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---

### I. Introduction: Context and objectives
- A harsh social fallout from the global financial crisis highlighted income inequalities and led to calls for increases in social spending.
- Over the last decade, Spain raised allowances to poor families with children, long-term unemployment benefits, student stipends, and the minimum wage.
- Pensions continued to rise in real terms despite adverse population dynamics, implying significant spending pressures over the medium to long term.
- In 2019, Spain’s public debt level is still close to 100 percent of GDP, nearly three times as high as in 2007.
- The paper assesses delivery, adequacy, and effectiveness of social spending and emphasizes more efficient provision of public expenditure to yield better outcomes for a given cost.
- The Independent Authority for Fiscal Responsibility (AIReF) carried out granular reviews in selected expenditure areas: healthcare spending (prescription drugs, hospital spending) at the regional level, a proposed minimum income scheme at the state level, subsidies and grants (e.g., university scholarships and housing), and active labor market policies (in particular, hiring incentives).
- Paper scope and structure:
  - Chapter II: Overview of the social protection system and spending trends.
  - Chapter III: Main categories of social protection spending (pension, unemployment, social assistance), their sustainability, adequacy and efficiency.
  - Chapter IV: Spending for health, education and training (active labor market policies) and its efficiency.
  - Chapter V: Policy recommendations.
- The paper does not analyze the new government’s coalition agreement on social reform agenda in full, but mentions a few proposals in selected areas.

### II. Overview of social spending: Structure and aggregate patterns
- Responsibility for social spending in Spain is shared across all levels of government; pensions and contributory unemployment systems remain centralized, while most other social protection is decentralized.
- Social protection coverage: sickness, retirement, unemployment, survival, disability, family spending (maternity/paternity and transfers), transfers for housing and to reduce exclusion.
- Education: a state ministry has overall mandate, but Autonomous Communities make most decisions regarding their education systems.
- Active labor market policies provision is decentralized to the regional level.
- Aggregate and comparative points:
  - Social protection outlays in Spain are about half of total public expenditures.
  - Spain spends less than the EU-average when measured relative to GDP.
  - The administrative cost of Spain’s social protection system is below the EU average.
  - Most Spanish social spending is public, unlike other EU countries with greater private mandatory and voluntary outlays, particularly on pension and health spending.
  - Social protection spending was strongly countercyclical over the past decade and acted as an automatic stabilizer during the crisis: when output contracted, social benefits in percent of GDP increased (mostly due to unemployment benefits); the reverse occurred with the recovery since 2014.
  - In nominal and real terms, most social benefits—except subsidies for some years—continued to rise during the past decade but at much more moderate levels than pre-crisis.

### III. Definition and scope: "What is Social Spending?"
- Social spending definition used: spending on social protection, education, and health following IMF (2019).
- Social protection comprises social insurance and social assistance programs.
  - Social insurance (e.g., unemployment insurance, pensions and healthcare) aims at protecting households from shocks and is typically financed by contributions or payroll taxes.
  - Social assistance (e.g., universal and targeted transfers) aims at protecting households from poverty and is financed by general government revenue.
- For this paper:
  - Active labor market and training policies are discussed under “education spending.”
  - Healthcare is discussed jointly with education spending in Chapter III since it is tax-funded in Spain.
- Note: Healthcare is not part of social protection definition in Spain since it is tax-funded and universal. Eurostat includes it in its statistics and IMF (2019) framework includes it if contribution-funded.

### IV. Pensions: magnitude, generosity, and sustainability
- Contributory pensions constitute the largest part of social protection and are considered fairly generous in the regional comparison; they comprise long-term disability, old age and early retirement, and survivor pensions.
- There is a small non-contributory pension scheme aimed at people who are unable to join the labor market.
- Spain’s pension spending in percent of GDP is at par with peers and the EU average.
- The replacement rate of Spanish public pensions (the average initial benefit as a share of average wage) is considerably higher than the EU28 average.
- Survival benefits are much above average.
- As a result, old-age poverty in Spain is relatively low and pensioners have been well protected from the global financial crisis.
- Sustainability concern:
  - The sustainability of the pension system is at risk unless additional measures are taken.
  - In principle, full implementation of the 2011 and 2013 reforms would keep pension spending broadly in check in response to unfavorable demographics.
  - The 2018 Aging Report, which assumes full implementation of the reforms, estimates public pension outlays to rise by 1.7 percentage points of GDP by 2050 and fall by 1.5 points through 2070 compared to 2016.
- Pension sustainability and projections:
  - Past 2011/13 reforms would imply a significant reduction in the benefit ratio (the average benefit payment in relation to the average wage), which has so far not proven to be socially acceptable.
  - Social pressure led to a relinking of pension increases to inflation since 2018 and a delay in implementing a discount (“sustainability”) factor for changes in life expectancy.
  - These deviations from the past reforms, if pursued permanently, are estimated to result in additional pension spending of about 3–4 percent of GDP by 2050 under current macroeconomic and demographic projections (IMF, 2018; Bank of Spain, 2018).
  - To ensure sustainability of the pension system, a comprehensive reform package is needed. Specific measures could include:
    - incentivizing longer work lives;
    - raising revenues without raising the already high contribution rates;
    - encouraging supplementary savings (IMF, 2018).

