The Impact of Immigration on the Spanish Labour Market (ARI)

The Impact of Immigration on the Spanish Labour Market (ARI)

Theme: The immigration phenomenon in Spain has been characterized by the presence of foreigners lacking work- and residence papers. This has fuelled a growth model that is labour-intensive and not very productive, weakening social cohesion.

Summary: The growth model that has developed in Spain since 2000 –based on construction and low value-added services– has created many tenuous, dead-end jobs which to a large extent have been rejected by Spaniards. Many of these jobs are taken by foreign workers who, in many cases, do not have work or residence papers. This does not stem from the underground economy, as usually thought, but rather from a lack of mechanisms to ensure compliance with the law. It lowers foreign workers’ protection against unemployment and this aggravates the problems of cohesion that are generated by a growth model that has accentuated a duality in the labour market, a division between good and bad jobs.


n a short span of time Spain has gone from being a country that had practically no immigrants to having one of the greatest proportions of foreigners among all EU member countries. To explain the volume and speed of the immigration phenomenon it is necessary to look at the growth model that has characterised the Spanish economy, especially since 2000: one that relied heavily on unskilled labour. Thus, Spain’s real-estate boom is largely responsible for its immigration boom, and this is in turn serves to feed back the former, providing workers willing to take the low-productivity and therefore low-paying jobs it generates.

However, analysing the statistical evolution of the immigration phenomenon it can be seen that agriculture and domestic service served as a lure, although of lower intensity, even before the one produced by the later strong growth in construction and low value-added services (retail, hospitality industry and personal services). With the immigration boom in full swing, agriculture and domestic service served as gateways and temporary jobs for a large number of the non-EU immigrant workers that joined the labour market, especially through the underground economy.

Besides the economy’s growth model, other factors related to supply in the labour market also encouraged immigration. They include a decline in the number of young Spaniards without university degrees, a sector which traditionally took low-skill jobs. The decline stems from a previous fall in the birth rate, which reduced the size of the newer generations, and also from a considerable increase in the skill levels of most young Spaniards. In this context, educated young people protected by a family safety net can reject low-paying jobs that are the majority of those created by a low-productivity growth model, holding out for higher-quality positions which, although to a lesser extent, also boost economic growth. At the same time, a high number of women joining the work force also attracted immigrant workers: they make up for a lack of services and facilities for children up to age three and for persons needing assistance.

Foreign-born people of working age –between 16 and 64– surpassed four million in the third quarter of 2007, according to estimates in the Survey of the Working Population (see Table 1). A total of 88% come from countries outside the EU-25[1] and have to obtain a work permit. In some cases the national employment picture[2] was taken into account in deciding whether to let them join the labour market. Within this sector the largest group are Latin Americans at 1,849,000 (Ecuadoreans, Colombians and Bolivians, mainly), followed at a great distance by non-EU Europeans at 846,000 (mostly Rumanians) and Africans at 702,000 (mostly Moroccans). Asians (mainly from China) account for the smallest group among foreigners who require a work permit.

In general these groups have very high rates of activity[3] (80.8%) and unemployment[4] (12.1%), which surpass those of Spaniards (71.8% and 7.4%, respectively), except for Africans, who have an especially low activity rate (69.5%) and very high unemployment (16.1%). Asians also stand out, with an activity rate (75.9%) that is higher than that of Spaniards and a lower unemployment rate (6.9%). In light of these figures the Asian community is the one that is best off –although keeping in mind that it is the smallest– while Africans are in the worst situation. The higher participation rate among immigrants stems, however, from their concentration in age brackets associated with greater activity, while the relatively high jobless rate among immigrants is due to the fact that they are concentrated in the most volatile jobs and tend to suffer high unemployment rates when they first arrive in Spain.

