Preparing the Basque Country, Spain for the Future of Work

Executive Summary

The COVID-19 crisis is causing an unprecedented downturn in labour markets across the OECD. The Basque Country has been particularly affected by COVID-19, as lockdown measures in March-May 2020 ground two of its key sectors – industrial manufacturing and tourism – to a temporary halt. These parts of the economy drove requests for the Spanish government’s short-term work schemes (STW) in the region.

After the 2008 economic crisis, it took over ten years to recover employment levels, while the quality of jobs suffered. Indeed, prior to COVID-19, unemployment in the Basque Country reached 9.3%, significantly lower than the Spanish average of 14.1%. COVID-19 will test the region’s resilience. Unemployment sat at 13.5% as of June 2020 – an increase of 4.2 percentage points. This share is set to increase as the government phases out STW and the region faces the risk of new lockdown measures. The crisis is also likely to accentuate multiple long-term labour market shifts.

Teleworking is one of a number of structural labour market evolutions likely to take place. Around 32% of jobs can be carried out remotely in the Basque Country, a factor that can support recovery as multiple restrictions for public health remain in place. Automation is also likely to accelerate. In the Basque Country, 22% of jobs are at high risk of automation (versus 14% for the OECD), meaning they could disappear. 33% are at risk of significant change (versus the OECD average of 32%), whereby the job likely remains but the skills required to perform it change. Automation is an opportunity to raise productivity, though it also poses risks to some workers, sectors and occupations.

Basque policy actors are taking action to manage this accelerated digital transition. Lanbide, the Basque employment service, is digitalising services, enabling service continuity during COVID-19. Lanbide staff, however, would benefit from greater capacity to administer Active Labour Market Policies (ALMPs), without harming coverage of one of the region’s main social policies, the Renta de Garantía de Ingresos (RGI). Social partners in the Basque Country are also moving towards a pact on a fair digital transition, which will help firms anticipate skills changes, retrain workers and avoid layoffs.

As in many OECD regions, job polarisation is occurring in the Basque Country, with middle skilled jobs declining by 6.4% since 2000. Positively, most of the shift has been towards high-skilled jobs, which grew by 4.8% versus low skilled jobs, which grew by only 1.6%. The shift to high-skilled jobs partly reflects the region’s high levels of educational attainment, above Spanish and EU averages. That being said, over 33% of workers occupy jobs below their skill level. The quality of jobs has not followed the upskilling of jobs, accentuating recruitment difficulties in the region and weighing on social cohesion.

This under-utilisation of talent is a missed opportunity for the region. To mitigate this, Lanbide has taken steps to work more closely with employers. Engagement with firms to implement stronger work practices and modify job offers to better correspond to job seekers constitute new possibilities. The region’s social dialogue roundtable is also setting up new labour market observatories to track change. There is also an opportunity to further encourage the upskilling of workers who are in economic sectors that will take longer to recover (or will not fully recover) or that might face structural change as a result of accelerated automation. The following recommendations could help to further enhance Basque efforts.

Future-proofing the region through better skills anticipation

• Form an expert group composed of industry specialists to conduct skill foresight exercises across sectors and occupations: Expert groups within Lanbide could analyse the service’s rich set of data on job postings, engage with firms and formulate policy-relevant analyses of the evolution of skills demand in the region. The expert group could identify scenarios of the skills needed for different sets of occupations, expanding studies beyond the region’s traditional industry base to a growing service sector. Results could be communicated to training centres for coordination and dissemination purposes.

• Help SMEs conduct analyses of their skills needs: A mechanism could be established to allocate funding to groups of SMEs in the same industry to conduct analyses of the skill needs they may have in common, with the goal of sharing training capacities. The Agencia vasca de desarrollo empresarial (SPRI) may be well positioned to take such a role as part of its innovation support services for Basque SMEs.

• Put in place an employer skills survey across the Basque Country: A publicly-administered employer survey could be established to collect information on skills challenges that employers report both within their existing workforces and when recruiting, the levels and nature of investment in training and development, and the relationship between skills challenges, training activity and business strategy. The region could take the United Kingdom as an example, where an annual employer skills survey has allowed the government to gather an idea of skills needs, training and work practices.

Reinforcing Lanbide’s role as a central labour market actor

• Lanbide’s caseload can be modified to more fully implement labour market activation policies without harming coverage of passive policies: Administration of the region’s income support programme, the Renta de Garantía de Ingresos (RGI), could be streamlined and simplified. This would allow Lanbide to devote itself more fully to the delivery of activation policies – including coaching, skills training and other employment preparation programmes – as the recovery progresses.

• Lanbide staff could help employers, and particularly SMEs, to formulate job postings based on Lanbide’s job seeker information: Dedicated teams could be established within the employment service to help design job postings based on skills identified among job seekers, while also co-creating job postings, particularly for job seekers who are ready or nearly ready to work but face barriers with advertised vacancies.

• Build on Lanbide’s Cuenta de Formación, or personal training account, through the greater use of data to match skills: Building on Lanbide’s recent training accounts for job seekers, programmes could connect Lanbide with training centres, helping them design programmes and evaluate training modules based on the skills of workers.

Better using the skills of the labour force and promoting quality jobs

• Encourage firms to better use the high skills available and raise the quality of jobs: The region can engage employers in workplace innovation strategies, such as high performance work practices (HPWP), which better use the high skills of the workforce. This could be done by setting “good practice” standards across the region that sets out guidelines on how a company can review the way it uses the skills of workers and how it designs jobs. It can also include providing direct advice to firms through intermediaries (e.g. vocational training institutions) or business networks.

• Build new labour market tools that support worker transitions: The Basque Country’s social dialogue roundtable, the Mesa de Diálogo Social, has created new labour market observatories on skills as well as occupational health and safety. Such tools can be expanded drawing on international practices, such as Swedish job security councils, which could provide intensive personalised support to workers before job loss occurs. These could be included in the region’s pact on a fair digital transition.

• Participate in the Spanish government’s labour inspection initiative to reduce the abuse of fixed-term contracts: Coordinate through the Spanish government’s Plan director por un trabajo digno, which has identified a large share of abusive fixed-term contracts, to focus efforts to identify labour law abuse. Sectors or occupations most at risk could be identified for the Basque labour inspectorate to co-participate in the plan’s campañas extraordinarias autonómicas.