Spain urged to reform labour policies for inclusive, skill-based and resilient growth

The OECD and Spain’s Ministry of Labour report calls for an overhaul of Spain’s fragmented Active Labour Market Policies to boost job quality, skills, and inclusion. It urges shifting from short-term job creation to long-term, data-driven reforms that align with digital and green transitions.

The report “Improving Active Labour Market Policies in Spain,” prepared by the OECD in collaboration with the Spanish Ministry of Labour and Social Economy, delivers a compelling analysis of Spain’s enduring employment challenges and offers a blueprint for reform. Despite economic recovery and falling jobless figures in recent years, Spain continues to struggle with one of the highest unemployment rates in Europe, particularly among youth, women, and low-skilled workers. The study emphasizes that while growth has returned, the benefits are unevenly distributed, with millions trapped in precarious temporary jobs. Active Labour Market Policies (ALMPs), which include training, employment incentives, and job placement programs, are presented as vital tools for bridging the gap between growth and inclusion. Yet, their effectiveness has been weakened by administrative fragmentation, limited coordination, and a lack of systematic evaluation.

A Dual Labour Market Holding Back Progress

Spain’s labour market, the report argues, remains divided into two worlds: one of stable, well-protected jobs, and another of temporary, insecure contracts. This structural duality discourages both workers and employers from investing in long-term skills development, reducing productivity and widening inequality. Although economic recovery following the pandemic has been steady, bolstered by EU Recovery and Resilience funding, the quality of new employment is a persistent concern. The OECD warns that short-term contracting has become a systemic feature of the Spanish economy, particularly affecting young people and women. This imbalance undermines human capital formation and contributes to the country’s comparatively low productivity. Against this backdrop, ALMPs are essential to support transitions between jobs and help workers adapt to structural change. However, the report finds that these programs are fragmented across multiple regional administrations, leading to inconsistent outcomes and inefficiencies.

Fragmentation and Funding Challenges

A major obstacle identified by the OECD is Spain’s complex and decentralized governance structure for labour policies. Responsibilities are split between the national Public Employment Service (SEPE) and the country’s 17 autonomous communities. While regional autonomy allows for local adaptation, it has also produced wide disparities in performance and funding allocation. Some regions, such as the Basque Country and Catalonia, perform strongly thanks to better coordination with employers and innovative training schemes. Others lag due to administrative rigidity and limited engagement with businesses. The report reveals that Spain spends less on ALMPs than the EU average, and much of this funding is concentrated on short-term job creation rather than reskilling and lifelong learning. Charts in the report illustrate this imbalance, showing that countries investing more in targeted training achieve higher employment retention rates. The OECD urges Spain to shift its funding priorities from reactive subsidies toward upskilling, re-skilling, and digital training, aligning them with the demands of a rapidly changing economy.

Public Employment Services in Need of Transformation

The report devotes considerable attention to the Public Employment Services, portraying them as overburdened and bureaucratic rather than proactive and strategic. While some regions have introduced digital platforms and personalized job counseling, most continue to focus narrowly on benefit administration. The OECD calls for a transformation of SEPE into a data-driven, client-focused institution that can anticipate labour market trends and tailor support to individual needs. The goal, it stresses, is to move from passive service delivery to active engagement with job seekers and employers alike. To achieve this, Spain must invest in staff training, modern digital infrastructure, and shared information systems linking national and regional levels. The report also highlights the need for partnerships with private employment agencies, training providers, and employers to expand job opportunities, especially for groups facing structural disadvantages, such as the long-term unemployed, youth, and women returning to work after caregiving breaks.

From Policy Vision to Measurable Results

Perhaps the most striking conclusion of the report is that Spain lacks a strong culture of evaluation and accountability. Many ALMPs operate without reliable performance indicators or follow-up mechanisms, making it difficult to assess their real impact. The OECD urges Spain to adopt evidence-based policy frameworks, using impact assessments, pilot programs, and longitudinal studies to identify what works best. It also recommends leveraging digitalization not only for service delivery but for data collection and analysis to guide policy decisions. The report concludes that the window for reform is now: Spain’s access to EU Next Generation funds offers a historic opportunity to build a more inclusive, adaptable, and resilient labour market. However, the authors warn that without institutional reform and stronger coordination between the national and regional authorities, this opportunity could be lost. If implemented with transparency and coherence, the OECD’s recommendations could transform Spain’s labour market from one of Europe’s most segmented into a model of innovation, equity, and sustainable growth.