8
diminished somewhat in recent years, as the data in Table 1 show, Portugal’s record has been
remarkably superior to that of Spain. The data for 2000 showed a level of unemployment in
Spain more than three times higher than that found in its smaller neighbor. Particularly
disturbing was the high level of long-term youth unemployment and female unemployment in
Spain, with serious social consequences. It is crucial to note that the figures on unemployment
actually understate the difference between the two Iberian neighbors, in that the Portuguese labor
force is significantly larger than its Spanish counterpart. Labor force participation has been
chronically low in Spain, especially among women, a pattern found throughout southern Europe
except for Portugal. If one focuses on the percentage of the population between 15 and 64 years
old that was employed, the employment rate was on average more than 20% higher in Portugal
than in Spain during the 1990s.
Economists analyzing the Iberian employment puzzle have tended to attribute the
divergence in one way or another to employment costs or conditions, asserting that lower wage
costs in Portugal, and (for Blanchard and Jimeno) more generous unemployment provisions
11
in
Spain, rendered job creation far more difficult in the larger of the two Iberian cases. Yet those
economists writing on the puzzle have been less than unanimous in the weight assigned to such
factors. Indeed, Blanchard and Jimeno concluded that much of the disparity could not be fully
accounted for. This is not the place to fully review the evidence supporting (or opposing) the
claim that differences in employment costs or conditions contribute centrally to generating the
Iberian employment puzzle; my objective here is, instead, to review possibly complementary (or
11
However, on the question of the impact of unemployment payments on the
unemployment rate see also Gosta Esping-Andersen, Why We Need a New Welfare State,
(Oxford: Oxford University Press, 2002), p. 47.
Convention