Young people crushed by banking, economic crisis: Bank of Spain

Over the past five years, Spain's economy has grown at a faster rate than almost any other in the Eurozone. But not everyone has benefited. And a new report by the Bank of Spain confirms, no one has paid as heavy a price as the generation that came of age in the years immediately before and after the collapse of Spain's insane housing bubble and the banking crisis that followed.

The Bank of Spain's triennial Family Financial Survey, based on data through 2017, shows that heads of households under the age of 35 saw their median gross income (income before taxes and contributions) plunge by 18% from 2010 to 2017 - more than any other age group. Median gross income of all age groups combined in 2017 was still below their 2010 levels, although three age groups - 35 to 44year-olds, 65 to 74-year-olds and 75 to 84-year-olds - did see their incomes rise, at least on a nominal (not inflation-adjusted) basis.

When it comes to personal wealth, the data is even more dismal for the under-35s. In 2010 their median net wealth after debts stood at €71,600. But by 2017 it had collapsed 92% to €5,300. The main reason is that since the crisis, almost all under-35s have been financially excluded from the property market, largely due to their shrinking incomes levels. Other age groups have also seen their net wealth diminish, albeit less, since 2010, mainly as a result of the fall in house prices, which account for the lion's share of household wealth in Spain.

The Family Financial Survey, published every three years, is meant to provide a snapshot of the financial health of Spanish households. When it comes to the youngest households, the picture is not pretty. Between 2010 and 2017, their median gross income fell from €27,700 to €22,800.

The contrast with retirees could not be starker: their median annual income jumped from €20,000 in 2010 to €25,500 in 2016. This increase is partly due to rising pension benefits, which, unlike most salaries, have more or less kept up with inflation over the last ten years. It's also a result of an influx of new pensioners onto the pension rolls who have earned more money in their lifetime and are therefore eligible for a higher pension, which bumps up the median income for pensioners as a whole.

By contrast, young households have to contend with a job market that is rigged against them. While many young workers have contracts that are measured in months, weeks or even days, more established workers have open-ended contracts that are both exceedingly rigid and extravagantly generous when it comes to layoffs.

The system dates back to the days of the Franco dictatorship when workers received as much as 60 days' severance pay for each year worked, making it almost impossible for companies to lay off workers without putting themselves out of business. Even today, after a series of labor market reforms, many Spanish workers receive more than 20 days' severance pay per year worked.

To give companies some degree of hiring flexibility, without completely alienating unions and workers, Spain's government liberalized the use of temporary contracts in the 1980's. And companies fell in love with them. Lasting a maximum of two years (at which point the employee has to move on or be given a permanent post), the contracts offer meager protection, miserly layoff payouts, and usually dismal pay. These problems are further compounded by the outsized role of the tourism sector, which is notorious for creating casual, low-paid jobs.