Economic

Introduction

In the year of 2007 to 2008, the major financial crisis has brought down the economy in the world and caused much hardship. While many countries were affected, the impact in each part of the world was different. Many European countries are currently struggling with debt along with the collapse of the housing market. Spain is one of the most seriously affected of all the EU countries by the financial crisis. Spain is unique among EU members because of its staggering unemployment rate. No other country has over 20 percent overall unemployment and about 50 percent youth unemployment.

This essay is divided into 3 sections: The unemployment rate in Spain, Youth unemployment in Spain and what the government plans to do in order to decrease the high overall and youth unemployment rate.

Unemployment Rate in Spain

Unemployment means people of working age who actively seek jobs but are not employed. Spain’s unemployment has reached 26% at the beginning of 2013, and showed no signs of recovery from the recession. Unemployment figures can be underestimated by not including “discouraged workers” and the underemployed. Discouraged workers are workers who give up from not being able to find a job over a period of time. The underemployed are those with jobs that don’t fully utilize their skills. Unemployment figures can also overestimate, as it does not include Spain’s underground economy such as university students of working age.

There are 2 types of unemployment, natural and cyclical unemployment. Natural unemployment includes structural, frictional, and seasonal unemployment while cyclical unemployment occurs when the economy is in recession.

The diagram below illustrates Spain’s Recession and Unemployment:

The increase in Spain’s unemployment is likely due to an increase in its cyclical unemployment. As a result of the recession, aggregate demand shifts from AD to AD1 as shown in the diagram above. AD is affected by several components of aggregate...