Spain's Productivity Handbrake

Spain has a ~30% productivity gap to countries like the United States or Germany. Spaniards produce almost a third less value per hour worked than Americans or Germans. A gap that large has many causes, and this essay does not try to explain all of them.

Instead, it looks at one unusually visible example of how well‑intentioned regulation can discourage Spanish firms from scaling: a regulatory wall at exactly 50 employees.

Larger firms tend to be more productive, and productive companies often try to grow.¹ Regulatory roadblocks can make that growth less attractive. With regulation, the devil is in the details, and the way some Spanish regulation is designed might be particularly harmful.

Reaching 50 workers in Spain suddenly loads a firm with new legal duties: elect a works council and health‑and‑safety committee; negotiate a gender‑equality plan; reserve 2% of positions for disabled staff; stand up an internal whistle‑blower channel; and—since April 2025—file an LGTBI inclusion protocol. Fines for failing to meet some of these duties can reach 1.000.000€.²

Owners call it the maldición del empleado 50—the curse of employee 50. Some shelve expansion plans or split operations just to stay under the line.

The cliff shows up in hard data. A study of these regulatory thresholds estimates that there are 62% more firms with exactly 49 employees than we would otherwise expect.³ The spike at 49 and the dip immediately above it are hard to miss.

The graph does not tell us how much this cliff affects national productivity, and firm sizes differ across countries for many reasons. Still, the broader contrast is striking: only 0.6% of Spanish firms employ fifty or more workers, versus 2.5% in Germany and 6% in the United States.⁴ Put differently, the share of Spanish firms that break through the 50‑employee threshold is one-quarter the German rate and one-tenth the U.S. rate.

This matters for at least two reasons.

1. Resource misallocation: Capital and labour can remain in tiny, low‑productivity firms instead of migrating toward better‑run, scale‑hungry ones.
2. Stunted potential: Some high‑potential start‑ups may remain below the threshold, fragment their operations or migrate abroad.

The 50‑employee threshold does not explain Spain’s productivity gap. It is, however, a particularly vivid example of how regulation meant to protect workers can also discourage firms from growing. Other countries show it’s possible to protect workers without erecting regulatory cliff‑edges. One possibility, besides removing it entirely, is to spread regulation across several higher head‑count milestones.

Reforming and addressing the 50‑employee cliff would remove one quiet but persistent drag on Spanish productivity. Until that happens, Spain will continue to drive with this particular productivity handbrake engaged.

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