### V. Unemployment protection
- Spending on unemployment in Spain has been consistently elevated given the high level of structural unemployment.
- The main category is the contributory unemployment benefit (prestación por desempleo).
- In 2017 contributory unemployment spending was higher in Spain compared to some advanced economy peers and the EU average, including as a percent of GDP.
- Spain’s high unemployment level explains much of the elevated spending and spending per inhabitant is also above the EU average.
- Unemployment protection is viewed as broadly adequate, with levels and duration considered by some estimates fairly generous.
- Eligibility and design:
  - To receive contributory unemployment benefit in Spain, a claimant must have contributed to Social Security for a minimum of one year.
  - This contributory period gives the right to receive benefits for 120 days (4 months; maximum 24 months), given that a claimant is actively seeking employment.
  - The 2012 reform reduced benefit amounts drawn after 6 months.
- Non-contributory benefits:
  - The system includes several subsidies with different requirements; recipients must agree to work with public employment offices to design a personalized job plan.
  - Those without access can apply for the Active Insertion Scheme (renta activa de inserción) and extraordinary unemployment benefits (SED).
  - The latter was introduced in 2018 for long-term unemployed.
- Implementation caveat:
  - The impact of programs like SED relies on the capacity of regional public employment services to provide individualized assistance, which so far has been uneven by region and statistics are difficult to collect.

### VI. Other social assistance and minimum income schemes
- Other social assistance spending is below the EU average.
- Spending on social exclusion, family (including child benefits), and housing stands at about 1.6 percent of GDP, below the peer average, with housing spending especially small.
- Family benefits are the main spending item in this category in Spain.
- Minimum Income Schemes:
  - Main instrument to reduce social exclusion; non-contributory cash safety nets for working-age people not eligible for unemployment benefits or whose entitlement has expired.
  - Include: (i) the non-contributory unemployment support (subsidio de desempleo) at the national level; and (ii) the minimum income benefit, renta mínima de inserción (RMI), at the regional level.
  - Benefits are means tested and adjusted to a basic amount for a single-person household, supplemented according to additional household members.
  - Considerable variation exists in both the basic amount and supplements across regions.
- Adequacy and coverage issues:
  - Since 2011, fiscal consolidation pressure and increased demand led to adjustments focusing on reducing demand and number of beneficiaries, while social inclusion objectives appear to have been deprioritized.
  - Social assistance has not been fully effective in alleviating poverty. As of 2017, over one-quarter of the Spanish population was still at risk of poverty or social exclusion.
  - Spain has the highest child (0 to 17-year-olds) poverty rate in Western Europe, at 22.1 percent.
  - Minimum income benefits for single (no child) and couple (with two children) households bridge income to only about 30 percent of the median disposable income.
  - Some estimates put basic minimum income amounts below 40 percent of the national median income for families, with a few autonomous communities as exceptions.
  - Coverage is much lower than households in need (e.g., as of 2014 most communities covered only between 1 and 3 percent eligible households).
- Contributing factors to weaknesses:
  - Differing sensitivity of schemes to household size and needs; inconsistent additional benefits for special needs (single parenthood, children, disabilities, housing) across regional schemes.
  - Gaps in design leading to weak benefits for children in need or inadequate assessment to ensure income is above 40–60 percent of median disposable income.
  - Stigma and complex rules discourage applications; complicated administration and imprecise eligibility mechanisms.
  - Measurement issues: income data may fail to reflect true household resources.

### Box 2 — Parameters of RMIs (euros) and regional variation
- Andalucía — Basic: 419.56 euros — Duration months: 5
- Aragón — Basic: 491.01 euros — Duration months: 2
- Asturias — Basic: 443.0 euros — Duration months: no limit
- Baleares — Basic: 431.5 euros — Duration months: 12/extension possible
- Canarias — Basic: 478.8 euros — Duration months: max 24
- Cantabria — Basic: 430.3 euros — Duration months: indefinite as long as conditions are fullfilled
- Castilla-La Mancha — Basic: 446.5 euros — Duration months: 24 max
- Castilla y León — Basic: 430.3 euros — Duration months: indefinite as long as conditions are fullfilled
- Cataluña 2/ — Basic: 604.0 euros — Duration months: indefinite as long as conditions are fullfilled
- Ceuta — Basic: 300.0 euros — Duration months: 12/60 max
- Extremadura — Basic: 430.3 euros — Duration months: 12
- Galicia — Basic: 403.8 euros — Duration months: 12
- Madrid — Basic: 400.0 euros — Duration months: indefinite as long as conditions are fullfilled
- Melilla — Basic: 328 euros — Duration months: 12/24 max
- Murcia — Basic: 430.3 euros — Duration months: 12
- Navarra — Basic: 610.8 euros — Duration months: 12, extention possible
- País Vasco — Basic: 693 euros — Duration months: 24, with exceptions
- La Rioja — Basic: 430.2 euros — Duration months: 7 duration depends on evaluation
- Comunidad Valenciana 2/ — Basic: 257.8/515.1 euros — Duration months: indefinite as long as conditions are fullfilled
- Notes: 1/ Schemes and names vary by region. 2/ Includes several schemes/varies by individual or household.

