SPANISH ECONOMY

CURRENT SPAIN:
ECONOMICS / POLITICAL SCIENCE

Economics and choices

The word economy comes from ancient Greek
word oikonomia for “management of a
household.”

A household and an economy

face many similar decisions:
● Who will work?
● What goods and how many of them should be
produced?
● What resources should be used in production?
● At what price should the goods be sold/bought?
● How to allocate goods and services that we buy?
The three dimensions of economic analysis
• Real dimension: consumption of goods and
services, investment in new capital, in education,
employment of resources,… In general, direct
means to satisfy human needs.
• Financial dimension: matching savings and
investments (savers to borrowers), balance of
revenues and expenditures, long-run interest rates,
credit flows, default rates,… In general, refers to
means and institutions that allow long-run
investments
• Monetary dimension: inflation, short-run interest
rates, liquidity assets, means of exchange… In
general, related to the creation and use of money in
societies.

Microeconomics and Macroeconomics

•Microeconomics is the study of how
people make decisions and how these
decisions interact (normally, in
markets demanding or supplying goods
and services)

•Macroeconomics is the study of

economy-wide phenomena, including
inflation, unemployment, recessions,
economic growth in the long run,…
 Three important questions:
WHAT, HOW, TO WHOM

Microeconomic goals/problems:
• Efficiency (productive and allocative) and
incentives
• Equity/Fairness (poverty, inequality,…)

Macroeconomic goals/problems:
• Business cycle (unemployment, inflation,
trade and public imbalances,…)
• Sustainable long term growth (productivity,
standards of living,…)

Basic economic
principles: Individual
decision making
 1. Resources are Scarce
• A resource is anything that can be used to
produce something else.
• Resources are scarce—the quantity available
isn’t large enough to satisfy all productive uses
(“No free lunch” principle)
• We are forced then to make trade-offs and
compare the costs with the benefits of different
alternative choices.
• The production-possibility frontier (“guns vs
butter” dilemma) represents our set of choices
(the feasible set).

The production possibilities frontier

(aka: the feasible frontier)
 2. Opportunity Cost
• The real cost of an item is its opportunity
cost: what you must give up in order to get
it (Eg.: One opportunity cost of attending the economics class is your
best time use elsewhere you will not attend during the lecture)

• All costs are ultimately opportunity costs,

some explicit and some implicit.

• Increasing, constant or decreasing

opportunity costs? What do you think?

3. Marginal thinking
• Many decisions are not “either–or” but
instead “how much.”
• Marginal decisions are decisions to do more
or less of an activity. These decisions are
made at the margin: comparing the
marginal costs and benefits of doing a little
bit more of an activity versus doing a little bit
less.
• The marginal rate of transformation and the
marginal rate of substitution.
• Marginal thinking means not considering
sunk costs, but… don´t we?
 4. Responding to incentives
• People usually take advantage of
opportunities to make themselves
better off.

• People respond to extrinsic

incentives (anything that offers
rewards/punishment to people who change their
behavior)

• But also to intrinsic motivations.

•What is the underlying message of the ‘candle

problem’?

• How do intrinsic and extrinsic motivators differ,

and when is it suitable to use each?

•What are your thoughts on the talk? Do you

believe it challenges the fourth fundamental
principle of individual decision-making?”
 Check your understanding

Hans Rosling: The magic washing machine

1. Where is set the poverty line? How many people is below it? How many people is
above it?
2. How many people in the world have access to washing machines?
3. How much of the world energy use is in the “rich Word”?
4. What two ways of reducing pollution are likely to prevent climate change?
5. What different trade-offs face women in Sweden now than women in countries
without washing machines?
6. What is the opportunity cost of NOT having washing machines?
7. Apply the “marginal thinking” principle to anything related in this talk
8. Look for instances of the “people respond to incentives” principle in the talk
SOME APPLICATIONS OF THE PRINCIPLES in
THE SPANISH ECONOMY

Opportunity costs: A woman’s work

▪ In 1975, only 20% of Spanish married women were in the
labor force (and 80% of married men). By 2021, the number
is near 54% (62% for men).
▪ In 1990 the ratio in labor participation was 50w/100m, today
is almost 90w/100m
▪ This change is in part due to changing attitudes and the
growing availability of home appliances, especially washing
machines.

