Public investment incentives should in return require the creation of local jobs

• August 23, 2023
• Andrew

From the start of the Spanish transition until today, the main weakness of the Spanish economy has been its inability to generate sustainable quality employment for the majority of the working population. This inability has brought unemployment rates to unbearable levels in times of recession in our country. Industrial reconversion thus brought the unemployment rate to 21.6 % in 1986, the economic crisis in 1993 dragged it to 24.5 %, and with the financial crisis of 2008 it reached 27 % at the most acute time of the crisis in 2013. Given that the unemployment rates of the young population tend to be about twice those of the general population, in a country such as Spain recessionary moments mean that almost half of the young population is unemployed. The youth unemployment rate (under 25) reached 56.9 % in 2013.

There is probably no need more prevalent in the Spanish economy than the creation of more decent and lasting jobs. It is not a question of creating any kind of employment, but of jobs generating high added value, entailing decent working conditions, with high wages and high social security contributions. Job stability is also essential in order to ensure satisfactory career development prospects for most citizens. Although the data from the latest Labour Force Survey (Q2022) are apparently positive in terms of the number of jobs created, they do not hide the precariousness and poor quality of many of the new jobs created, which are intended to provide services of low added value.

If the creation of good jobs is so prevalent, we need to ask ourselves what strategy would lead a society to generate many and good jobs. Rodrick and Stantcheva (2021) propose a new governance model based on four pillars, which should be developed together and set out below.

The first pillar consists of the development of business-aligned active employment policies. Active employment policies are interventions carried out with job-seekers to guide and train them with the aim of equipping them with the skills needed to reach or change jobs. However, it must be recognised that these measures have not always achieved the desired employability objectives, partly because guidance and training have been carried out at the expense of business needs. These authors propose to strengthen ‘sectoral training programmes’, the special feature of which is that it is the sector’s own companies that determine the type of training required for their businesses and those which, through public/private cooperation, establish the pathways of those who are active until they enter the labour market.

The second pillar is based on public prioritisation of industrial policies that generate high levels of employment and quality. So far, public incentives for business investment have job creation as a mostly subsidiary objective. However, these authors advocate the need to encourage publicly available business investment with an “employment perspective”, i.e. companies receiving public investment support should commit themselves to certain actions directly related to employment, such as creating a certain number of decent and stable jobs, working with local suppliers, avoiding relocation of part of their production, or training commitments for employed persons. As can be seen, the obligations of companies receiving incentives to innovate with employment may vary, depending on each case, but what is clear is that good jobs can be created only by good companies or institutions, and the authors argue that public investment aid should have this “employment perspective”.

The third pillar consists of incentivising technologies that are “employment-friendly”, i.e. the implementation of which encourages the creation of other tasks that in turn create activity and thus jobs (brilliant technologies), as opposed to others that basically replace the workforce (poor technologies). The authors propose that governments should be able to apply “job foresight tests”, which identify public spending priorities for innovation. This approach requires a rethink of the type of incentives to invest in technological development, which in turn also leads companies to rethink the type of technological development to be addressed. It may be attractive for a company to replace workers in an assembly chain with robots. But in its surroundings, it should look at how to create jobs for the manufacture of the same robots that increase their efficiency.

The fourth pillar sets out the need to impose international economic policies that safeguard domestic labour and social standards. Under this pillar, authors set out the need to incorporate provisions for binding labour rights when companies operate in other countries.

These pillars should in turn be addressed in the framework set up by the European Commission, which has clearly identified the main areas to invest in in the coming years. First, technologies to help Europe become climate neutral by 2050. Second, technologies that accelerate the digitalisation process. It is in these two expanding areas that the creation and growth of good businesses, generating good jobs, are needed more than ever.

The task is not easy, as it is not trivial to identify the companies that have the capacity to generate many and good jobs, or the territories in which to boost them. Courage and courage are needed. There will certainly be mistakes, but what is clear is that industry has proven to generate more quality and lasting jobs than low-value added services. There is an urgent need to reindustrialise Spain with the focus on quality job creation.

Ametic think tank