The Spanish case: over- and under-qualification

With historical unemployment rates, various governments have taken measures that do not seem to have the expected outcomes. The Spanish problem of unemployment, especially among those who are younger than 25, along with cases of over-qualification and under-qualification of the youth will be presented in this paper. Finally, the option of vocational training is analysed as one of the key factors to enhance employability.

There are more than five million people unemployed, reaching rates over 55 per cent in the case of those under the age of 25. Following several labour market reforms, the problem has not been solved as those reforms were focused on the creation of temporary employment opportunities instead implementing a real change to the productive model.

Currently there is a double challenge in Spain. Firstly, a productive and stable employment must be created quickly, avoiding this way the volatility of our unemployment rate. Secondly, in order to achieve this purpose, there must be a change in the pattern of growth of the Spanish economy, as many experts and politicians have claimed for years.

The achievement of both aims relies on a labour market reform that assures an efficient job seeking, proper salary negotiations, as well as a correct programme for incentive measures. In order to facilitate a quick and lasting reduction of the unemployment rate, the economy needs to be based on productivity and suitable labour reforms. The disjunctive that the political debate presents is between a change of the growth model and a labour reform, resulting usually in a temporal and circumstantial labour reform. However, a change in the growth model does not make the labour market reform unnecessary. Both are important in order to enhance productivity and a permanent decrease of the unemployment rate.

The main causes of the sharp increase in job destruction in the past years are as well known as the accelerated growth during 1994 and 2007 which led to an unsustainable situation. The specialisation in activities with low productivity and the availability of low skilled workers can largely explain this pattern in an economy where growth has been encouraged by very low interest rates.

Nevertheless, the failures in the legal framework have been a decisive factor in the huge adjustment that the Spanish labour market is currently suffering from. The low investment in active employment policies, the inefficient design of passive policies, and most especially, the extraordinary proportion of temporary jobs, are some of the examples of this malfunction. In order to bring this situation to a lasting end, a productive employment creation is necessary with a quick and stable pattern, avoiding the extraordinary volatility of the unemployment rate.

The engine of growth of the past years has shrunken. For this reason, the Spanish economy has to look for the development of alternatives, based on activities with a high added value that requires an intensive use of skilled labour. Even supposing that these changes can take effect immediately with the correct incentives, these measures can guarantee the moderation of the fluctuations of unemployment, as happens in the euro zone countries, but it does not guarantee by any means the quick creation of employment so needed by the Spanish economy.

One of the biggest problems of the Spanish economy has already been presented as the high rate of youth unemployment. This problem is leading to an over-qualification and has been intensified by the under-qualification of workers in the labour market, creating large mismatches.

Over-qualification and under-qualification of the youth
There are several studies that point out the mismatches between the education system and the labour market. This situation, maintained over decades with different intensities, is especially critical among young people. At the present time, with an economic crisis and a high youth unemployment rate, this mismatch attracts special interest as it points to a clear inefficiency in the education system. With its current configuration and structure, it is not able to satisfy the demand of the Spanish productive system.

There are several problems pointed out by different studies. The first of these refers to the fact that the increase in formation has being clearly skewed towards university education, creating a mismatch between the offer and demand based on the social background, impacting the youth unemployment. According to data from Eurostat, the number of university graduates between 25 and 34 year old, was 39,2 per cent in 2010, being the highest average in the EU.

Secondly, the increase of human capital in Spain has been insufficient to achieve a convergence with the countries of the EU, especially among youth with secondary education. As a matter of fact, in 2010, the 38,8 per cent of the Spanish population between 20 and 24 years old only possessed primary education versus 23,4 per cent in EU15 countries, being one of the last positions in relative importance of secondary studies (40 per cent of Spanish youth under 25 years of age have secondary education versus 61,1 per cent average in the EU15 countries, mainly resulting from vocational training). The data from Eurostat confirms the relative shortage of vocational training graduates in Spain, in comparison with those countries that have adopted a dual training system, as Germany or the Netherlands.

This data determines that the polarisation among young people in Spain has resulted in an obvious mismatch between the demand and supply of a skilled workforce. This situation has led to a rise in underemployment or over-qualification and to a fall in skilled wages. According to several studies, the percentage of graduates in jobs that require a lower degree than the one they possess has amounted to more than 30 per cent since the beginning of the 90s, being the highest percentage in the EU27 countries and ten percentage points more than the EU15. This difference is even wider in the youngest cohorts. In 2007, the percentage of over-qualified workers was more than 40 per cent among youth from the age of 25 to 29 in Spain. On the other hand, the OECD (2010) has determined that underemployment among youth with secondary education is lower than in other countries with higher rates of vocational training in developed countries. Nevertheless, Spain is at the forefront of youth employed with secondary education of second stage with elementary employment or not qualified, with a 17 per cent in 2007.