▪ In pre-appliance days, the opportunity cost of working

outside the home was very high: it was something women
typically did only in the face of dire financial necessity. With
modern appliances, the opportunities available to women
changed.

▪ Today in Spain we still face several gender gaps in the

labor market
 Labor market definitions
•Labor force (active population): people
either working or actively seeking for a
job and currently available to start
working (16+ or 16-64)

•Unemployed: part of the labor force

that cannot find work.

•Inactive population: working-age

population NOT in the labor force

•Participation rate: labor force as a

share of working-age population.

•Employment rate: employed people as

a share of working-age population

•Unemployment rate: unemployed

people as a share of labor force
•Female participation and employment
rates (or unemployment rate) are defined
as share of total working-age women (or
total female labor force)

•We can also segment the data according

to different characteristics: temporary vs.
permanent jobs, full-time vs. part-time,
public vs. private sector, branch of the
economy, age, nationality,…

Latest data (Dec, 2024)

epa0424 (ine.es)

•People at the age of work:

•Men: 20,322,500
•Women: 21,487,600
•Employed:
•Men: 11,706,600
•Men (20-29 years old): 1,600,300
•Women: 10,151,200
•Women (20-29 years old): 1,419,900
•Unemployed:
•Men: 1,232,900
•Men (20-29 years old): 336,200
•Women: 1,362,600
•Women (20-29 years old):306,200
 With the previous slide information calculate:
• Total participation rate
• Total employment rate
• Total unemployment rate
• Total youth unemployment rate
• Male participation rate
• Male employment rate
• Male unemployment rate
• Male youth unemployment rate
• Female participation rate
• Female employment rate
• Female unemployment rate
• Female youth unemployment rate

Solution
16+ Total Men Women
1. Working-age
population 41.810.100 20.322.500 21.487.600
2. Employed population 21.857.800 11.706.600 10.151.200
3. Unemployed
population 2.595.500 1.232.900 1.362.600
4. Labor Force (=2.+3.) 24.453.300 12.939.500 11.513.800

5. Participation rate
(4./1.) 58,49% 63,67% 53,58%
6. Employment rate
(2./1.) 52,28% 57,60% 47,24%
7. Unemployment rate
(3./4.) 10,61% 9,53% 11,83%
20-29 Total Men Women
8. Employed population 3.020.200 1.600.300 1.419.900
9. Unemployed
population 642.400 336.200 306.200
10. Labor Force (=8.+9.) 3.662.600 1.936.500 1.726.100
11. Youth unemployment
rate (=9./10.) 17,54% 17,36% 17,74%
Women are more than men…
(they live longer)
Gráfico, Gráfico de líneas
With higher levels of education…
Descripción generada automáticamente
 Though depends on the field of study…

Gráfico

Descripción generada automáticamente

Gender gaps in Spain

1. The labor market participation gap
(improved but improvable)
2. The quality-of-work gap (part-time gap,
mismatch gap, glass-ceilings,…)
3. The housework gap (probably at the
heart of the problem, especially due to
the motherhood penalty)
4. The gender pay gap (careful definition)
Less women work than men, they work
less hours, in less qualified jobs for a lower
salary and more often than men in “double-
shifts”
 Improvement in participation rates
(2-3 decades delay but catching up fast)
A closing gap…
But it could be better…

Also, in employment rate…

 but lower than others

Unemployment gap:
smaller in recessions, larger in expansions
 Smaller for youth…

2. Quality-of-work gaps:
involuntary part-timers
The mismatch gap
And on top of that… glass ceilings!
3. The housework gap
The motherhood penalty
 Impacts of first child

