Unemployment a social time bomb for Spain

Wed Dec 31, 2008 8:09pm EST
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By Sonya Dowsett

MADRID (Reuters) - Tensions mounting between native job-seekers and immigrants competing for a declining pool of work in Spain will intensify in 2009 as generous benefits for those laid off reach the end of their fixed terms.

Unemployment at 12.8 percent in November, a 12-year high and by far the highest rate in the European Union, could reach 20 percent of the workforce in 2010 as a slump in construction spreads into the wider economy, economists say.

That is a level not seen since the 1990s and as Spain heads for its deepest recession in 50 years it may trigger social unrest like that of the 1980s, when high unemployment and low wages led to country-wide demonstrations and violent strikes.

Spain makes payouts of up to 70 percent of salaries for up to two years, depending on how long workers have been paying into the social security system.

With nearly 3 million unemployed, many of those laid off during 2008 will come to the end of dole payouts next year and will struggle to make ends meet in a depressed labor market with no sign of paid work.

"This coming year, a lot of people will stop receiving the dole," said Sandalio Gomez, professor of labor relations at business school IESE. "We could end up with social unrest as people take to the streets to demonstrate."

The make-up of Spain's workforce has changed drastically with the arrival of nearly 5 million immigrants boosting the population by 15 percent over the past decade.

Desperate Spaniards who have lost jobs in construction are taking up work they formerly shunned, from cleaning bars to fruit-picking, displacing immigrants who struggle to find alternative work.   Continued...

<p>Hays Recruitment Consultancy Section Manager Ignacio Ramos (L) interviews Vicente Balmaseda at the Hays offices in downtown Madrid December 5, 2008. REUTERS/Susana Vera</p>