Furthermore, the excess of graduates and over-qualification has a negative effect on people’s chances to keep a long term job and, thus, a negative effect on the unemployment rate. Moreover, advancing technology has increased the demand for skilled workers and reduced the one for non-qualified workers. This also implies that skilled workers are employed in traditional positions of non-qualified workers, because of excess or due to a rise in the hiring standards of the companies. Combined with the extraordinary rise in temporary employment among youth during the last decade OECD (2010), we can assume that those factors have worsened the economic situation of this cohort, sharpening their economic dependence, as has been documented in several reports.

The last data published by Eurostat (2011) is also relevant to show the impact of the incidence of over-qualification and the existing mismatch between the education and the labour market in Spain. In 2008, 29 per cent of the Spaniards where over-qualified for their current job, as the average ratio for the EU27 countries was 19 per cent for both, men and women. This ratio is higher among immigrants living in Spain (57 per cent for men and 59 per cent for women).

This data discloses the need to think about the current dysfunctional paths set in the Spanish educational system to enhance the entrance of the youth to the labour market. This fact, along with the deficiencies of the labour market, choosing segmentation and flexibility, show the ineffectiveness of the educational and employment policies developed to promote employability of this cohort in Spain.

In order to palliate these mismatches that affect all the European countries, and especially Spain, the European Commission has set an agenda of recommendations for the period from 2012 to 2020 to improve youth employability and a better adequacy between education and employment, based on the following principles:

1. Reduce the labour market segmentation and the education paths, supporting the educational and labour transitions.
2. Intensify the capacity of the European Union to foresee better the needs in qualifications and try to adjust better the needs between the labour market and the education received by the youth.
3. Adapt the qualification of young workers to job offers and capitalise the potential of the European job market.
4. Promote geographical mobility across all the EU, encouraging graduates and vocational trainees through internships in foreign companies (Leonardo) and the educational mobility (Erasmus) supporting and subsidising the learning of foreign languages.

Ultimately, the European Commission proposed itself in 2011 to develop new indicators about current educational situation of the youth in all the European countries in order to enhance their employability. The ultimate goal is to encourage a new approach to the employment demand of this collective and to enhance the transition to the labour market. Another goal is to propose a recommendation to the European Council to reduce the early school leaving and to create a High Level Panel of Experts to study the improvement of the qualifications and competences of the youth to enter to the labour market.

Vocational training for employment
For years, the vocational training of unemployed people and the lifelong learning /innovation courses for people that are already employed has been managed by different institutions. This has led to a disperse system, which has made it difficult to provide a continuous training. A change in the system was necessary in order to tackle different problems: the need to progress towards the integration of the different education offers, the improvement of education quality and its evaluation, enable the recognition of the qualifications accreditation and the acquired competences through training and permanent learning.

Generally, among the positive achievements over the last years, it should be reiterated the importance of the integration process of the previous subsystems of vocational and permanent training and the recent recognition of professional experience. Also, other highlights are: the personal implication of teaching staff, progressive flexibilization of the offer and the relationship between the subsystems, the incorporation of the professional competences perspective and the creation of a catalogue of competences.

Some of the most critical elements are: the persistence of the lack of social recognition towards vocational training, the resistances to the full integration of the different subsystems; the need of a better fit between the educational offer and the labour market; making the educational system more flexible, simplifying the procurement of formal titles and certificates and the hiring of teachers and experts; a simplification of processes and a greater attention to quality, especially in training of employment; the enhancement of general educational achievement in general, that prevents access to the continuation of post-obligatory studies; and the lack of an effective professional guidance.

More specifically, the reality of vocational training addressed to employed workers has some aspects that should be mentioned. Firstly, participation of workers and companies in training activities is insufficient, despite progress achieved. As a matter of a fact, the business culture in Spain sees continuous training more as a cost than as an investment, although it has positive effects with regards to competitiveness.

Furthermore, there are other weaknesses to point out, such as, the relatively low participation of some collectives, such as older and low skilled persons; the general and transversal character of the training activities, which generates a low offer in specific competences linked to the National System of Competences; and the shortcomings in quality and training evaluation. Moreover, the lack of incentives in formation –that focuses on the individual appreciation of the capitalisation of the formation effort- has been pointed out in different areas. It also affects family reconciliation, especially among women, when these activities take place out of business hours.

Concerning training focused mainly on unemployed people, the first relevant point to be made is that the economic investment and budget is lower in Spain than the average of the EU –despite the considerable progress, which has been already made. This fact reveals that it is necessary to strengthen financial resources to rise the formation offer, and it should be considered in the debates about activation of unemployed that usually are focused on the penalty to workers who are beneficiary of unemployment benefits who do not want to participate in formation activities.

Another important aspect concerns the current management model, based on territorial decentralisation of public services and the generalised outsourcing to a multitude of collaborating entities, making it difficult to have a coherent policy. In addition, a good information system is currently lacking as well as a good professional guidance that can match formations and employment offers.

Finally, it should be emphasised that the design of the contents of the formation offers do not correspond, in general terms, with the characteristics of the demands of the productive system, neither with a projection of future needs. This fact points out the necessity for a change in the productive model.