30% of the unemployed in Spain bear 90% of the social cost of unemployment, in reference to the loss of well-being generated by the lack of work in the population as a whole, according to a study by the BBVA Foundation and the Valencian Institute of Economic Research (Ivie). This 30% corresponds mostly to people over 45 who have been unemployed for two years; mainly women who do not receive any benefits and have a medium-low educational level.
The report explains that, although the unemployment rate is the variable most used to measure the incidence of unemployment in a country, it does not report the effects that unemployment causes on the personal well-being of the unemployed. This loss of well-being of the unemployed, evidenced in both losses of income and self-esteem, presents different degrees of intensity and impact.
“By focusing our attention on the unemployment rate, we are ignoring fundamental information about the state of the labor market and the dimension of the social problem of lack of employment. Unemployment rates are far from providing the information necessary to assess the impact of unemployment on society, because there is clear evidence that while a part of the unemployed population enters employment, another part becomes chronic,” the study highlights.
This is why the BBVA Foundation and the Ivie consider vital “a new way of measuring unemployment”, which takes into account both the unemployment rate and its duration, as well as the lost income of unemployed people. “Only in this way will we have a precise vision of the implications of this social problem and an adequate basis for designing policies to combat it and assess its effects,” he maintains.
Only one in three unemployed people receives any help
The study indicates that unemployment represents a waste of resources, which generates a reduction in personal well-being (loss of income and self-esteem) and social well-being (problems of integration and social cohesion). These effects, which they accuse of being “unwanted”, “are magnified” in cases of long-term unemployment, a situation that tends to become chronic, or when they are not entitled to any benefits.
The latest Active Population Survey (EPA) reflects an unemployment rate of 11.8% in Spain, compared to the 27% that was almost reached in 2012. The authors of the study warn that “this good data is less positive when it is also analyzed “The duration and coverage of benefits for unemployed people.” They state that more than 41% of the more than 2,850,000 unemployed are long-term unemployed (more than a year without work) and 28% have remained unemployed for more than It also ensures that two thirds of the unemployed do not receive any type of subsidy.
“This inability of the unemployment rate to reflect very relevant social aspects of unemployment has caused both institutions and the academic field to rethink the measurement of unemployment,” notes the report, which gives as an example the proposal of Brussels to resort to the notion of “slack in the labor market”. In this study, the BBVA Foundation and the Ivie address unemployment from the perspective of its social cost. To do this, combine three different dimensions: incidence (unemployment rate), severity (average duration of unemployment and income lost due to remaining unemployed), and hysteresis (probability of remaining unemployed).
Necessary changes in the measurement of unemployment
To calculate this social cost, the authors estimate the income that each worker has lost due to being unemployed, as well as their loss of well-being. This rate is calculated by the income lost during the entire time you remain unemployed. The sum of the total income lost by all unemployed people gives the social cost of unemployment (CSD). The fall in the unemployment rate has not been sufficient to compensate for the deterioration in the well-being of unemployed people, particularly the long-term unemployed.
In the opinion of the BBVA Foundation and the Ivie, this means that “the average variables have little informative value and, therefore, it is necessary to address the problem of measuring unemployment with more informative indicators and develop policies designed to measure and focused “. in the most vulnerable groups.”
According to this study, the Balearic Islands is the region with the lowest social cost of unemployment because it is the region in which the average duration of unemployment is notably lower than the rest. The Basque Country, on the other hand, has a longer average duration of unemployment than the rest of the regions and a greater wage loss due to lack of employment. These two factors explain a high social cost of unemployment despite having the lowest unemployment rate.