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Comment by _wp3r | Hacker News Reader

I do not think I would hire anyone in Spain if I was a business. There is a requirement to pay 6 months of unemployment for every 1 year of employment.

So there is a negative incentive to keep old employees and not hire anyone new, due to the instant severance required at termination.

It is kinda of like paying 150% for only 100% of a good.

Employment policy has far more to due with unemployment than any other metric. The instant increase in youth UE was due to a huge percentage of youth workers being in the construction industry that took one of the hardest hits in the downturn, and the fact that replacement cost of any full time employee is to high to attempt fiscally.

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Spain has real structural problems in its labor markets. But those kind of generous policies aren't unique to Spain within Europe. And other European countries have far, far, far lower unemployment. Why?

The answer is that employment policy does not have more to do with unemployment than any other metric. This is a story about a huge housing bubble and an awful currency union.

I agree. I did not mean to marginalize the other issues, just emphasize the very negative effects of labor policy. Spain has been an unemployment leader for 20 years, long before this recent bubble and even the Euro, so in some fashion policy has to play a larger role than outside influences.

Spain has become a victim of the "perfect storm" in regards to internal and external forces.

Although many European countries also have generous policies, I think Spain is fairly unique in terms of the sheer level of generosity (and inflexibility) baked in to their labour laws. The only other comparable European state is Greece and their unemployment figures are running very close to those of Spain.

Edit: And the reason Spain's overall unemployment rate is even worse than Greece is probably as you say due to the fact that they've suffered more than most from the housing and construction bust (since it accounted for such a large section of their economy).

Edit 2: I think that both my argument and yours are overly simplistic. There are so many other factors at play which make it difficult (impossible) to point a finger at one particular cause. Examples: corruption, over reliance on tourism, lack of focussed structural investment (e.g. infrastructure), byzantine business laws and regulations, large sections of society regarding tax evasion as socially acceptable (with equally lax enforcement from the government) etc. Also, in Spain's case, there's also the dynamics of the Catalan and Basque issues to consider (which have economic impacts as well).

Six months of unemployment per year of employment? Where are these figures from?

For unjustified firing, the employer has to pay 33 days of salary for each worked year (was 45 before the recent labor law reform)[1]

Not even the unemployment subsidy, which is given by the social security and paid for workers with taxes on their monthly pay, is that big (4 months for the first year, and 2 months more every 6 additional months worked, with a limit of 24 months).

[1] http://www.eitb.com/en/news/detail/828511/austerity-measures...

> "I do not think I would hire anyone in Spain if I was a business."

I know I wouldn't hire anyone in Spain if I were a business, because there's no demand in Spain. If my sales aren't growing, there is simply no need, full stop.

Businesses hire employees when they need them to make more money. If it is possible to serve their customers and their growth without more employees, they'd have no need to hire any employees, regardless of taxes, regulations, employment policies, etc.

As long as it is possible to make more profit with another employee, they will hire another employee.

So unless regulations/taxes/laws haven't become trivially broken -- where it's impossible to make money as a business with employees -- employment policy is simply not something that's going to impact the decision.

...there's no demand in Spain. If my sales aren't growing, there is simply no need, full stop.

No demand? Really? Spaniard's won't pay $0.25 euro's to have their house cleaned, or $0.50 for a restaurant meal? Demand is not completely inelastic at 0.

The reason there is unemployment is because something is preventing markets from clearing. For example, it's possible that the government pays people more not to work than employers are willing to pay them to work.

Incidentally, there are plenty of reasons I might hire even if sales aren't growing in my sector of the economy. For example, I might want to increase my market share.

> "Demand is not completely inelastic at 0."

No. But wages and prices are sticky. And they've been noted as such since before there was unemployment or any employment policies of note. So it seems silly to further some notion that they may be the factors behind the stickiness and thus the failing demand.

frankydp, "There is a requirement to pay 6 months of unemployment for every 1 year of employment." that has never been the case.

furthermore, labour legislation changed 4 weeks ago, and it's at par with the rest of Europe now.

Yes that's why the countries in Europe with lax labour laws, low wages, low environment controls, and a weak workforce have the lowest unemployment - look at Germany.

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