The American Interest
Analysis by Walter Russell Mead & Staff
The War on the Young—in Spain

Over at the New Republic, Jonathan Blitzer files a harrowing report on the dire situation of Spain’s youth. The country is experiencing 25 percent unemployment—with youth unemployment twice that number. The reason? An economic system constructed by government and unions that perversely incentivizes against hiring and retaining young people:

The peculiarities of the Spanish labor market are at the very crux of the youth unemployment problem, says economist Carlos Sebastián, a professor of economic analysis at Madrid’s Complutense University. Indeed, it is impossible to understand the generational rift at the heart of contemporary Spain without examining the traditional strength of Spain’s unions, and the raft of perverse incentives that it encouraged, for employees and employers alike.

In the late 1970s, in the heady early days of Spanish democracy, the country’s parties made a concerted effort to show their affinity with the working classes; in practice, this meant accommodating unwieldy union demands. When a recession hit in the 1980s, one of the few ways the government could combat unemployment without cutting into existing labor prerogatives was to create “temporary contracts.” These were designed to make it easier for businesses to hire young people (as well as immigrants). But since it paid out fewer benefits, it also made it cheaper for businesses to shed these workers when the going got tough.

The recipients of these temporary contracts—ie: the occupants of the Spanish labor market’s lower rung—have always been the country’s youth. There is thus a steep drop-off in how Spain’s older and younger generations have been trained to think of their economic prospects. In talking to Spaniards in their twenties and thirties, it is routine to meet people, regardless of their background, who describe being hired for a year or two, then fired, and rehired several months later. It’s also rare to find anyone in her twenties or thirties who has had, or knows someone who has worked under, anything other than temporary contracts.

We would be wise to learn from Spain’s plight before it’s too late. America has its own intergenerational reckoning on the horizon, and unless elected officials act to rebalance our failing blue model priorities, young people in this country could end up just like Spain’s: unemployed, in debt, and without prospects.

Published on June 1, 2012 9:00 am
  • thibaud

    Once again, WRM’s obsession with public sector unions leads him to make the leap from a valid data point to an absurd conclusion. He can’t seem to get this bugbear off his mind, even when the subject at hand is not the public sector but the private sector where the vast majority of jobs reside.

    Spain’s PRIVATE SECTOR unions, like those of France, have for decades caused that nation’s PRIVATE SECTOR employers to retain older workers at the expense of hiring younger ones.

    With almost no exceptions, America’s >90%-nonunion PRIVATE SECTOR employers do not face any such pressure.

    In fact, in the sector showing the most robust employment growth in the US economy – the software and gaming segment of high tech – the evidence is very strong that WRM has it exactly backwards: young and (relatively) cheap workers are favored over older, (relatively) expensive employees.

    Again, the “blue model” canard here is a complete distraction from the reality, which is that US employers post-crash are doing everything they can to avoid hiring workers in the US. You can blame this on some mirage called “uncertainty,” but a much more likely reason is our absurd linkage of employment and health insurance that results in a sky-high marginal cost of hiring a worker in the US.

    Sever this link, expand medicare to all, proceed with other health insurance reforms, and you’ll see the US unemployment rate drop swiftly as US firms’ marginal hiring cost falls.

  • JKB

    Seems the solution would be for more entrepreneurship to go around the obstacles. Of course, even in the US there is a bias against becoming an evil business owner among the young. But, in the US, innovation is still prized. As such, with an effort to cut the red tape and facilitate small business creation, many young people could find their new path. And, discounting those who go from zero to billions before they every pay their own rent, small business owners aren’t really blue staters having the government man on their back 24/7 and all.

    At some point the young will wake up in the occupy tent and realize, if not them, then who and start taking responsibility for their future. Which, without corporate hiring, means being owner/operator/chief employee.