ct in the past five years, as Spain has been forced to live within its means and state spending has been slashed to control the soaring budget deficit. However, tourism remains its most important industry, accounting for about 4% of the GDP and employing approximately 10% of the workforce. Also accounting for a large part of the workforce are chemicals and petro-chemicals, heavy industry, food and beverages, as well as being Europe’s fourth largest manufacturing country. Other growth areas besides tourism include insurance, property development, electronics, and financial services. LABOUR MARKETThe modern labor market in Spain has been characterized by the peak in the creation of new jobs from 1986-1990, as well as the large reduction in employment in 1992 during the following economic deceleration. Approximately two million new jobs were created during the economic expansion, which amounts to a growth rate of 3% per year. 1,100,000 people took advantage of this situation and entered the labor market during this period, 896,000 of them of whom were women. Also during this period, the average wage increase was 7.4%, compared to an average inflation rate of 6.5%. However, during the 1991-1992 economic deceleration period, production grew by 1.75% in real terms while employment decreased by an average of 0.85%. Wages increased by an average of 8.5%, which displays a decline in job creation that corresponds with the increasing expense of the work factor and its substitution by capital. A fixed production factor was labelled to the high wage claims in 1990 which failed to have an immediate impact in the reduction of employment. This continued through 1991 and 1992, where high wage demands continued among the labor force, which forced companies to reduce the size of their staff. The development of wage increases is important to the Spanish government, and in an attempt to keep up with the European Community wages, a wage inc...
