Rising Unemployment Costs Driven by Higher Benefits and Salaries in Spain
Average unemployment benefits exceed €1,000 monthly, pushing overall costs to nearly €1,300 per recipient.
Recent data indicates a significant increase in Spain’s unemployment expenditure, even as the labor market exhibits signs of strength.
Enhanced salaries and expanded coverage due to government initiatives have contributed to a growing fiscal burden on the state, with the average unemployment benefit now exceeding €1,000 monthly.
By February 2025, the latest available figures from the Ministry of Labor revealed a gross average of €1,014.5 for contributory unemployment benefits, which marks a €30 increase from the previous year, reflecting a rise of 3%.
When incorporating social security contributions paid by the Public Employment Service (SEPE), the average cost per unemployment beneficiary escalates to €1,299.54 per month, representing a substantial increase of 19% over the past year.
In February, total expenditure for unemployment benefits reached €2.185 billion, which is an increase of 7.8% compared to the same month the previous year.
This growth in expenditure occurs alongside a reduction in the number of beneficiaries, currently standing at approximately 1.7 million, a decrease of 9% from February 2024. Furthermore, the number of beneficiaries has declined significantly from the 1.9 million reported in early 2019, just before the COVID-19 pandemic.
At that time, the monthly unemployment bill was less than €1.6 billion, with beneficiaries receiving an average of €827, which is €187 less than the current figure.
The paradoxical rise in unemployment costs, despite a falling unemployment rate—with figures showing a decrease from over 3.2 million in March 2019 to below 2.6 million recently—can be attributed to several factors.
Key changes highlighted by the Ministry of Labor include rising salaries that determine benefit calculations and the reversal of prior reforms that had reduced benefits to 50% of the regulatory base after six months; the current government has increased this to 60%.
Additionally, the expansion of eligible groups for unemployment benefits and the introduction of employment support complements, which allow benefit recipients to engage in work, have also played roles in the climbing costs.
According to Fernando Luján, Deputy General Secretary for Union Policy at UGT, the improvement in the salary basis for calculating unemployment benefits is congruent with the last collective labor agreement (AENC) and the sustained increase in the minimum wage.
This inflationary trend in salaries accounts for the approximate 3% annual increase in benefit amounts, yet both average costs per beneficiary and total monthly payroll expenses are rising at considerably higher rates.
The former has seen an increase of nearly 8%, while the latter is approaching 20%, largely driven by the government-mandated increases in social security contributions, aimed at addressing the pensions of the baby boomer generation.
Amid ongoing financial challenges, the SEPE has recently reported deficits, attributed to insufficient revenue to meet the soaring expenditure.
The Independent Authority for Fiscal Responsibility (AIReF) has projected that unemployment spending will remain steady at 1.2% of GDP until 2050, despite declining unemployment figures, due to economic improvements and benefit adjustments correlated with inflation.
Enhanced salaries and expanded coverage due to government initiatives have contributed to a growing fiscal burden on the state, with the average unemployment benefit now exceeding €1,000 monthly.
By February 2025, the latest available figures from the Ministry of Labor revealed a gross average of €1,014.5 for contributory unemployment benefits, which marks a €30 increase from the previous year, reflecting a rise of 3%.
When incorporating social security contributions paid by the Public Employment Service (SEPE), the average cost per unemployment beneficiary escalates to €1,299.54 per month, representing a substantial increase of 19% over the past year.
In February, total expenditure for unemployment benefits reached €2.185 billion, which is an increase of 7.8% compared to the same month the previous year.
This growth in expenditure occurs alongside a reduction in the number of beneficiaries, currently standing at approximately 1.7 million, a decrease of 9% from February 2024. Furthermore, the number of beneficiaries has declined significantly from the 1.9 million reported in early 2019, just before the COVID-19 pandemic.
At that time, the monthly unemployment bill was less than €1.6 billion, with beneficiaries receiving an average of €827, which is €187 less than the current figure.
The paradoxical rise in unemployment costs, despite a falling unemployment rate—with figures showing a decrease from over 3.2 million in March 2019 to below 2.6 million recently—can be attributed to several factors.
Key changes highlighted by the Ministry of Labor include rising salaries that determine benefit calculations and the reversal of prior reforms that had reduced benefits to 50% of the regulatory base after six months; the current government has increased this to 60%.
Additionally, the expansion of eligible groups for unemployment benefits and the introduction of employment support complements, which allow benefit recipients to engage in work, have also played roles in the climbing costs.
According to Fernando Luján, Deputy General Secretary for Union Policy at UGT, the improvement in the salary basis for calculating unemployment benefits is congruent with the last collective labor agreement (AENC) and the sustained increase in the minimum wage.
This inflationary trend in salaries accounts for the approximate 3% annual increase in benefit amounts, yet both average costs per beneficiary and total monthly payroll expenses are rising at considerably higher rates.
The former has seen an increase of nearly 8%, while the latter is approaching 20%, largely driven by the government-mandated increases in social security contributions, aimed at addressing the pensions of the baby boomer generation.
Amid ongoing financial challenges, the SEPE has recently reported deficits, attributed to insufficient revenue to meet the soaring expenditure.
The Independent Authority for Fiscal Responsibility (AIReF) has projected that unemployment spending will remain steady at 1.2% of GDP until 2050, despite declining unemployment figures, due to economic improvements and benefit adjustments correlated with inflation.
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Translated by AI
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