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Blue Model Death Throes in Spain

Spain’s youth unemployment rate, now over 50 percent, is the stuff of nightmares for economists. But even those young Spaniards lucky enough to be gainfully employed are beginning to learn that having a job doesn’t guarantee you’ll get paid. As the New York Times reports, many Spanish businesses are so strapped for cash that they can no longer pay employees on time, or in some cases pay them at all. Many of these employees are too afraid to quit and face the cratering job market, and so solider on in the hopes that they will eventually get what they are owed:

“Before the crisis, a worker might let one month go by, and then move on to another job,” said José Francisco Perez, a lawyer who represents unpaid workers in the Valencia area. “Now that just isn’t an option. People now have nowhere to go, and they are scared. They are afraid even to complain.” . . .

Often the unpaid workers, like Mrs. Molina, whose company is now in bankruptcy proceedings, hope their labor will keep a struggling operation afloat over the long run. Unemployment benefits last only two years, they point out, and they wonder what they would do after that. But in the meantime, they cannot even claim unemployment benefits. And no amount of budgeting can cover no payment at all.

Making matters worse, the government insurance funds designed to help workers in precisely this situation are also running out of money:

The regional government would not address the dimensions of the problem, when questions were submitted in writing. Instead, it offered a statement saying it was doing its best to pay its debts. “We are aware of the difficulties faced by many associations and suppliers caused by the delay in payments from the public administration,” the statement said. The Region of Valencia, it said, was working to “overcome this crisis at the earliest opportunity,” understanding that “paying contributes towards activating the economy.”  [ . . . ]

On a recent morning, workers began lining up outside the Valencia offices of the government insurance fund even before it opened. The mood was grim. Most would get only a fraction of what they were owed. Recently, the government reduced the maximum reimbursement of $1,700 a month to four months, rather than five.

This is the depressing endpoint of the blue model. First they stop paying the pensions. Then they stop paying the suppliers. Then they stop paying the salaries.

Spanish workers are discovering what happens if you trust the people who tell you, “Don’t worry, the government has plenty of money. Your benefits are secure; we’ve put it in a lock box.”

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