### VII. Education outcomes, intergenerational mobility, and ALMPs
- Education outcomes have generally lagged EU peers.
  - PISA scores improved in 2015, reaching OECD averages in all three core areas, but they fell or stagnated in 2018 testing, especially in sciences.
  - No upward intergenerational mobility in educational attainment for 55 percent of the children of low educated parents who also have not attained an upper secondary education.
  - The large percentage of young adults without an upper secondary education accounts for 34 percent in Spain compared to 15 percent on average across OECD countries.
  - Early school leaving rate: 18.3 percent in 2017.
  - Gap between unemployment rate of those with tertiary education and less than upper secondary education: around 14 percent (EU average: 10 percent).
  - Share of young people neither in employment nor in education or training (NEET): around 15 percent in 2017.
  - Early childhood education enrolment rate: 96 percent of children aged 3 to 6 years in 2015 (OECD average: 76 percent).
  - According to OECD (2014), 36 percent of teachers never received formal appraisal.
  - Average class size is slightly below the OECD average (2016).
- Active labor market policies (ALMPs) and labor market outcomes:
  - Expenditure on ALMPs in Spain is relatively low and not particularly effective.
  - ALMPs include programs for labor integration, training, job rotation and job sharing, employment incentives, supported employment and rehabilitation, direct job creation and start-up incentives.
  - Training programs are the main participation component of ALMPs.
  - Evidence indicates:
    - Spending on ALMP measures and labor market services is low relative to the number of unemployed persons and is diversified across a large number of programs.
    - Programs are generally not effective in matching cohorts with necessary skills, especially the long-term unemployed, low-skilled and youth.
    - Programs are not well coordinated or designed to foster employability, though there are some positive experiences.
    - ALMPs have limited participation rates; Public Employment Services face capacity constraints to offer individualized support; several policies are not appropriately targeted; evaluation mechanisms are uncommon.
- Education reforms, governance, and decentralization challenges:
  - Education reforms have been piecemeal and paused since 2016.
  - The 17 Autonomous Communities make most decisions regarding their own education systems, complicating coordination.
  - Recent initiatives aim to improve matching between vocational education and labor market needs, develop the dual vocational education and training system, promote work-based learning and raise attractiveness of the system.

### VIII. Takeaways and policy recommendations
- Overall assessment:
  - Social spending in Spain is below the peer average in several categories and in many aspects is not achieving effective outcomes.
  - Healthcare is a bright spot: generally well-functioning, provides equity in access and delivers favorable outcomes at efficient spending levels.
  - The contributory pension system has offered high replacement ratios at reasonable pension spending-to-GDP ratio, resulting in low old-age poverty; however, maintaining such benefits without comprehensive reforms is not sustainable given population aging.
  - Elevated spending on unemployment protection reflects high structural unemployment, indicating skills mismatches and poorly targeted education and training programs.
  - Least social assistance is devoted to the most vulnerable: children and low-income households.
- Social assistance weaknesses and reforms:
  - Gaps in adequacy and coverage due to administrative inefficiencies, low income thresholds, means testing, and lack of coordination.
  - Fragmentation of social interventions along single objective dimensions and lack of a unified, coherent approach.
  - Absence of a single point of contact or one-stop shop to coordinate income support, social and unemployment services.
  - Overlapping benefits and limited mobility across regions reduce efficiency and may impede labor market participation.
  - The Universal Social Card (in force October 2018) could help collect information on all benefits received by individuals from national and regional governments.
- Specific policy recommendations:
  - Improve access to assistance for families in need, better calibrate sustainable income levels, increase means-testing of some existing benefits (e.g., daycare, scholarships), increase funding of selected programs, and simplify administrative processes to improve participation.
  - Examine AIReF (2019a) proposal on the design of a basic social benefit and its medium-term financing options, alongside estimating adequacy, coverage and efficiency of existing assistance programs.
  - Ensure education, training and ALMPs better match market needs to reduce barriers to intergenerational mobility, regional disparities, and skills mismatches.
    - Recent initiatives on training and geographical mobility and plans to introduce a teacher appraisal system will require appropriate funding for implementation and monitoring.
    - Pursue well-targeted and cost-effective vocational training, ALMPs and improved apprenticeship to bridge unemployment and opportunities.
    - Standardize information collected on ALMPs, coordinated by the State Public Employment Service, to facilitate evaluation of effective policies.
    - Consolidate the large number of ALMPs with low participation and limited funding and expand the most promising existing programs.
    - Improve cross-regional standard compliance for dual vocational education and training and ensure publicly available, consistently coded data to evaluate policy success.
  - Healthcare policies should target reducing regional disparities and address emerging challenges:
    - Improve the health cohesion instrument of the National Health System and strengthen resources allocated to coordination.
    - Develop and promote interoperable e-government and e-services, especially in remote regions and border areas, and invest in infrastructure targeted at strengthening primary care and integrated care.
    - Widen the spectrum of policy tools to ensure fiscal sustainability of health care spending and improve cooperation between budgeting officials and those in charge of healthcare.
    - AIReF sees opportunities in governance, procedural aspects, efficiency and equity in prescription drug pricing, and increasing Autonomous Communities’ weight in decision-making.
  - Make the labor market more inclusive by addressing the high share of temporary employment:
    - The large gap in dismissal costs between permanent and temporary jobs is a root cause of few open-ended contracts.
    - Combining a single open-ended contract with a separation fund offers the best prospects for shifting to a higher share of permanent jobs without necessarily raising overall dismissal costs or lowering employment protection for most workers.
- Fiscal and financing considerations:
  - Any strategy that expands social spending needs sustainable financing given Spain’s elevated public debt.
  - Expanded social spending should not crowd out other crucial spending (e.g., physical infrastructure) nor create significant distortions.

