Else Beekman
Spain has reached a milestone in its unemployment benefits system. For the first time ever, the average contributory unemployment benefit has surpassed €1,000 per month. This surge, driven by rising wages and policy reforms, reflects broader economic shifts that impact both workers and the state budget.
The rise in unemployment benefits is primarily linked to higher wages. According to economist Marcel Jansen of the Universidad Autónoma de Madrid, “Wages have increased, and consequently, so have contributory benefits.” In January 2025, the average benefit reached €1,019.80 per month, continuing a trend that began in December 2024.
According to El Economista, the Spanish government ensures that unemployed workers receive 70% of their previous salary during the first six months of unemployment. After this period, the percentage decreases to 60%. This adjustment, implemented in 2023 under Labour Minister Yolanda Díaz, has significantly influenced benefit amounts.
Higher salaries, higher unemployment costs
In January, 958,000 people received contributory unemployment benefits—a 5.1% increase from the previous year. The government’s expenditure on these benefits rose by 8.5%, surpassing €1.5 billion.
Much of this increase stems from a new wave of unemployed professionals with higher wages. Many lost their jobs due to the expiry of temporary contracts, individual dismissals, or job suspensions. This shift follows the 2022 inflation crisis, which led to salary adjustments and a rise in Spain’s minimum wage.
Policy reforms and their impact
Recent labour reforms have played a crucial role in shaping Spain’s unemployment benefits landscape. Before 2023, unemployment benefits were calculated at 50% of a worker’s previous salary. However, this percentage has now increased to 70% for the first six months of unemployment, providing greater financial support for those who have lost their jobs. Additionally, eligibility for benefits has expanded to include workers who were previously excluded, such as domestic employees and artists, extending social protection to a wider segment of the workforce.
Another significant change involves pension contributions. Increased employer and employee contributions have led to a rise in state spending on unemployment aid, putting additional pressure on public finances. Furthermore, a reform introduced in late 2024 allows job-seekers to take temporary work while still receiving benefits. This measure aims to provide more flexibility for unemployed individuals, reducing the risk of job-seekers repeatedly entering and exiting unemployment lists.
The reemployment paradox
Labour economist Pierre Cahuc has extensively studied the effects of unemployment benefits on re-employment probabilities. His research indicates that while higher unemployment benefits provide financial support, they may also have disincentive effects on the re-employment hazard. Specifically, increases in unemployment insurance benefit levels had a small disincentive effect on the re-employment hazard on average. Larger disincentive effects were observed for men with elapsed durations between 4 and 18 months, whereas for men unemployed longer than 18 months, or for men residing in the south, the effect was negligible.
Also read: Unemployment in Spain falls below 11%