Spain’s shoe sector shines in black economy

Hunched over her sewing machine in a Spanish workshop, a woman puts together a ballerina slipper which will soon slip onto the foot of a customer in Madrid, New York or Tokyo.

Spain's shoe sector shines in black economy
Shoemakers stitch shoes at Salvador Artesano in Elche. Photo: Jose Jordan / AFP

Spain is the second-largest footwear producing country in the European Union after Italy, with 96.5 million pairs of shoes produced in 2013.

"Made in Spain" shoes are selling well at home and abroad but success comes in part thanks to some employees working off the books to help keep costs down.

The shoe sector "subscribes to the underground economy," said Jose Maria Mollinedo of Spain's tax inspectors union Gestha.

Up to half of Spain's shoe production is done in the underground economy, according to a study by students at Madrid's Autonomous University.

Over two-thirds of Spain's 1,400 footwear firms are concentrated in the Mediterranean coastal region of Valencia, with many clustered around Elche and the nearby town of Elda.

Spain's shoe industry rejects assembly line production, favouring instead semi-artisanal manufacturing by small and medium sized firms.

Big retailers such as Louboutin and Zara make some of their shoes in the country.

The sector's roughly 25,000 workers tap into a rich tradition of leather craftsmanship that dates back to the 19th century.

The industry had its golden age in the 1970s when US firms shifted their production to Spain, which was at the time isolated and less developed.

Like its European neighbours, Spain suffered in 2005 with the end of import quotas on shoes made in China.

But it managed to hold on to the production of mid to high-end shoes and the value of Spain's shoe exports hit a new record in 2013 of €2.64 billion ($2.83 billion).

– 'Always like this'-

But some of those prospering Spanish shoemakers are paying their workers off the books to avoid the taxman.

"I have always known it to be this way," said Manuel Molina, a 57-year-old leather cutter.

He recalls that his mother also worked in the industry making shoes at home and was paid in cash that was not declared to the tax office.

The practice is encouraged by the fact that certain tasks, such as cutting leather and cloth or sewing parts, can be done in small workshops or even athome instead of in a factory.

For women, it is a way to earn money while looking after their children at home.

Spain's economic downturn has increased the number of people willing to work in the shoe sector's underground economy, said Molina.

His six brothers and sisters, as well as his parents, are all working, or have worked, making shoes, he added.

The Spanish federation of footwear manufacturers FICE refused to comment on the topic, preferring instead to highlight rising exports to 170 nations.

Undeclared work in the shoe sector takes many forms, according to Carlos de Castro, a sociology professor at the Autonomous University who has studied the sector.

It could consist of seamstresses who work at home or men, often illegal immigrants, who load and unload trucks, he said.

Some companies only declare some of their employees to the taxman, while others outsource some or all of their production to clandestine workshops.

The practice angers unions as well as rival shoe firms that operate above board, who complain they are facing unfair competition.

"We can't compete with someone who does not pay their employees, who does not pay Social Security and whose production costs per pair of shoes is two or three euros less than ours," said Julian Mendez, a manager at Elche-based shoe firm Salvador Artesano.

Unions say their demands for work inspections at shoe firms have multiplied but they are often ignored.

"The state administration does not react," said Juan Antonio Macia of the Elche branch of the General Workers Union (UGT), Spain's second largest union.

– Young turned off –

Few workers in the underground economy, however, complain about their poor pay and working conditions out of fear of losing their jobs in a country with a sky-high 23.78 percent unemployment rate.

Conditions for workers with a contract are not rosy either. Salaries are low — between 963-1,060 euros per month before taxes — and temporary contracts that offer little job security are common.

"We are making shoes almost at the same price as in China," said Angel Cerda of the Elche branch of the  Workers' Commissions (CCOO), Spain's largest union.

There is a risk that young people will steer clear of the shoe sector because of  poor conditions and Spain's know-how will be lost, said de Castro.

"You learn the profession from your grandmother, from your mother and it is transmitted this way," he said.

Molina says he has always advised his twin son and daughter, aged 29, to "work, but not in the shoe sector".

By Laure Fillon / AFP

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Spain’s middle-class youngsters the most likely to end up poor across all EU

Spain leads the ranking of EU countries with the highest risk of young people ending up in poverty as adults, despite coming from families without economic difficulties.

Spain is the fourth EU country with the highest inherited poverty
Spain is EU country with most middle-class young people who end up poor. Photo: Jaime ALEKOS / AFP

Spain is also the fourth EU country with the highest rate of inherited poverty risk, according to Eurostat, the EU Statistical Office.

Data on intergenerational poverty indicates that there is a correlation between the financial situation of the household you grew up in and the risk of being poor when you reach adulthood and in Spain, there is a strong link. 

The latest statistics available from 2019 show that the at-risk-of-poverty rate for the EU was 23 percent among adults aged 25 to 59 who grew up in a poor financial situation at home when they were 14 years old. This is 9.6 percentage points more than those who come from families without financial problems (13.4 percent). 

READ ALSO: Spain’s inflation soars to 29-year high

How the situation in Spain compares with the EU

Spain has become the EU country with the highest risk of poverty among adults who grew up in families with a good financial situation  – 16.6 percent.

This was followed by Latvia with 16 percent and Italy with 15.9 percent.

That statistics also show the countries where it is less likely to be poor after growing up in households without economic difficulties. These include the Czech Republic (5.9 percent), Slovakia (7.9 percent) and Finland (8.5 percent).

The overall poverty rate in the EU decreased by 0.1 percentage points between 2011 (13.5 percent) and 2019 (13.4 percent), but the largest increases were seen in Denmark (1.9 points more), Portugal (1.8 points), the Netherlands (1.7 points) and Spain (1.2 points).  

On the other hand, the biggest decreases in the poverty rate were seen in Croatia (-4 percent), Lithuania (-3.6 percent), Slovakia (-3.5 percent) and Ireland (-3.2 percent).

READ ALSO: Spain’s government feels heat as economic recovery lags

Inherited poverty

The stats revealed that Spain was also the fourth country with the highest rate of inherited poverty risk (30 percent), only behind Bulgaria (40.1 percent), Romania (32.7 percent) and Italy (30.7 percent).

This means that children of poor parents in Spain are also likely to be poor in adulthood. 

The countries with the lowest rate of inherited poverty risk were the Czech Republic (10.2 percent), Denmark (10.3 percent) and Finland (10.5 percent).

The average risk-of-poverty rate for the EU increased by 2.5 percentage points between 2011 (20.5 percent) and 2019 (23 percent), with the largest increases seen in Bulgaria (6 points more), Slovakia and Romania (4.3 points), Italy (4.2 points) and Spain (4.1 points).

The biggest drops were seen in Latvia (-8.5 points), Estonia (-8.0 points) and Croatia (-2.3 points). 

The largest gaps in people at risk of poverty when they reach adulthood were in Bulgaria (27.6 percentage points more among those who belong to families with a poor economic situation as teenagers compared to those who grew up in wealthy households), Romania (17.1), Italy (14.8), Greece (13.5) and Spain (13.4).