### IX. Key statistics and figures (as presented)
- Projected additional pension spending: about 3–4 percent of GDP by 2050.
- Pension projection from 2018 Aging Report: 1.7 percentage points of GDP by 2050 and fall by 1.5 points through 2070 compared to 2016.
- Alternative pension projection point: 3.9 percent by 2070.
- Spain child poverty rate (0–17 year-olds): 22.1 percent.
- Over one-quarter of the Spanish population at risk of poverty or social exclusion as of 2017.
- Family, social exclusion, and housing spending: about 1.6 percent of GDP.
- Contributory unemployment benefit eligibility: minimum contribution of one year; entitlement period begins at 120 days (4 months); maximum 24 months.
- 2012 reform reduced benefit amounts after 6 months.
- Increase in family benefits per child in 2019 for families in severe poverty: from 341 per year to 588 euros.
- Early school leaving rate: 18.3 percent in 2017.
- Young adults without an upper secondary education: 34 percent in Spain (OECD average: 15 percent).
- Early childhood education enrolment rate: 96 percent of children aged 3 to 6 years in 2015 (OECD average: 76 percent).
- Teachers never formally appraised: 36 percent (OECD, 2014).

*Source: wpiea2020016-print-pdf*

### REFERENCES ______________________________________________________________24

### wpiea2020016-print-pdf - REFERENCES ______________________________________________________________24

### I. Introduction: Context and objectives
- A harsh social fallout from the global financial crisis highlighted income inequalities and led to calls for increases in social spending.
- Over the last decade, Spain raised allowances to poor families with children, long-term unemployment benefits, student stipends, and the minimum wage.
- Pensions continued to rise in real terms despite adverse population dynamics, implying significant spending pressures over the medium to long term.
- In 2019, Spain’s public debt level is still close to 100 percent of GDP, nearly three times as high as in 2007.
- The paper assesses delivery, adequacy, and effectiveness of social spending and emphasizes more efficient provision of public expenditure to yield better outcomes for a given cost.
- The Independent Authority for Fiscal Responsibility (AIReF) carried out granular reviews in selected expenditure areas: healthcare spending (prescription drugs, hospital spending) at the regional level, a proposed minimum income scheme at the state level, subsidies and grants (e.g., university scholarships and housing), and active labor market policies (in particular, hiring incentives).
- Paper scope and structure:
  - Chapter II: Overview of the social protection system and spending trends.
  - Chapter III: Main categories of social protection spending (pension, unemployment, social assistance), their sustainability, adequacy and efficiency.
  - Chapter IV: Spending for health, education and training (active labor market policies) and its efficiency.
  - Chapter V: Policy recommendations.
- The paper does not analyze the new government’s coalition agreement on social reform agenda in full, but mentions a few proposals in selected areas.

