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06 January 2025

Spain: Analysis of the economic impact of discrimination and inequality

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This report by Mahía Casado and Medina Moral (OBERAXE) analyses the economic impact of discrimination against the foreign population in Spain, focusing on the labour and education sectors. The study quantifies the economic cost of discrimination, highlighting losses in wages and productivity. The report aims to inform policymakers and stakeholders about this issue, emphasising the need for targeted interventions to promote equality and inclusion.

The analysis is based on microdata from the 2022 Labour Force Survey (EPA) subsample, supplemented with data on education levels and wage deciles. PISA data is also analysed to assess the impact of discrimination on academic performance and dropout risk.

The cost of racism in the labour market

Labour Force Participation: While activity levels are similar between the native and foreign populations, discrimination against foreign women in labour force access is evident. The female activity rate difference is 2.3% against foreign women, equivalent to about 65 500 women excluded from the labour market, with an estimated loss of €1 200 million annually, or 0.09% of GDP.

Unemployment: The unemployment probability for foreigners is 5.2% higher than for natives, even after controlling for other variables. This translates to about 250 000 additional unemployed foreigners, with an estimated wage loss of €5 100 million annually, or 0.38% of GDP.

Overqualification: Foreigners show higher overqualification rates, both for those with higher education (26% vs. 11% for natives) and secondary education (30% vs. 16%). The overqualification not explained by the model, attributable to discrimination, is estimated at 11%, with an economic impact of €2 800 million for higher education workers and €900 millions for secondary education workers.

Wage differences: The average gross monthly wage for foreigners is 23% lower than for natives. The analysis indicates that a significant part of this difference is explained by other variables, but a residual part, estimated between 2.2% and 4.4%, is attributable to discrimination, with an economic cost of €11 000 million, or 0.8% of GDP.

The cost of racism in education

Access to the education system: Enrollment rates for foreign students are lower than for natives at various education levels, particularly in the transition from secondary to higher education. Discrimination in access to the education system is estimated at €2 165 million annually.

Classroom discrimination: PISA data analysis shows that foreign students have lower academic performance and higher dropout rates compared to natives. This is attributable to factors such as disadvantaged family environments, greater exposure to bullying, and a lower sense of belonging at school. The estimated economic cost of classroom discrimination is €102 million annually.

Conclusions and recommendations

This policy brief demonstrates that discrimination against the foreign population in Spain has a significant economic cost, amounting to approximately €12 billion annually, or 1% of GDP. 

Discrimination manifests in various areas, from the labor market to the education system, with a particularly negative impact on women.

Targeted interventions are recommended to:

  • promote the participation of foreign women in the labour force through work-family reconciliation measures, training programmes, and support for entrepreneurship;
  • combat discrimination in job access by strengthening equal opportunity policies and promoting workplace diversity;
  • reduce overqualification among foreigners by facilitating the recognition of professional qualifications and access to professional development pathways;
  • ensure equal access to the education system by investing in linguistic and cultural support programmes for foreign students and combating school segregation;
  • fight classroom discrimination by promoting an inclusive school climate and raising awareness among school staff on intercultural issues;
  • invest in awareness and training programmes to promote a culture of inclusion and respect for diversity.

The report concludes that eliminating discrimination against the foreign population is not only a moral imperative but also an economic investment. Effective integration of foreigners into the social and economic fabric of the country would bring significant benefits to society as a whole, in terms of economic growth, social cohesion, and collective well-being.

Details

Authors
Ramón Mahía Casado and Eva Medina Moral - The Spanish Observatory on Racism and Xenophobia (OBERAXE)
Geographic area
Spain
Contributor type
National governmental actor
Original source
Posted by
Francesco Pasetti - CIDOB
Country Coordinator

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