Spain has created an environment in which, for many citizens, it seems more lucrative not to work than to enter the labor market. This is criticized in a report published on Tuesday by the Civismo Foundation entitled “Existing Incentives in Spain Not to Work.” The document warns of the negative effects of a poorly designed assistance system that ultimately perpetuates inactivity or encourages undeclared employment.
The study presents alarming figures on this problem: In some cases, unemployment benefits exceed €1,150 per month, which is equal to or even higher than the Interprofessional Minimum Wage (SMI). This reduces the attractiveness of taking legal jobs with low salaries. When we also consider the costs associated with holding a job—such as transportation, work-life balance, or continuing education—it becomes clear that the equation tips in favor of receiving benefits.
The report warns urgently: Subsidies must not become a trap that prolongs unemployment. Instead of encouraging job searches, Civismo argues that many subsidies increase dependence on the state, especially when combined with undeclared income from the informal economy, which still accounts for 15.8% of national GDP.
The study also identifies a structural problem, as existing incentives are not geared toward reintegration into the labor market. The result is a dual market in which many people combine public benefits with income from the informal economy. This situation not only penalizes taxpayers but also weakens the tax base and undermines the system’s sustainability. For this reason, Civismo calls for conditions to be placed on subsidies, staggered according to labor income, and strengthened training programs so that social protection does not act as a barrier to economic activity, but rather as a springboard to decent and formal employment.
The publication documents a variety of benefits based on different circumstances: subsidies for insufficient contributions, for those who have exhausted other benefits, for returning emigrants, for those released from prison, for people over 52, and many others. In addition, there are the active integration income, the extraordinary unemployment benefit, and the minimum living income, which can amount to up to €1,449 per month.
Civismo provides three concrete examples of the extent to which these subsidies can exceed €1,150 per month:
- Example 1 describes the case of a person without children who has exhausted the contributory benefit but has access to benefits such as unemployment benefits, housing benefits, and other regional support. This person can receive a total of up to €947.70 per month without working, which is only slightly below the minimum wage. If they are offered a formal job with a minimum wage, the associated costs (transportation, eating out, etc.) make accepting the job unattractive.
- Example 2 shows an unemployed mother with two minor children who receives multiple benefits, including subsidies, child benefits, minimum living income, and rent subsidies. In total, she can earn up to €1,154.30 per month, which is equal to or higher than the net income of a full-time minimum-wage job. This situation illustrates how the system can actively discourage job searches.
- Finally, Example 3 analyzes a typical case in which an individual combines work in the informal economy with public benefits. Although officially unemployed, she earns undeclared income from casual jobs and continues to have access to social benefits. This combination allows her to significantly exceed the income of a low-paying legal position, revealing a structural flaw that penalizes workers who choose the formal route.
As an alternative, the study proposes reclaiming the negative income tax, a proposal supported by both Milton Friedman and James Tobin, which aims to strengthen work incentives without penalizing those entering the labor market. It also recommends decoupling the minimum wage increase from political or ideological criteria and aligning it with the trend in real productivity, taking into account different gradations depending on the sector.
Libre Mercado reported on this topic in March, emphasizing that support for groups classified as “vulnerable” has already reached 7 million people and has cost up to €28,500 million Coverage that has doubled under the government of Pedro Sánchez.