### II. Overview of social spending: Structure and aggregate patterns
- Responsibility for social spending in Spain is shared across all levels of government; pensions and contributory unemployment systems remain centralized, while most other social protection is decentralized.
- Social protection coverage: sickness, retirement, unemployment, survival, disability, family spending (maternity/paternity and transfers), transfers for housing and to reduce exclusion.
- Education: a state ministry has overall mandate, but Autonomous Communities make most decisions regarding their education systems.
- Active labor market policies provision is decentralized to the regional level.
- Aggregate and comparative points:
  - Social protection outlays in Spain are about half of total public expenditures.
  - Spain spends less than the EU-average when measured relative to GDP.
  - The administrative cost of Spain’s social protection system is below the EU average.
  - Most Spanish social spending is public, unlike other EU countries with greater private mandatory and voluntary outlays, particularly on pension and health spending.
  - Social protection spending was strongly countercyclical over the past decade and acted as an automatic stabilizer during the crisis: when output contracted, social benefits in percent of GDP increased (mostly due to unemployment benefits); the reverse occurred with the recovery since 2014.
  - In nominal and real terms, most social benefits—except subsidies for some years—continued to rise during the past decade but at much more moderate levels than pre-crisis.

### III. Definition and scope: "What is Social Spending?" (Box 1)
- Social spending definition used: spending on social protection, education, and health following IMF (2019).
- Social protection comprises social insurance and social assistance programs.
  - Social insurance (e.g., unemployment insurance, pensions and healthcare) aims at protecting households from shocks and is typically financed by contributions or payroll taxes.
  - Social assistance (e.g., universal and targeted transfers) aims at protecting households from poverty and is financed by general government revenue.
- For this paper:
  - Active labor market and training policies are discussed under “education spending.”
  - Healthcare is discussed jointly with education spending in Chapter III since it is tax-funded in Spain.
- Note: Healthcare is not part of social protection definition in Spain since it is tax-funded and universal. Eurostat includes it in its statistics and IMF (2019) framework includes it if contribution-funded.

### IV. Pensions: magnitude, generosity, and sustainability
- Contributory pensions constitute the largest part of social protection and are considered fairly generous in the regional comparison; they comprise long-term disability, old age and early retirement, and survivor pensions.
- There is a small non-contributory pension scheme aimed at people who are unable to join the labor market.
- Spain’s pension spending in percent of GDP is at par with peers and the EU average.
- The replacement rate of Spanish public pensions (the average initial benefit as a share of average wage) is considerably higher than the EU28 average.
- Survival benefits are much above average.
- As a result, old-age poverty in Spain is relatively low and pensioners have been well protected from the global financial crisis.
- Sustainability concern:
  - The sustainability of the pension system is at risk unless additional measures are taken.
  - In principle, full implementation of the 2011 and 2013 reforms would keep pension spending broadly in check in response to unfavorable demographics.
  - The 2018 Aging Report, which assumes full implementation of the reforms, estimates public pension outlays to rise by [text truncated in source].

*Source: wpiea2020016-print-pdf - REFERENCES ______________________________________________________________24*

### 1.7 percentage points of GDP by 2050 and fall by 1.5 points through 2070 compared to 2016.

### wpiea2020016-print-pdf - 1.7 percentage points of GDP by 2050 and fall by 1.5 points through 2070 compared to 2016.

### Pension sustainability and projections
- Past 2011/13 reforms would imply a significant reduction in the benefit ratio (the average benefit payment in relation to the average wage), which has so far not proven to be socially acceptable.
- Social pressure led to a relinking of pension increases to inflation since 2018 and a delay in implementing a discount (“sustainability”) factor for changes in life expectancy.
- These deviations from the past reforms, if pursued permanently, are estimated to result in additional pension spending of about 3–4 percent of GDP by 2050 under current macroeconomic and demographic projections (IMF, 2018; Bank of Spain, 2018).
- To ensure sustainability of the pension system, a comprehensive reform package is needed. Specific measures could include:
  - incentivizing longer work lives;
  - raising revenues without raising the already high contribution rates;
  - encouraging supplementary savings (IMF, 2018).

### Unemployment protection
- Spending on unemployment in Spain has been consistently elevated given the high level of structural unemployment.
- The main category is the contributory unemployment benefit (prestación por desempleo).
- In 2017 contributory unemployment spending was higher in Spain compared to some advanced economy peers and the EU average, including as a percent of GDP (Table 1).
- Spain’s high unemployment level explains much of the elevated spending and spending per inhabitant is also above the EU average.
- Unemployment protection is viewed as broadly adequate, with levels and duration considered by some estimates fairly generous (Figure 3; Tatsiramos, 2014; Glassdoor Research, 2016).
- Eligibility and design:
  - To receive contributory unemployment benefit in Spain, a claimant must have contributed to Social Security for a minimum of one year.
  - This contributory period gives the right to receive benefits for 120 days (4 months; maximum 24 months), given that a claimant is actively seeking employment.
  - The 2012 reform reduced benefit amounts drawn after 6 months.
- Non-contributory benefits:
  - The system includes several subsidies with different requirements; recipients must agree to work with public employment offices to design a personalized job plan.
  - Those without access can apply for the Active Insertion Scheme (renta activa de inserción) and extraordinary unemployment benefits (SED).
  - The latter was introduced in 2018 for long-term unemployed.
- Implementation caveat:
  - The impact of programs like SED relies on the capacity of regional public employment services to provide individualized assistance, which so far has been uneven by region and statistics are difficult to collect (ILO, 2015; EC, 2017).

