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Why the European Commission is wrong: the case of Spain
The Vice President of the European Commission, Olli Rehn, in charge of Economic and Monetary Affairs is becoming the most unpopular EU Commissioner in Spain. He emphasizes over and over again that labor market rigidities are causing the high unemployment in Spain. “Labor rigidities” is a polite way of accusing the Spanish trade unions for the high rate of unemployment that exists in Spain. Indeed, labor rigidities are supposed to mean that, because the unions have been able to get job security for some workers, employers have it too difficult to fire them. This supposed rigidity has not stopped them, however, from firing nearly 4 million workers out of the whole labor force of 16 million. According to Olli Rehn, employers should have it even easier to get rid of workers. The more workers they can fire, the more workers they will hire.
This position also appears in large sectors of academia, although using a different narrative. They divide the labor market between the “insiders” (those who have a job due to the power of the unions, primarily male adults), and the “outsiders”, (those excluded from the labor market, i.e. the unemployed, youth and women) due to the rigidities. And they present the first group as responsible for the unemployment of the second. This position has achieved the category of dogma, not only in the European Commission, but also in the other two components of the Troika, the International Monetary Fund (IMF) and the European Central Bank (ECB). In Spain, this position has become part of the conventional wisdom, reproduced by major economic policy research centers, such as FEDEA, funded by the major banks and large corporations of that country.
The intention of this insiders (adult men) versus outsiders (youth and women) position is to divide the working population, indicating that job security is a “threat” to both youth and women’s employment prospects. And a result of the pressure exercised by the Troika over the Spanish governments, both the one led by the social democrat José Luis Rodríguez Zapatero and the other one, the Conservative party led by Mariano Rajoy, have been eliminating job protection and permanent fixed contracts. And as a result, unemployment has exploded. It is already at 27% and among the unemployed youth, 57%. Employers have been firing and firing, with very little hiring in return. The outcome of eliminating the so-called rigidities has been the largest unemployment ever.