Spain's 'barbell' workforce weighs down economic recovery

Experts say Spain has too many highly educated and undereducated workers, and not enough of the blue-collar workers it needs to help its economy rebound.

As Spanish students return to school for a new academic year, a pressing concern under debate nationally is whether their education will help them find a niche in the Spanish economy, which has been racked by recession and rampant unemployment.

But are they even being trained for the jobs that the Spanish economy needs to recover?

Many economists say no, warning that Spain has an oversupply of both highly educated talent and undereducated labor, and insufficient mid-level skilled workers now and forecast into the future.

Spain's population trends and rising academic failure are “catastrophic, considering the demographic and economic perspective,” says Josep Oliver, applied economics professor in the Unviersidad Autónoma de Barcelona and an expert on labor and education policies.

And to fix its "barbell" workforce, the solution is to significantly improve elementary and secondary education, experts warn. Not doing so “is the most foolish thing we can do from a social and economic point of view,” Dr. Oliver says.

“Spain’s does not need an education refurbishing, but an overhaul. We will inevitably need a qualified work force or will have to resort to importing it. We look more like Mexico, but I’d like to be more like Finland.”

The need for a new economy

During its boom decade starting in the mid-1990s, the Spanish economy was fueled primarily by construction, mostly of homes that Spaniards bought up in an apparent infinite climb in real estate prices. In the process, high-school dropout rates spiked as students were lured by rich salaries in construction.

But when the housing bubble burst in 2008, hundreds of thousands lost their jobs with little to no hope of regaining them, as the model became untenable.

Some politicians and economists proposed a high-tech, research-and-development model, like Germany's high-tech sector. But economic experts say that Spain’s best shot at overcoming the economic crisis is implementing a model more like Germany's mid-level industrial output of products like cars, industrial equipment and spare parts, and even high-end food stuffs and shoes.

Exports of mid-level industry, like automobiles, are driving Spain’s economic recovery, statistics show.

“If you look at what they are exporting, middle-tech sectors like automotive and capital goods are doing well. There is room there, and even some room at the top, for example with alternative energies,” says Gayle Allard, an economics professor in Madrid-based IE Business School.

A 'barbell' workforce

But Spain's mid-level industry is small. And if expanding it is the goal, there's a major problem to be overcome in reaching it: educating the skilled workers the sector requires.

There is little debate that the workforce is imbalanced: Experts, labor statistics, and multinational studies all say so. But the crisis has worsened the structural problems, not only by destroying jobs and shrinking salaries, but by shaping the next generation into a "barbell" workforce – lots of workers with insufficient skills, lots of workers who are overqualified, and very few in between.

The country’s most pressing handicap is that 46 percent of the working age population only have elementary education, according to the Organization for Economic Cooperation and Development (OECD) in its annual report on Spain's education, which was released in June. That percentage is the second worst in Europe after Portugal, and twice as high as that of Chile, in South America.

What's worse, around a quarter of Spaniards have insufficient skills to make a living in the country’s current – and future – labor markets, meaning they are barely literate, Oliver says.

On the other end of the spectrum, Spaniards are more likely to be overqualified in the labor force than most of their peers in OECD countries. Different studies estimate as much as 30 percent of the workforce is overqualified. “That wouldn’t be a problem if our economy worked well, though,” Oliver notes.

But in the middle – that is, high-school graduates without a university degree – Spain remains acutely deficient. Its mid-level, technically trained workforce is half the OECD average: almost a third that of Germany’s, smaller than Brazil’s or Chile’s, and more comparable to Mexico’s.

It’s not for lack of resources, but waste, experts say. Spain is among the highest spender in education in per capita terms in the OECD, but its test results are consistently among the lowest in the Europe.

Reforms

The Spanish government is implementing a thorough overhaul of its education, labor, and research policies to swell the ranks of the mid-level blue-collar class – including streamlining the academic requirements to allow more students to pursue technical training, instead of going to university.

Dr. Allard is optimistic that it will help. “I think the second half of the year we will see a steady recovery. For Spain to come back to 2008 [before the economic downturn], it will take some time though. It has been terribly painful, but reforms wouldn’t have happened otherwise,” she says.

But Oliver worries the reforms will only partially sync Spain's workforce requirements with its education system.

“We need more resources to train mid-level workers that match the economy’s requirements, but honestly this is hard to change in the short term,” Oliver says, pointing to the insufficient reforms in the elementary and secondary school level that is not producing enough graduates to fill the blue-collar vacuum. 

Oliver cites tourism, one of Spain’s most vital sectors, as an example. More foreign language and properly trained people are needed, but the education system is not geared for that goal, while there is an oversupply of highly specialized graduates in social sciences, who have few work options.

But experts say that the reforms are being undermined by European-imposed austerity-driven cuts to education budgets. The budget crunch has raised tuition, decreased university scholarships and research funding, and deteriorated the quality of education through high school. A case in point: Madrid’s regional government cut spending in public schools nearly 14 percent in 2013.

And the new educational policies are being rolled out in conjunction with unpopular, politically motivated reforms, such as the mandatory inclusion of Catholic religion in the curriculum and a requirement to offer schooling in Spanish, as opposed to regional languages, when a student asks for it.

“The government is confusing apples and oranges,” Oliver says. “It shouldn’t be looking to profit politically from reforms because this is a 15-year process.”