### Other social assistance and minimum income schemes
- Other social assistance spending is below the EU average.
- Spending on social exclusion, family (including child benefits), and housing stands at about 1.6 percent of GDP, below the peer average, with housing spending especially small (Table 1).
- Family benefits are the main spending item in this category in Spain.
- Minimum Income Schemes:
  - Main instrument to reduce social exclusion; non-contributory cash safety nets for working-age people not eligible for unemployment benefits or whose entitlement has expired.
  - Include: (i) the non-contributory unemployment support (subsidio de desempleo) at the national level; and (ii) the minimum income benefit, renta mínima de inserción (RMI), at the regional level.
  - Benefits are means tested and adjusted to a basic amount for a single-person household, supplemented according to additional household members.
  - Considerable variation exists in both the basic amount and supplements across regions.
- Since 2011, fiscal consolidation pressure and increased demand led to adjustments focusing on reducing demand and number of beneficiaries, while social inclusion objectives appear to have been deprioritized (EC, 2015a).
- Adequacy and coverage issues:
  - Social assistance has not been fully effective in alleviating poverty. As of 2017, over one-quarter of the Spanish population was still at risk of poverty or social exclusion.
  - Spain has the highest child (0 to 17-year-olds) poverty rate in Western Europe, at 22.1 percent.
  - Minimum income benefits for single (no child) and couple (with two children) households bridge income to only about 30 percent of the median disposable income.
  - Some estimates put basic minimum income amounts below 40 percent of the national median income for families, with a few autonomous communities as exceptions.
  - Coverage is much lower than households in need (e.g., as of 2014 most communities covered only between 1 and 3 percent eligible households).
- Contributing factors to weaknesses:
  - Differing sensitivity of schemes to household size and needs; inconsistent additional benefits for special needs (single parenthood, children, disabilities, housing) across regional schemes.
  - Gaps in design leading to weak benefits for children in need or inadequate assessment to ensure income is above 40–60 percent of median disposable income.
  - Stigma and complex rules discourage applications; complicated administration and imprecise eligibility mechanisms.
  - Measurement issues: income data may fail to reflect true household resources (EC, 2013; EC 2015a; AIReF 2019; Funcas 2019).

### Key statistics and figures (as presented)
- Projected additional pension spending: about 3–4 percent of GDP by 2050.
- Pension benefit ratio change mentioned: "1.7 percentage points of GDP by 2050 and fall by 1.5 points through 2070 compared to 2016."
- Spain child poverty rate (0–17 year-olds): 22.1 percent (highest in Western Europe).
- Over one-quarter of the Spanish population at risk of poverty or social exclusion as of 2017.
- Family, social exclusion, and housing spending: about 1.6 percent of GDP.
- Contributory unemployment benefit eligibility: minimum contribution of one year; entitlement period begins at 120 days (4 months); maximum 24 months.
- 2012 reform reduced benefit amounts after 6 months.
- Increase in family benefits per child in 2019 for families in severe poverty: from 341 per year to 588 euros.

*Source: wpiea2020016-print-pdf - 1.7 percentage points of GDP by 2050 and fall by 1.5 points through 2070 compared to 2016.*

### Box 2. Minimum Income Schemes

### Box 2. Minimum Income Schemes

### Overview
- The subsidio de desempleo is received by claimants based on the proportion of hours worked.
- Underlying requirement for subsidio de desempleo: have some working history, and be signed up as a job seeker, or working part time.
- Flexibility for part-time workers: beneficiaries can receive the subsidio with the amount of support being reduced proportionally to the number of hours worked or stop receiving it till the job contract ends.
- Means-testing of these benefits also seem to account for the number of children in the household.
- The renta mínima de inserción (RMI) is specifically aimed at those with a weak or non-existent employment background, and who are also on low incomes, but there is a large divergence in payouts by region.1

### Regional variation, eligibility conditions, and emergency support
- Access to RMI varies significantly on a regional level as Autonomous Communities are free to set their own income thresholds, resulting in large coverage discrepancies.
- Differences reflect in part varying costs of living (higher in northern regions than in the southern and central ones) and in part political choices on the level of income support.
- Autonomous Communities also operate means-tested emergency schemes for people with urgent non-periodical economic needs (e.g. utility bills, mortgage or other type of loan payments, etc.) that cannot be covered by the Minimum Income scheme (e.g. due to insufficient time of residency in the Autonomous Communities).
- In addition to means-tested criteria, eligibility conditions for regional minimum income support include:
  - age requirements,
  - how long the household has been together,
  - conditions of residency and how long the household has been registered in the municipality.
- These conditions generally refer to the individual who applies, but in certain cases they extend to the household unit (EC 2015a).