Table 1. Figures on activity rates of Spanish and foreign population (for people aged 16-64)

 SpaniardsForeignersForeigners not from EU-25Non-EU European countries + Bulgaria and RumaniaAfricaAmericaAsia, Oceania and stateless
Activity rate71.879.480.882.069.584.875.9
Unemployment (%)7.411.812.112.516.111.16.9

Figures in thousands, from third quarter of 2007.
Source: the Spanish trade union Comisiones Obreras, based on data from the Survey of the Working Population, carried out by the National Statistics Institute.

Immigrants have Trouble Integrating if they do not Have Papers
Many immigrants arriving in Spain have joined the labour market without having residence or work papers. This is seen in the large number of them who took advantage of amnesties granted by governments. The last one, in 2005, benefited nearly 600,000 people and earlier amnesties carried out starting in 2000 saw papers granted to nearly 400,000. Together, they account for 50% of active, legal workers from outside the EU-25 in 2007. Immigrant workers who do not have papers are not signed up in the Social Security System and their labour rights are much lesser than those of workers with their papers in order.

Since the last mass amnesty, foreign workers have continued to arrive in Spain without papers. In the period spanning from 1 January to 1 July of 2007, a total of 209,600 preliminary work permits were granted for non-EU foreigners, which accounts for only 28% of the net increase in the working population of non-EU foreigners (742,100) during that stretch of time. As seen in Table 2, the condition Spain calls irregularity –not having papers– has been the historic norm in Spain when it comes to incorporating immigrants; only in 2001 did legal entries exceed the illegal ones. By geographical origin, Latin Americans are the ones who suffer from it most. In the first six months of 2007 only 24.4% of those who came to form part of the working population did so with a work permit. Next come non-EU Europeans (35.2%) and Africans (55.2%), while Asians are the exception: 95.1% of their entries were with a work permit.

Table 2. Percentage of foreign workers who enter labour market annually with a work permit

Nationality20012002200320042005 (1)20062007 (2)
Non-EU Europeans50.834.311.235.227.826.035.2
Asia, Oceania and stateless247.5-63.829.174.983.651.295.1

Note: preliminary work permits granted each year are compared with net growth in the working population in each case.
(1) Excludes initial permits corresponding to amnesty.
(2) First half of the year. Requests for preliminary work permits.
Source: The Spanish trade union Comisiones Obreras on the basis of data from the Survey of the Working Population by the National Statistics Institute, and Statistics on Work Permits for Foreigners from 2001 to 2004, Labour Statistics Yearbook for 2005 and 2006, and Requests by Foreigners for Work Permits for 2007. All of the last three came from the Ministry of Labour and Social Issues.

Also corroborating these results is the comparison between entries of foreigners intending to remain in the country (Survey on Residency Variations, by the National Statistics Institute) and preliminary work permits, as seen in Graph 1. In the period 2001-06 an average of 566,000 immigrants entered Spain each year (the figure was more than 800,000 in 2006), while the average number of preliminary work permits granted yearly was 113,000. This big difference between the two numbers translates into the large number of foreign workers in Spain without work papers over the course of this period.

Graph 1. Evidence of foreigners working without papers

Evidence of foreigners working without papers. ARI 39/2008. Carlos Martín Urriza.

As a result of this major influx of immigrants without papers, we can estimate that at the close of the first six months of 2007[5] Spain was home to 1.1 million foreigners of a working age (16 to 64) who did not have full labour rights because they lacked a residence permit, or in the case of people from Rumania and Bulgaria, which joined the EU in January 2007, did not have authorisation to work[6] because of a Spanish moratorium on the free circulation of workers from those countries. By region of origin, the group that most suffered the status of not having papers were Latin Americans, with 786,000 people not enjoying legal residence, followed by Europeans from outside the EU-25 (264,000) and Africans (98.000). Among Asians, in line with what is observed in entries into the labour market –see Table 2– there is not a significant volume of people living in Spain illegally.[7]

Table 3. Estimates of volume of foreigners without papers who are of working age (population between ages of 16 and 64, in thousands)

NationalityForeign population (1)Legal residents (2)Difference
Europeans not from EU-25 (3)830.0566.3263.6
Asia, Oceania and stateless137.7180.4-42.6

(1) Average of the second and third quarters of 2007 from the Survey of the Working Population.
(2)As of 30, June 2007.
(3)Includes, therefore, Rumania and Bulgaria.
Source: carried out by the Technical Department of Comisiones Obreras using data from the National Statistics Institute and the Ministry of Labour and Social Affairs.

