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Why more people than ever in Spain are overqualified for their jobs 

Spain has beaten its record of workers with higher education qualifications - 9 million - a bittersweet milestone which highlights the degree of overqualification in a work market that’s dominated by low-paying service-based jobs. 

spain overqualification jobs
Photo: Jaime Reina/AFP

It’s a well known fact that Spain isn’t the destination of choice for most foreigners who want to further their careers.

For tens of thousands of Spaniards every year, it’s also the country they have to leave if they want to move up the career ladder or get their foot in the door.

Seventy-six percent of Spain’s work market is made up of service-based jobs mainly in tourism, hospitality and sales, all of which are professions that do not necessarily require a university qualification.

But 9.08 million of the 19.7 million people who currently work in Spain have a higher education qualification, the latest figures published in Spain’s Working Population Survey (EPA) in July report, reflecting how around 46 percent of Spain’s workforce is forced to accept a job that’s not in their field and probably not meeting their salary expectations.

Spain is one of the countries in the EU with most university graduates but it’s on top of the leaderboard when it comes to wasted talent. 

According to Eurostat data from January 2021, 37 percent of Spain’s workforce is overqualified, 17 percent more than the EU average. 

Since 2011, it’s had the highest overqualification rates among workers in the bloc, which highlights how Spain’s economy has long been focused on tourism and services, with no clear change in sight. And the figures suggest the balance has been worsening over the last decade. 

Foreigners in Spain are among those who end up in a job they’re overqualified for most often. 

Among EU migrants in Spain, around half of those working are overqualified, but when it comes to non-EU workers the trend is even more pronounced: two in every three are doing jobs they haven’t studied and trained for. 

Eurostat data showing overqualification rates in the EU across the EU for Spanish nationals, EU citizens and non-EU citizens.

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One of the problems behind this alarming situation for third country nationals is the two-year wait for qualifications to be recognised by Spain’s Ministry of Education, essential in particular for people in regulated professions such as medicine, nursing, dentistry, law and more. 

Tens of thousands of workers who could offer their expert skills to Spain, in particular health workers during this ongoing pandemic, are being held back by painstaking and outdated bureaucratic practices that force them to choose any job just to make ends meet. 

Having a qualification means less than ever in Spain, but the latest data by EPA reflects how the country has 500,000 more workers with higher qualifications than in 2020.

For foreigners in Spain faced with these dire work prospects, it’s often a case of weighing up the pros of a country with a high quality of life and accepting the cons of a limited job market, setting up their own businesses or having their main source of income abroad. 

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What you need to know about investing in index funds in Spain

Index funds are considered a safer and more passive way of investing for those with little financial knowledge. However, understanding what they are, the best funds available, and how they're taxed in Spain is key before investing your money.

What you need to know about investing in index funds in Spain

What are index funds?

According to a basic definition by Banco Santander, “index investment funds are collective investment undertakings whose investment policy strives to mimic a certain index.”

What does that actually mean? And what is being mimicked here? Let’s look at an example. An index fund tracking the Vanguard Global Stock Index, for example, will put together an asset portfolio that essentially mirrors, or is similar to, at least, the Vanguard portfolio, in terms of composition. 

So that means that if the Vanguard Index has any major changes in terms of portfolio makeup, the fund manager (more on the best of those in Spain below) changes your index fund to reflect that change.

Often in Spain index funds would be linked to the IBEX 35, Spain’s main stock exchange, but many people invest in regional or global funds too. Besides that, index funds basically function in the same way as other funds: the money in the fund is used to buy and sell assets to make profit.

Generally speaking, the benefits of index fund investing are their low cost, the little financial knowledge and time investment required from the investor, and their diversification. The drawbacks are the lack of downside protection when there are losses, the lack of choice in index composition, and the fact that your investments can’t ‘beat’ the market.

READ ALSO: The best high-yield savings accounts in Spain

How profitable can index funds be?

Owing to the fact that the entire point of index funds is to mimic a particular index, the way we think about profitability is slightly different than with other forms of investment.

In that sense, there’s really no such thing as a ‘good’ or ‘bad’ index fund based on its performance. How well the index fund performs is better thought of as how well it replicates the index it is supposed to be mimicking.

According to Rankia, a Spanish investment service and comparison site, index funds vary wildly in terms of returns, but compound annualised returns ranging from as low as -40 percent in the worst case examples to 55 percent profits in the best.

Obviously, how much you make in cash terms depends on the size of your original investment in the fund.

Can you invest in foreign index funds in Spain?

Yes, you can. In fact many people do, and fund managers often recommend doing so.

In Spain, the main fund managers that offer index funds include iShares, EBN Bank, Amundi, Vanguard, Pictet, Bankinter, Caixabank, BBVA, and Credit Suisse.

Which are the best index funds to invest in from Spain?

Most index funds are grouped on a regional basis, so there are several funds that mirror European markets, North American markets, the Pacific region markets, and so on, as well as broader global index funds.

According to Rankia, some of the best global index funds to invest in from Spain include:

Fidelity MSCI World Index Fund P-ACC-EUR
Total Expense Ratio (TER): 0.12 percent
3-year return: 11.73 percent

Vanguard Global Stock Index Fund EUR Acc
TER: 0.18 percent
3-year return: 11.63 percent

Amundi Index MSCI World – IE (C)
TER: 0.19 percent
3-year return: 11.51 percent

Vanguard ESG Developed World All Cap Equity
TER: 0.20 percent
3-year return: 9.29 percent

Vanguard Global Small-Cap Index Fund
TER: 0.29 percent
3-year return: 7.37 percent

Amundi Index FTSE EPRA NAREIT Global – AE (C)
TER: 0.34 percent
3-year return: 3.17 percent

How are index funds taxed in Spain?

Under the Spanish tax system, index funds are taxed as savings income as part of the IRPF (Spain’s income tax) and are included as capital gains and losses, as if they were any other type of stock market shares or investment product.

However, one of the advantages of index funds over other forms of investment is that if you sell one index fund in order to buy another, you don’t pay for the capital gains obtained because it is considered a transfer from one fund to another and is therefore exempt from taxation.

This makes it one of the best investment options if you want to get a higher return on your earnings via compound interest because you can take advantage of these capital gains to reinvest them instead of paying them in taxes.

As index funds in Spain are taxed in the same way as any other investment products that is subject to savings rates, they are taxed at the following rates:

19 percent for capital gains of less than €6,000

21 percent for capital gains between €6,000-€50,000

23 percent for capital gains in excess of €50,000

READ ALSO: Bank overdraft in Spain: What are the risks and penalties?

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