Pablo Hernández de Cos: Stylised facts about the post-pandemic performance of the Spanish labour market and future challenges

Closing address by Mr Pablo Hernández de Cos, Governor of the Bank of Spain, at the "Canary Islands, investment hub" forum during the Canary Islands Money Week, organised by the University of Las Palmas de Gran Canaria, Las Palmas, 3 November 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Dignitaries, ladies and gentlemen, good morning.

I would like to thank the distinguished chancellor of the Universidad de Las Palmas de Gran Canaria, Mr Lluis Serra, and the dean of the Faculty of Economics, Business and Tourism, Mr Juan Manuel Benítez del Rosario, for their kind invitation to deliver the closing address of the Canary Islands Money Week, organised by this university.

Of all the building blocks of an economy, the labour market is one of the most fundamental. A country's macroeconomic performance and the efficiency of its economic and social policies largely depend on the functioning of this market.

In recent years the global economy has experienced an unprecedented series of shocks, whose impact on production, aggregate demand, employment and, ultimately, producer and consumer incomes crucially depends on how the labour market copes with them.

These shocks have occurred against a background of secular trends (such as population ageing and technological change) with the capacity to transform the functioning of the labour market and economic activity.

In Spain, moreover, the labour market has traditionally been characterised by serious dysfunctionalities, which have resulted in very high unemployment rates, affecting the different population groups very unevenly (with a higher incidence among women, young people and low-skilled workers), and an excessive prevalence of long-term unemployment. This market also suffers from an excessive duality between workers on permanent and temporary contracts that is economically inefficient, socially unfair and not conducive to productivity growth, and which also leads to adjustments in the event of adverse economic shocks through job losses to a much greater extent than through wages and makes the market prone to mismatches between labour supply and demand even in periods of particularly buoyant economic activity.