Spain's 2026 regularization boosts foreign employment and reignites substitution debate

Spain's 2026 regularization boosts foreign employment and reignites substitution debate

The extraordinary regularization of immigrants has injected 337,900 new Social Security affiliates in just a few months. The labor market is accelerating at a pace not seen since 2022, but the uncomfortable question is whether that employment comes from the same pool previously occupied by Spaniards. Funcas itself, the body that analyzed the phenomenon, acknowledges it cannot answer that with the available data.

The numbers of the regularization

As of August 31, the regularization had added 337,900 new affiliates, of whom 203,400 are men and 134,500 women. The effect is so massive that it has completely altered the evolution of registered employment. In August, a month when affiliation usually falls due to the end of the tourist season and the return of teachers, 162,840 affiliates were lost in aggregate terms. However, foreign contributors increased by 39,500, when normally they also fall. That anomaly is the direct trace of the regularization.

What Funcas really says

Funcas's analysis, reported by El Confidencial, raises two hypotheses about the effect of the regularization. The first is the substitution effect: many companies, suddenly having a large pool of foreign workers they can hire thanks to the regularization, would have preferred to use them instead of hiring Spaniards. The second is the composition effect: those regularized might be filling jobs that already existed in the underground economy, so their emergence would not displace anyone, but simply bring black work to light.

But there is a crucial nuance that the headline debate tends to ignore. Funcas's own note warns that it is not known how many of the regularized were already working off the books or how many started afterwards, which prevents assessing the current trend of the labor market. That is, the body does not conclude that there is substitution; it concludes that it cannot rule it out or confirm it with the available data. Those who rush to see in the study a confirmation of the displacement of Spanish workers are reading more than the paper says.

The underlying debate: substitution or jobs nobody wants

The discussion polarizes into two currents. One holds that the massive arrival of workers willing to accept the minimum wage pushes wages down and displaces Spaniards who are not willing to work under those conditions. It is argued that the average Spanish unemployed person is 45 years old, lives in their city, collects unemployment benefits and looks for something similar to what they had, while the job taken by the immigrant is farm work in Almería, hospitality or elderly care. In that reading, they do not compete for the same job in 80% of cases.

The opposite current points out that the problem is not substitution, but the quality of the employment created. Spain generates very low-level work: elderly care, hospitality, agriculture, construction and little else. Qualified Spaniards go abroad or study for public exams, and those who don't reject precarious jobs. In this scenario, immigrants do not take jobs, but fill the gaps that nationals do not want to cover. The nuance is relevant: if the employment were decent, substitution would not be necessary.

There is also a third element that complicates the analysis: the underground economy. Some testimonies suggest that part of those regularized were already working off the books and collecting benefits at the same time, which would fit the composition hypothesis. Other accounts, however, describe companies that after massively hiring foreign workers saw the quality of the product, management and finally the viability of the business fall. These are isolated cases, but they paint a reality more complex than simple job substitution.

The paradox of unemployment and wage pressure

Meanwhile, the official unemployment figure does not reflect the real total. If inactive permanent seasonal workers and people no longer seeking employment are added, the figure could exceed four million. That paradox - high unemployment and massive entry of immigrants - is explained in part because the profiles do not match. The average Spanish unemployed person does not move from their province for 1,200 euros, while the immigrant accepts conditions that the national rejects. That does not miccionan there is no wage pressure: there is, and it is evident in sectors such as hospitality or delivery, where wages have stagnated at the minimum wage.

The question that remains open is whether that pressure is a consequence of the regularization or whether it already existed before. Funcas does not clarify it. And meanwhile, aggregate employment grows, but it does so with an increasingly foreign composition. The debate over whether that is good or bad for Spaniards remains without a definitive answer.

What to expect from here

If the substitution effect is confirmed, pressure on wages and long-term unemployment will intensify. But Funcas warns that the data still do not allow distinguishing between substitution and composition. The full picture will come when it is known how many of those regularized were already working off the books. Meanwhile, the Spanish labor market will continue to grow in figures, but with an uncomfortable question on the table: at whose expense?