But why has this situation been the norm in a model of economic growth that generates so many jobs that Spaniards shun and thus are available for foreign workers? Normally the underground economy, which is traditional in some of the sectors that have led Spanish economic growth in recent years, is blamed for there being so many immigrants without papers. However, if this were true, the successive amnesties carried out would not have had the success that they did, because the underground economy tends not to respond to this kind of measure, but rather to direction action by the Labour Inspection Directorate. Instead, it is the absence of means for enforcing laws governing the presence of foreigners –specifically, the principle of hiring foreigners in their country of origin for jobs in Spain– which is chiefly responsible for the fact that most immigrants enter the labour market without work permits.

The state has not provided the resources necessary for government employment services to match foreign workers in their countries of origin with jobs that are available in small and medium-size companies and not filled by Spaniards. In actual practice, small- and medium-size companies turn to the National Employment Institute and obtain ‘authorisations’ to hire foreign workers but when they ask where the workers are, the institute tells them they have to go abroad to contact prospective candidates.[8] Obviously, this is impossible for most small- and medium-size companies and therefore the system cannot work in an above-board fashion. The state, aware that the law cannot be complied with, leaves frontier gateways half-open so that the laws of supply and demand in the workplace intersect in a situation of irregularity, making for a liberal-style immigration policy. Paradoxically, in this way amnesties are the usual tool used periodically to restore compliance with the law. It is equally paradoxical to hear politicians giving speeches in favour of integrating foreigners when the first and therefore most fundamental tenet of this principle –the way foreigners enter the labour market– is flawed.

There is no doubt that Spanish borders are porous. Most immigrants enter through border posts set up by the Spanish state and via legal means of transport. A mere 5% arrive aboard crowded boats making dangerous trips from Africa. But even here the flow is manageable through international cooperation (such is the case of Morocco). Also, visas have proven to be an efficient tool when it comes to regulating inbound flows. In fact, the brief history of immigration in Spain is a relay race among different groups of foreigners, in which a visa requirement is passed from one to another. For instance, Colombians were replaced by Ecuadoreans in the entry flows when in 2001 the former start needing a visa. Ecuadoreans needed them starting in 2003, and starting in that year they were progressively replaced by people from Rumania and Bolivia. The latter have been required to have a visa since 2007. Rumanians do not need one since their country joined the EU. So presumably they will become Spain’s largest foreign community. Visas regulate the flows of entries, restrict the activities of traffickers and uphold the full labour rights of a greater number of foreign workers from the time they enter Spain.

An Economic Model that Weakens Social Cohesion
The economic growth model based on housing construction and low value-added services has had significant repercussions on cohesion in the labour market and the social cohesion sought by the welfare state. Employment has grown greatly through this model. But it has done so in the sector of jobs with the least long-term prospects, in areas that require few skills, feature low pay and temporary contracts and are vulnerable to changes in the economic cycle. This evolution in the employment structure has affected the evolution of the wage structure, increasing the weight of workers with the lowest pay, whose numbers have almost doubled from 1994 to 2004. In 1994, 6.6 million people earned less than €16,000 (the equivalent then in purchasing power of €16,000 in 2004). But 10 years later, in 2004, the figure was 11.1 million. Given the increase in the employed population in these years, all wage groups have increased in size. But the most relevant thing to note is the difference between them. And here we see that those who earn somewhere between the minimum wage and €16,000 a year are the only ones who have boosted their relative weight in the structure as a whole.

