Spain’s ‘Best Generation’ Stung by First Slump in its Memory

By Emma Ross-Thomas

Dec. 9 (Bloomberg) -- Roberto Frenedoso, a 23-year construction worker, has little to do these days except loiter around a square with his unemployed friends in Madrid’s Getafe suburb.

Frenedoso and his pals, victims of the country’s economic slump, were in grade school when Spain’s last recession struck in 1993. While a decade-long, property-fueled boom doubled the size of Spain’s economy and fired a generation’s hopes of lasting prosperity, 28 percent of young people are now out of work. That’s about twice the European Union average.

“I had my job, my money, my things, my expectations, now I don’t have anything,” said Frenedoso. He continues to look for a job around Getafe, where the rows of new homes are a reminder of the boom that’s now turned to bust.

Spain, the economy that created more than half the new jobs in the euro region between 2002 and 2005, has been one of Europe’s biggest losers from the global economic slowdown. Unemployment jumped to an EU-high of 11.3 percent in the third quarter and growth contracted for the first time in 15 years.

The European Commission forecasts the jobless rate will rise to 13.8 percent in 2009 and Europe’s fifth-largest economy will contract 0.2 percent after expanding an average 3.8 percent annually over the past decade.

Workers between 15 and 24 years are bearing the brunt of the downturn because they get the most precarious job contracts, making them first to be cut when growth slows.

‘Best Generation’

“Spain is missing out on the best generation it ever had; People have never been so well-educated as we are in terms of languages and computer skills,” said Carlos Aller, 25, an unemployed graphic designer.

Prime Minister Jose Luis Rodriguez Zapatero, whose government said last year that Spain would cope with an end to the property boom, is doing little to help younger workers even after courting them in March’s successful re-election campaign.

While his administration has announced 90 billion euros ($116 billion) of stimulus measures to reverse the economic slide and try to create 300,000 new jobs, none of them are aimed directly at youth.

Spain’s young workers are feeling the unintended consequences of the country’s piecemeal attempts to reform its labor market over the past two decades.

Instead of overhauling the whole system, it left generous protection for established workers in place, while allowing the wide use of temporary contracts for new workers that can be easily and cheaply terminated.

Flexible

The proportion of young people in such work was 63 percent in 2007, compared with 36 percent across the 30-nation Organization for Economic Cooperation and Development.

“The only flexibility companies have is the temporary contracts, so the young people are the first ones to lose their jobs and they’re losing them massively,” said Gayle Allard, vice- rector of the Instituto de Empresa business school in Madrid and an expert in labor markets.

The cost of cutting someone who has worked at a company for 20 years amounts to 56 weeks salary in Spain, compared with 32 in France and 13 in Poland, according to the World Bank’s Doing Business Index.

“All the new contracts they make are temporary, they can fire you when they want,” said Aller, who has never had a permanent job. “People aren’t looking for houses to buy and I guess a lot of people are putting off having a family and that kind of thing.”

Economy Focus

As well as hurting young people themselves, labor market rules may hobble Spain’s attempts to shift the focus of its economy away from construction and toward more productive industries such as biotechnology and renewable energy.

“Young people are much more apt at working in and promoting research and development,” said Sandalio Gomez, a professor of management at IESE business school.

And the longer they stay out of employment, the harder it will be to get back in, data from the Madrid-based Association of Large Employment Agencies shows.

Ana San Jose, a 21-year-old clerk, is well aware of what her afternoons hanging out in Getafe will cost her.

“All I’m getting experience at is sitting in the square,” she said. “The future’s looking very dark: no house, no money, no kids, nothing.”

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net