Spain suffers acute unemployment problem, reforms aim at handling dual job market

Spain is suffering the notches of a painful job market, unable to cater to the needs of the long-term unemployed and the youth. The Spanish employment has lost grip and flexibility over its long-hauling job market.

"Although it is still too early to fully evaluate the impact of these reforms, they already seem to have had direct effects on wages and employment," BNP Paribas said in a research report.

Moreover, the job market reforms of 2012 aimed at giving Spanish companies greater internal flexibility and to restore their competitiveness. They were also directed at reducing the duality of the job market.

At the height of this crisis, companies preferred to eliminate jobs rather than reduce wages or the number of hours worked. Hoping to limit the economic slowdown’s impact on employment, in 2012 Spain began promoting firm-level collective bargaining agreements (basic wage, supplements and overtime pay, distribution of working hours) to make sure that company specifics were better taken into account.

"More alarmed, households are more likely to increase their precautionary savings, to the detriment of consumer spending," BNP Paribas commented in the report.