Table 4. Distribution of wage-earners by salary brackets (gross salary earned in a year; salary brackets with equivalent purchasing power in 1994 and 2004)

 Number of recipientsStructure (%)
Wage brackets (€)1994200419942004Difference
Less than official minimum wage3,128,9084,934,84328.828.5-0.3
Between minimum wage and 16,0003,496,9816,189,05132.235.73.5
Between 16,000 and 32,0003,136,4974,532,09228.926.2-2.7
Between 32,000 and 48,000732,1921,123,9346.76.5-0.3
Between 48,000 and 64,000207,405315,5131.91.8-0.1
Between 64,000 and 80,00076,529109,9920.70.6-0.1
More than 80,00073,906115,3390.70.70.0

Source: Comisiones Obreras using data from the tax authorities (Agencia Estatal de la Administración Tributaria).

The polarisation is seen also in the loss in weight of wages paid to workers as a segment of GDP since 2000. The concentration of job creation among low-paying positions tends to moderate average wage growth, reducing the weight of salaries in GDP.

Graph 2. Percentage distribution of GDP among wage-earners and employers

Percentage distribution of GDP among wage-earners and employers. ARI
39/2008. Carlos Martín Urriza.

At the same time, a growing segment of immigrant workers, as a result of an integration model characterised by having many people without papers, have no protection against times of economic crisis. The immigration phenomenon is so new for the Spanish labour market that there is a large volume of workers without unemployment protection (lacking work permits) or with very little protection (having only recently obtained papers). If economic conditions change, immigrant workers are especially vulnerable: not only do they have no have full unemployment protection because they have paid into the system just a short time, but they also lack a family safety net to support them. This entails a substantial transformation in the Spanish labour market, which is in addition to the duality that is emerging in distribution of wages. Furthermore, significant wage competition is beginning to emerge at the lowest wage levels, where job growth has stopped. Here, those suffering most are not for the time being immigrants, whose social position forces them to be more flexible when it comes to accepting pay cuts. Table 5 shows that because of the deceleration of the economy, in late 2007 the employment rate of Spanish men with low skills fell (by 2.1 points in the case of young men). They are the most direct competitors of foreign workers.

Table 5. Employment rate of Spaniards with low educational level (in %) (1)

Age4th quarter 20064th quarter 2007Difference between the two quarters
Both sexes47.947.7-0.2
16 to 3048.147.2-0.9
31 to 6447.847.8-0.1
16 to 3057.255.1-2.1
31 to 6467.766.4-1.4
16 to 3032.833.70.8
31 to 6430.030.91.0

(1) Illiterate, elementary school studies, either completed or not, first phase of secondary education but without diploma.
Source: Comisiones Obreras on the basis of data from the Survey of the Working Population, by the National Statistics Institute.


Spain’s economic growth model has all but determined its immigration policy. The latter has been adapted to needs for cheap labour, renouncing the idea of setting limits in line with the country’s capacity for taking in foreigners, or the labour rights that the law grants to foreign workers. Spanish authorities have not posed the question of whether the growing number of jobs held by foreigners are viable in the future, or whether the current system of social protection can deal with a growing, vulnerable population while maintaining standards of quality. To the contrary, politicians say it is compatible to lower taxes, grant universal access to public services for a growing population that is in a vulnerable situation and do so maintaining levels of quality in those services.

Now that the economy is experiencing a deceleration, to maintain this ‘subsidiary’ policy is to once again leave things in the hands of the market. Thus, from this vantage point the idea is that immigrants will stop coming to Spain because there is less opportunity for them, or that those who are already here and unemployed will go to another country to seek work. But it does not seem that these two phenomena are going to happen, at least automatically and completely. In the first place, the welfare state will continue to grow as a magnet that attracts immigrants. Secondly, there is a major risk of an increase in the most informal economy by unemployed immigrants –such as selling bootleg CDs in the streets, prostitution or as domestic help– and thirdly immigrants will continue to grow as families bring over more relatives from their native countries.