Wrapping up…
• Usually is the mother who quits working after
becoming parents.
• Motherhood labor gaps (in participation,
unemployment and quality of jobs)
• There is a long-term gap from first child birth
between men and women (earnings, days of work,
quality of jobs,…)
• Spanish child penalty is worse than in Denmark or
Sweden but better than Germany, UK or even US
• Since 2021 paternity leave is the same as
maternity leave (16 weeks, nontransferable and the
first 6 weeks are compulsory)
 GPG - Class Assignment
After watching the following video on Gender Pay Gap answer the following questions:
1) How much is the GPG (unadjusted) on average?
2) The author mentions four possible reasons (adjustments) that might help explaining
the GPG. What are those?
3) In what majors do women enroll more/less than men? What reasons might explain
this difference? What outcome might be the result of this difference?
4) What are the effects in the labor market of women taking unpaid family
responsibilities more likely than men? Do economists think this circumstance is
important in explaining the GPG? What can we do to change this?
5) What is the rationale for wage gender transparency policies in the labor market?
6) How can we try and measure the “pure” gender pay discrimination without the
previous biases?
7) What do you think of the argument on equality and fairness the speaker talks
about?

4. The Gender Pay Gap

• What do we refer to when we say there is wage discrimination?
And how do we measure “unequal pay for equal work”?
• Would it be adequate to compare average earnings per year between
men and women? And average hourly wages?
• What kind of adjustments should we consider in order to compare on
“equal terms” the differences in wages?
• Shouldn’t we account for personal, occupation or firm
characteristics in this comparison?
– Age
– Education
– Job experience
– Type of occupation
– Type of contract (permanent or fixed-term)
– Working time (full-time or part-time)
– Economic sector
– Firm size …
• And if we do account for all those features and the gap is significantly
reduced, does it mean there’s no gender discrimination?
13%
9,4%

Gender pay gap statistics - Statistics Explained (europa.eu)

https://t.ly/UiYX

https://t.ly/UiYX

“An important part of the salary difference between men and women in
the Spanish labor market is due to the fact that women are working in
the market segments with the lowest salaries.”
Sources of earnings gaps
 Working time and GPG

GPG by economic activity

 GPG in private and public sector

RELATIONSHIP BETWEEN GENDER PAY GAP AND

GENDER EMPLOYMENT GAP
The GPG and the GEG
show a negative
25,
relationship. One
possible explanation
is the following: in
countries where the
employment rate for 20,
it
rom
GENDER EMPLOYMENT GAP

women is particularly
low (therefore, GEG is mal
high) women who still
choose to work may cz
15, pol
decide so due to their
higher job profile and
earnings cy
expectations. This sp cro ue27 hun
translates into a 10, euro

lower (unadjusted)
bulg ndl swiaus
gender pay gap as the blg
ger
lux slk
latter compares the dnk

average hourly slo por

swe
ice fr
5,
earnings of all est
working men against lat
nor fin
all working women
lit
without correcting for
the fact that working 0,
women tend to have 0,0 5,0 10,0 15,0 20,0 25,0

a specific profile (self- GENDER PAY GAP

selection).
 ADJUSTED (OR UNEXPLAINED GPG) IS A BETTER
(YET NOT PERFECT) MEASURE OF GENDER DISCRIMINATION

https://op.europa.eu/s/vRpL

https://op.europa.eu/s/vRpL

ADJUSTING THE GPG

Make the GPG bigger: Make the GPG smaller:

Economic activity (4.7%) Education (-1,6%)

Job experience (0,2%) Enterprise size (-1,3%)
Working time (0,2%)
 SEGGREGATION EFFECTS CAN MASK GENDER INEQUALITY

The Gender Overall Earnings Gap

(GOEG)

•Europe has developed a synthetic

indicator which measures the impact of
three combined factors on the
average earnings gap of all working
age women compared to men

•The three components are:

–Average hourly earnings
–Monthly average hours paid
–Employment rate (the most important factor in Spain)
GOEG
• Calculate the GPG, the GHG and the GEG for Spain, France, Germany
and the EU-27
• Calculate the GOEG for Spain, France, Germany and the EU-27
 Solution Assignment

Average number of
Average hourly Employment rate
hours paid per
earnings for age group 15-64
month