### Interaction with unemployment benefits
- Footnote: In order to establish a connection between RMIs and state unemployment benefits, the 2018 Budget Law established that common criteria for activation should apply to all non-contributory unemployment benefits and clarified that unemployment benefits can be topped up by minimum income schemes (EC, 2019).

### Spain: Parameters of RMIs 1/ (euros)
- Andalucía — Basic: 419.56 euros — Duration months: 5
- Aragón — Basic: 491.01 euros — Duration months: 2
- Asturias — Basic: 443.0 euros — Duration months: no limit
- Baleares — Basic: 431.5 euros — Duration months: 12/extension possible
- Canarias — Basic: 478.8 euros — Duration months: max 24
- Cantabria — Basic: 430.3 euros — Duration months: indefinite as long as conditions are fullfilled
- Castilla-La Mancha — Basic: 446.5 euros — Duration months: 24 max
- Castilla y León — Basic: 430.3 euros — Duration months: indefinite as long as conditions are fullfilled
- Cataluña 2/ — Basic: 604.0 euros — Duration months: indefinite as long as conditions are fullfilled
- Ceuta — Basic: 300.0 euros — Duration months: 12/60 max
- Extremadura — Basic: 430.3 euros — Duration months: 12
- Galicia — Basic: 403.8 euros — Duration months: 12
- Madrid — Basic: 400.0 euros — Duration months: indefinite as long as conditions are fullfilled
- Melilla — Basic: 328 euros — Duration months: 12/24 max
- Murcia — Basic: 430.3 euros — Duration months: 12
- Navarra — Basic: 610.8 euros — Duration months: 12, extention possible
- País Vasco — Basic: 693 euros — Duration months: 24, with exceptions
- La Rioja — Basic: 430.2 euros — Duration months: 7 duration depends on evaluation
- Comunidad Valenciana 2/ — Basic: 257.8/515.1 euros — Duration months: indefinite as long as conditions are fullfilled

Notes attached in source:
- 1/ Schemes and names vary by region.
- 2/ Includes several schemes/varies by individual or household.
- Source of table: Report on Minimum Income Schemes, 2018.

*Italic source attribution: Box 2. Minimum Income Schemes, wpiea2020016-print-pdf.*

### 3.9 percent by 2070.

### 3.9 percent by 2070.

### Education outcomes and intergenerational mobility
- Education outcomes have generally lagged EU peers.
- After years of underperformance, PISA scores improved in 2015, reaching OECD averages in all three core areas, but they fell or stagnated in 2018 testing, especially in sciences.
- Barriers to intergenerational mobility are high:
  - There has been no upward intergenerational mobility in educational attainment for 55 percent of the children of low educated parents who also have not attained an upper secondary education (OECD, 2018d and 2018e).
  - The large percentage of young adults without an upper secondary education accounts for 34 percent in Spain compared to 15 percent on average across OECD countries, despite a significant increase by 25 percentage points in upper secondary first-time graduation rate between 2005 and 2016.
  - The early school leaving rate remains among the highest in the OECD, at 18.3 percent in 2017.
  - The gap between the unemployment rate of those with tertiary education and less than upper secondary education is around 14 percent, higher than the EU average of 10 percent (OECD, 2018a).
  - The share of young people neither in employment nor in education or training (NEET) was around 15 percent in 2017.
- Regional disparities in educational outcomes persist (PISA scores, early school leaving rates, grade repetition, and performance).
- One positive indicator: early childhood education enrolment rate was 96 percent of children aged 3 to 6 years in 2015 compared to 76 percent on average across OECD countries (OECD, 2018c).
- Teacher quality and appraisal:
  - According to OECD (2014), 36 percent of teachers never received formal appraisal.
  - Teachers in Spain are paid at or slightly above the OECD average depending on the years of experience (2017).
  - The average class size is slightly below the OECD average (2016).

### Active labor market policies (ALMPs) and labor market outcomes
- Expenditure on active labor market policies in Spain is relatively low and not particularly effective.
- ALMPs in Spain include programs for labor integration, training, job rotation and job sharing, employment incentives, supported employment and rehabilitation, direct job creation and start-up incentives.
- Training programs are the main participation component of ALMPs (ILO, 2015).
- Evidence indicates:
  - Spending on ALMP measures and labor market services is low relative to the number of unemployed persons and is diversified across a large number of programs.
  - Programs are generally not effective in matching cohorts with necessary skills, especially the long-term unemployed, low-skilled and youth.
  - Programs are not well coordinated or designed to foster employability, though there are some positive experiences (ILO, 2015; IMF, 2017b and 2018b; EC, 2019).
  - ALMPs have limited participation rates; Public Employment Services face capacity constraints to offer individualized support; several policies are not appropriately targeted; evaluation mechanisms are uncommon.

