for International Settlements (BiS) shed light in a report investigating why Western labor markets are so resilient: “A constellation of factors has led to demand for labor exceeding supply. On the supply side, moderate growth in the working age population and changes in the working age population. » Labor market participation also influenced workers’ preferences for fewer work hours and more leisure, they point out. This latter factor could be a contributing factor to the productivity issues Artur reported.
Experts warn of a clear trend towards “work hoarding, i.e. scarcity breeds scarcity“, they say from the International Bank of Settlements. Furthermore, “excess demand for labor has been concentrated in sectors that workers have rejected during the pandemic. “These factors may explain why labor markets have been surprisingly resilient, even as growth loses momentum.”
Finally, the BIS report warns that “even if the pandemic experience does not leave a lasting imprint on the behavior of workers and businesses, structural and long-term forces could keep labor markets tight. Supply Demand for labor could remain subdued due to unfavorable demographic trends. and the ongoing reconfiguration of global supply chains (the so-called labor movement). relocation) could strengthen the transition of companies’ business models from “just in time” to “just in case”.
This would lead companies to create additional buffers, even on the labor side, which could generate upward pressure on wages and, by extension, on prices,” these experts believe. But their diagnosis raises doubts about this which will happen later. Demographics certainly demand something more from the economies of the Eurozone and the entire planet.
In a context of longer life expectancy and lower birth rates, the recipe seems simple: we need to focus on older workers and improve your productivity with technologywhile the promotion of young people towards “quality” jobs is accelerating (which, in countries like Spain, is delayed until their thirties). This could improve the distribution of income among workers and would even have positive effects such as a rebound in the birth rate and a narrowing of the gap in assistance programs, particularly in unemployment benefits and pensions.
But eradicate some early retirement cultures That precisely they have hidden behind technological advances is not only a question of will: it requires that companies can afford it without passing it on in prices.
This “squaring the circle” seems impossible in sectors that depend on intensive use of labor in low-skilled jobs, such as commerce, hotels and construction, which concentrate the largest share of the employment pie. Young people, who are better trained, do not accept them and seniors are simply not taken into account. A scenario in which Spain has much less ability to compete with its neighbors, especially when it comes to attracting and retaining foreign talent.