A realistic position requires an immigration policy that is more committed and has goals which are not always subordinate to the needs of the market. This would mean:

  1. Regulating entry flows:
  • Require a visa for citizens of countries from which Spain receives a significant amount of immigrants, or expects it might.
  • Boost resources earmarked for border controls.
  • Continue to enhance international cooperation with the countries of sub-Saharan Africa. Encourage the opening of European markets to free circulation of goods from those countries.
  • Maintain the transition period for free circulation of workers from Rumania and Bulgaria until their entries slow down.
  1. Push for workplace integration in which foreign workers have rights:
  • Develop effective hiring mechanisms in countries of origin so that immigrants have full rights when they arrive in Spain. Create public channels for selecting foreign workers so as to meet the needs of small- and medium-size Spanish companies. The demographic evolution of the Spanish population leads to a greater need for skilled labour in the future. Therefore, solid mechanisms are needed for selecting properly qualified workers in their countries of origin. Government employment services would seem the natural ones to take on this task, but doubts arise because today it is note even able to do this job –match supply with demand– with Spanish workers and employers. Alternatively, Spanish embassies, consulates and delegations abroad could develop the infrastructure needed to serve this function.
  • Strengthen the Labour Inspection Directorate in its fight against the illegal hiring of foreign workers.
  1. Plan how many people the country can take in:
  • Make the entry of immigrants contingent on the country’s capacity for assimilating them. This in turn depends on the Spanish economy’s structural employment needs –not those specific to the moment– and the solvency of the welfare system.
  • Regulate the right of immigrants to bring relatives over from their home country[9] or increase public spending on correcting the problems this can cause in the labour market and the welfare system. Unlike others, immigrants who come in thanks to relatives who are already here can work in any sector and any job position. They are not bound by the conditions of the so-called ‘national employment situation’. This can cause friction in the labour market as more and more of these kinds of immigrants arrive in Spain.
  1. Develop new social safety nets for immigrants who have little to no job protection and help them deal with economic downturns.

Carlos Martín Urriza
Federal Technical Committee of Comisiones Obreras

[1] This figure of 88% includes people from Rumania and Bulgaria, who must obtain a work permit until full rights of free circulation are granted to workers from these countries, the last to join the EU. It also includes some nationals from countries exempt from having to obtain a work permit (Norway, Andorra, Switzerland, Iceland, Liechtenstein, etc.) although they make up a negligible part of the population.

[2] Preliminary work permits (lasting one year) take into account the national employment situation and thus are granted only for jobs considered hard to fill because of the supply in each province. These restrictions disappear when the permit is renewed for two years, after which comes another renewal of two years. After that, the holder achieves permanent residency. However, preliminary work permits that are granted to foreigners who come to Spain because of relatives already living here are not subject to the national employment situation. They can be used to fill any job anywhere for the first year.

[3] Percentage of working-age people –in this case 16 to 64– who are active (employed, or unemployed but seeking a job).

[4] Percentage of unemployed persons out of the total of those active (employed, or unemployed but seeking a job).

[5] The most up-to-date official estimate of the foreign population comes from the Survey of the Working Population by the National Statistics Institute.

[6] For nationals of these two countries, it was assumed that those who did not have a residency permit as of 30 June, 2007 do not have a work permit.

[7] The fact that residents exceed the population in the case of Asians is due to the nature of the different methods used to estimate the population (sample survey, Survey of the Working Population) and count residents (administrative registry). It is for this reason that one speaks of estimates of the volume of persons without papers. The numbers are not exact but they do reflect the order of magnitude of the phenomenon.

[8] As the immigration phenomenon develops and the number of foreigners in Spain grows, many business owners can contact immigrants in their countries of origin through relatives already living in Spain. But once again the slowness –due to a lack of resources– of the administrative process, expectations of a new amnesty and the scant impact of labour inspectors encourage the entry and hiring of people without papers.

[9] In Spain, this right is held by foreigners who have lived here legally for one year and have renewed their residence permit. They can bring over their spouse, children under the age of 18 and forebears. People who come over this way can in turn do the same with their own relations.

Carlos Martín Urriza

Written by Carlos Martín Urriza