GPG GHG GEG GOEG

MEN WOMEN MEN WOMEN MEN WOMEN
EU-27 (1) 16,6 14,1 15,1% 162 142 12,3% 73,1 62,3 14,8% 36,5%

Germany 21,7 17,3 20,3% 153 123 19,6% 79,7 72,1 9,5% 42,0%

Spain 12,9 11,4 11,6% 161 146 9,3% 67,9 56,9 16,2% 32,8%

France 19,7 16,4 16,8% 154 142 7,8% 68,9 61,9 10,2% 31,0%

https://t.ly/SbSN

https://t.ly/SbSN
 Opportunity costs and incentives:
“La generación ni-ni” (neet generation)

• Due to high wages in construction during the last

economic boom thousands of young people quit
their studies and previous jobs in order to work in
building industries → higher opportunity cost of
studying.

• The recession has brought about a very high share

of young population that neither studies nor works
(the highest in EU) → the “ni-ni” generation.

• There is a somehow generalized view among Spanish

youth that it is useless studying since there is no job
opportunities → But this is not completely true

https://t.ly/YSgh

https://t.ly/YSgh
 Neets

Youth unemployment
https://data.oecd.org/chart/6ZUP

https://data.oecd.org/chart/6ZUP

Some basic facts

1. Educational Attainment and Employment Trends
– More young Spaniards have tertiary education: The percentage of 25–34-
year-olds with a university degree increased from 41% in 2016 to 52% in 2023.
– High dropout rates compared to OECD average: 26% of young Spaniards
(25-34 years old) have not completed upper secondary education, above the
OECD average of 14%.
– Education boosts job opportunities: 63% of those without secondary
education are employed, compared to 84% with a university degree.

2. Early Childhood and Compulsory Education

– Spain has high enrollment in early childhood education: 30% of children
under 2 years old are in early education (OECD average: 18%). By age 2, the
figure rises to 64% (OECD average: 42%).
– Compulsory education is shorter than OECD average: Spain mandates
school attendance from ages 6 to 16 (10 years), while the OECD average is 11
years.
3. NEETs
– Spain has one of the highest rates of NEETs: 17.8% of 18-24 year-olds are neither
studying nor working, though this has improved from 23.2% in 2016.
– Gender differences in NEETs: Women are more likely than men to be inactive, mainly
due to caregiving responsibilities.

4. Grade Repetition and Education Quality

– Spain has high repetition rates: 2.1% of primary students, 7.8% of lower secondary
students, and 6.5% of upper secondary students repeat a grade—well above the OECD
averages of 1.5%, 2.2%, and 3.2%, respectively.
– Parental education strongly influences student success: 77% of adults with at least one
university-educated parent also attained a tertiary qualification, but only 31% of those
whose parents did not finish high school reached this level.

5. Education Funding and Teacher Salaries

– Spain spends 4.9% of GDP on education: This is in line with the OECD average, but 88%
of primary school funding comes from public sources, below the OECD average of 93%
– Teacher salaries have grown slowly: Adjusted for inflation, Spanish teacher salaries
increased by only 2% over eight years, compared to an OECD average increase of 4%.
– Spanish teachers have fewer teaching hours than the OECD average: Lower secondary
teachers work 656 hours per year, compared to the OECD average of 706 hours.

6. Gender and Field of Study Gaps

– More women pursue higher education, but wage gaps persist:
58% of young Spanish women have a university degree
(compared to 46% of men), but women with tertiary education
still earn only 91% of men’s salaries.
– Low participation of women in STEM: Only 13% of female
students choose science, technology, engineering, or math-
related fields, while only 6% of men enter education-related
careers.

7. Private vs. Public Education

– Private education is growing in importance: 23% of university
graduates in Spain come from private institutions.
– Tuition fees for public universities are moderate: Bachelor’s
degree tuition costs around $1,708 per year, making Spain
relatively affordable compared to some OECD countries.
Education and earnings

Education and inequality

and lower returns on higher education
 Challenges of Spanish education system
1. Increasing the percentage of people with a
Intermediate Vocational Training degree
2. Reducing NEETs: Spain is the second
country in the EU with more “ni-nis” (more
than “si-sis”)
3. Decreasing the number of repeaters (28%
of students have repeated at least once)
4. Renewing teachers
5. Increasing investment in education (5% of
GDP is below EU average)