### Education reforms, governance, and decentralization challenges
- Education reforms have been piecemeal and paused since 2016.
- While a state ministry has an overall mandate, the 17 Autonomous Communities make most decisions regarding their own education systems, complicating coordination.
- Political disagreements, including on the level of spending, stalled negotiations on broad-ranging education reform.
- Recent initiatives aim to:
  - Improve matching between initial vocational education and training and labor market needs through higher involvement of the business sector and a review of the qualifications framework (OECD, 2018c).
  - Further develop and upgrade the dual vocational education and training system, promote work-based learning and raise the attractiveness of the system, in coordination with the regions, social partners and other stakeholders.
- An important outstanding issue is improving the quality of teaching.

### Takeaways and policy recommendations
- Overall assessment:
  - Social spending in Spain is below the peer average in several categories and in many aspects is not achieving effective outcomes.
  - Healthcare is a bright spot: generally well-functioning, provides equity in access and delivers favorable outcomes at efficient spending levels.
  - The contributory pension system has offered high replacement ratios at reasonable pension spending-to-GDP ratio, resulting in low old-age poverty; however, maintaining such benefits without comprehensive reforms is not sustainable given population aging.
  - Elevated spending on unemployment protection reflects high structural unemployment, indicating skills mismatches and poorly targeted education and training programs.
  - Least social assistance is devoted to the most vulnerable: children and low-income households.
- Social assistance weaknesses:
  - Gaps in adequacy and coverage due to administrative inefficiencies, low income thresholds, means testing, and lack of coordination.
  - Fragmentation of social interventions along single objective dimensions and lack of a unified, coherent approach.
  - Absence of a single point of contact or one-stop shop to coordinate income support, social and unemployment services.
  - Overlapping benefits and limited mobility across regions reduce efficiency and may impede labor market participation.
  - The Universal Social Card (in force October 2018) could help collect information on all benefits received by individuals from national and regional governments.
- Specific policy recommendations:
  - Improve access to assistance for families in need, better calibrate sustainable income levels, increase means-testing of some existing benefits (e.g., daycare, scholarships), increase funding of selected programs, and simplify administrative processes to improve participation.
  - Examine AIReF (2019a) proposal on the design of a basic social benefit and its medium-term financing options, alongside estimating adequacy, coverage and efficiency of existing assistance programs.
  - Ensure education, training and ALMPs better match market needs to reduce barriers to intergenerational mobility, regional disparities, and skills mismatches.
    - Recent initiatives on training and geographical mobility and plans to introduce a teacher appraisal system will require appropriate funding for implementation and monitoring.
    - Pursue well-targeted and cost-effective vocational training, ALMPs and improved apprenticeship to bridge unemployment and opportunities (McGowan and Andrews, 2015; IMF, 2017b).
    - Standardize information collected on ALMPs, coordinated by the State Public Employment Service, to facilitate evaluation of effective policies (AIReF suggestion).
    - Consolidate the large number of ALMPs with low participation and limited funding and expand the most promising existing programs (IMF, 2018a, 2018b).
    - Improve cross-regional standard compliance for dual vocational education and training and ensure publicly available, consistently coded data to evaluate policy success (ILO, 2015; OECD, 2018a; EC, 2019).
  - Healthcare policies should target reducing regional disparities and address emerging challenges:
    - Improve the health cohesion instrument of the National Health System and strengthen resources allocated to coordination.
    - Develop and promote interoperable e-government and e-services, especially in remote regions and border areas, and invest in infrastructure targeted at strengthening primary care and integrated care (European Commission, 2019).
    - Widen the spectrum of policy tools to ensure fiscal sustainability of health care spending and improve cooperation between budgeting officials and those in charge of healthcare (EC, 2016).
    - AIReF sees opportunities in governance, procedural aspects, efficiency and equity in prescription drug pricing, and increasing Autonomous Communities’ weight in decision-making.
  - Make the labor market more inclusive by addressing the high share of temporary employment:
    - The large gap in dismissal costs between permanent and temporary jobs is a root cause of few open-ended contracts.
    - Combining a single open-ended contract with a separation fund offers the best prospects for shifting to a higher share of permanent jobs without necessarily raising overall dismissal costs or lowering employment protection for most workers (IMF, 2018a).
- Fiscal and financing considerations:
  - Any strategy that expands social spending needs sustainable financing given Spain’s elevated public debt.
  - Expanded social spending should not crowd out other crucial spending (e.g., physical infrastructure) nor create significant distortions (IMF, 2019).

*Source: wpiea2020016-print-pdf - 3.9 percent by 2070.*

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_Source: https://www.imf.org/-/media/files/publications/wp/2020/english/wpiea2020016-print-pdf.pdf_