Unemployment: How does Spain cope?

MADRID, Spain — Over the last three years the Spanish economy has fallen off a cliff. At 22.8 percent it's unemployment rate is more than double the European average. Its government finances — in surplus at the start of 2008 — are now deeply in the red and the country is paying more than 5 percent interest on its bonds. It is trapped in the contemporary cycle of indebtedness leading to austerity leading to higher unemployment.

Yet Spanish society is holding together for a number of reasons. First, and foremost, family. But then there are others, such as the Catholic Church.

Catholicism is deeply woven into Spanish life, although that doesn't mean that churches are packed with worshippers.

In Madrid's working class barrio, Vallecas, Father Antonio de la Calle, of the Patrocinio del Senor church, laughs out loud when asked if the economic crisis has increased attendance at mass. Then he says, "No."

Father Antonio explains what people really want from the church. "They want the church to be an oasis, a place of calm." A round, bearded and kindly man, the Father keeps the door to his church open at all times. Attendance at mass may not be on the increase but more people are coming to church at other times, the priest says. "People come to sit, to speak to Him, or just cry."

Ask him if faith is the reason the Spanish are so patient with the current situation, and he responds, "People are not patient. They are in shock."

In this neighborhood of 300,000, poverty levels are growing and the priest spends much of his time finding food for the daily soup kitchen he runs. He donates his salary and asks friends for financial contributions. He has made an arrangement with the upscale La Paz open air market to provide food boxes every three weeks, so his parishioners can get fresh fruit and vegetables rather than hand outs of dried or processed food.

Father Antonio also works closely with Caritas, the Catholic social welfare charity. For more than 30 years, Caritas has been training the least employable in Spain and helping them find jobs. Most of those were immigrants. That has changed dramatically in the last three years. Immigrants are leaving Spain and now Caritas is dealing with many more native born Spanish than they ever have.

The year before the economy crashed, Caritas's budget for employment activities was a little over 23 million euros. Today it is over 33 million euros. Eighty-three thousand people used Caritas training and placement services last year. Only 16,791 found work.

"The distance to employment is much greater than it used to be," says Felix Sanchez, who oversees the charity's employment programs. "Four years ago, companies would phone us to ask if we had any workers we could recommend. Now we phone companies — once, twice, three times, four times — with no result."

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It isn't that the people Caritas trains are less able than they used to be. It's because, "a million more people have lost their jobs in the last year or so. These new unemployed have work experience, they have education."

With private employers not hiring, the charity has started its own businesses to employ those it is training. "They are non-profits, of course," says Sanchez. "The businesses are in gardening and cleaning, useful jobs. We pay union rates."

Last year, 534 jobs were created this way. It is simply not enough.

Black Economy

People do not survive just on their family networks and the Church but by doing work off the books. The black economy is notoriously difficult to measure. In the US, the accepted estimate is that a little more than 8 percent of GDP is generated in this zone beyond tax authorities. In Spain the number quoted is 20 percent. But that figure is often disputed.

No two businessmen can agree on the black economy's impact on employment.

Barcelona-based entrepreneur Jordi Roig doesn't think the true unemployment rate is over 20 percent. "If it was true we have a civil war on our hands," he says.

Misael Morate has a small business on the island of Majorca. He thinks the real unemployment rate is actually higher because some people have not been counted. "You have 200,000 recent university graduates. Most of them have not found work yet. You have 500,000 people recycling around government funded apprenticeship schemes. They are not counted in the official figures."

The pair differ on the size of the black economy. Says Roig, "We are Mediterraneans, like the Greeks and Italians … there is a difference between official statistics and real numbers.” Roig’s guess is that “30 percent of the economy is black economy." Morate’s estimate is more conservative: "Somewhere between 15 and 20 percent."

Steven Tobin, senior economist at the International Labor Organization in Geneva, says it is impossible to measure. "The black economy is not just guys working(off the books) for cash, it is the way families share out reduced wages."

Is it taxable income when your grandmother pays your rent?

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"Aguantar"

There is a part of the Spanish character that can be summed up in one word, according to American journalist William Lyon, who has been based in Madrid since the 1970's. "Aguantar." It means to stand your ground and bear up under pressure.

Lyon picked up the term back when he used to cover bullfighting for the newspaper, El Pais. "When the matador stayed in front of the bull's horns, even when it charged, we would say he was, 'aguanta mucho' — he really stood his ground without moving."

Lyon says the Spanish have an ability to take what's thrown at them and be unmoved. It's a product of their recent history. The bloody civil war of the 1930's led to the dictatorship of Francisco Franco. It is easy to forget that Franco's fascist dictatorship lasted until 1975. Full democracy wasn't restored until 1978. That means many Spaniards today grew up in a police state, where there was very little they could do except bear up and stand their ground.

I found an example of what Lyon was talking about just up the street from Father Antonio's church at the Tostas y Pintxos bar. Gallows humor and national pride is how aguantar is expressed.

It was Sunday and the place was full of regulars and their extended families. The crowd was unique by Vallecas standards. Most had jobs. The bar owner wandered through the crowd with a massive platter of lardo, a cut of pork that is 99 percent fat with a millimeter of meat to flavor it.

A 60-year old plumber named Eulalio, chain-drinking beers, helped himself to several pieces. Then said, "Pork will pay for the nation's pensions. It's the cholesterol. It will kill us sooner."

The crowd laughs. Then his friend Julien opens up his shirt to reveal a long scar down the middle of his chest from a triple bypass. Julien is now 73. Eulalio points at the scar, "He is screwing up my pension." More laughter.

Laughing in the face of disaster is a brave thing and a learned behavior. Vallecas is a very left-wing place and Eulalio grew up under a fascist dictatorship — a disaster for his family. But "aguantar' is his cultural inheritance. He is unshakably Spanish. "Despite the problems," Eulalio says, "Spain is still the best place to live."

How long will Eulalio's attitude hold?

A new conservative government, led by Prime Minister Mariano Rajoy, was sworn in December 20th.

The ILO's Steven Tobin, says Rajoy's prospects for getting people back to work are bleak. "It's going to be a tough road, for sure."

The economist points out that the fastest rise in unemployment at the moment is in the big conurbations like Madrid and Barcelona. "It's a worrying sign when the best performing regions up to now are doing worse than others on the employment front."

The reason for this is simple: the outgoing Socialist government has already initiated a downsizing of government to try and get Spain's debt under control. "There have been significant reductions in public service employment," Tobin points out.

Tobin says Rajoy needs to do two things:

"In the medium term, acknowledge that Spain is not going to have unemployment below ten percent tomorrow, next year, or the year after that. Then create an environment that moves the country towards a more balanced economy.

"In the short term, don't center your austerity measures on cutting unemployment benefits and social benefits." Although Tobin acknowledges, "Labor benefits and social measures are easiest to cut."

These benefits and many other programs are likely to be on the chopping block. Rajoy's first budget seeks to reduce government spending in 2012 by 16.5 billion euros (21.7 billion). That's a lot of money to take out of an already contracting economy.

Yet the new Prime Minister will have more leeway to do what is necessary than whoever wins next year's presidential election in the US.

Social cohesion is the secret. America is a divided society. Spain, so far, is not. The Spanish – with their families, their church and their "aguantar" to fall back on seem willing to wait for the upturn. Although their patience may not last forever.

At the Tostas y Pintxos bar Julien, the man with the scar explained the odd acceptance of mass unemployment this way: "My father told me a lesson from the 1930s: so long as there is food in the markets and enough to drink, then people are happy."

He adds, "Today there is enough food."  

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