October 30, 2020

Spain is stuck in a labor market full of temporary | Economy

Seven years of labor reform: more employment but more unequal | Economy

Now that the recovery has reached the fifth consecutive year of job creation, the Bank of Spain has prepared in its quarterly report a comparison on the evolution of the labor market before and after the Great Recession. The conclusion: the pattern hardly changes. The creation of employment is similar. Maybe a bit higher, since now it grows at a somewhat slower pace, he explains. However, the growth of the occupation continues to be sustained by temporary contracts, despite the economic improvement and that all the reforms had the intention of reducing the temporality.


to. With seasonal adjustment.
b. Average of four quarters

Source: Bank of Spain.

On the one hand, access to the labor market from unemployment or inactivity continues to be made mostly through a temporary contract. During the bonanza prior to the crisis, the proportion of people entering with an indefinite contract improved slightly. They were between 18% and 20%. However, with the crisis this percentage fell to 15% -16%. And, despite the recovery, it has been stabilized there. In principle, something should be correcting, as happened in the previous expansion. Especially when the reforms should have made more attractive the fixed work to lower their dismissal. However, it does not seem that it has been possible to encourage indefinite hiring. The duality between fixed and contingent is entrenched since the use of the temporary contract was facilitated in 1984.

On the other hand, according to the supervisor, the conversion rate of temporary contracts into indefinite contracts is well below that of before the crisis. If in 2006 and 2007 only 13% of contracts ended up becoming fixed after one year, now the ratio barely reaches 8%. A somewhat better figure than in 2016, when it was only 6%. But very far from the EU average, which is placed at 24% if the weight is taken by weight of the countries, or 15% if the arithmetic mean is taken.

Administration sources explain that Labor inspections are working and have improved the conversion rate during the last two years. In an ideal world, economists say that the temporary contract should serve as a springboard for a better position as experience is gained. However, that does not happen. The Bank of Spain already had an impact on the fact that even before the crisis, even workers with experience and high contributions suffered from temporary employment. Two studies, the inequality of the Bank of Spain and another of Florentino Felgueroso, José Ignacio García-Pérez, Marcel Jansen and David Troncoso-Ponce, reveal that the problem lies in that, apart from substitutions of expensive labor for cheap, companies have touched the hourly wages they pay little. What they do is adjust the working time, using the employees with a greater rotation, for shorter periods and only for the moments, days and hours that they need them. In this way, the number of hours worked grows less. In addition to reducing unemployment, the difficulty in reducing inequality lies in the fact that the less educated work fewer hours.

This excessive temporality is not justified simply by the type of sectors that predominate in the economy, said the European Commission last year in its report on the Spanish economy. And he pointed out that in Spain there is almost 30% more time in construction and agriculture than in the average of these sectors in the EU. Around 15% more in the hospitality, health and leisure. And around 10% more in industry, education or professional services. Only banking presents a temporality close to European.

Unproductive posts

In its report at the end of 2017, the IMF stressed that the improvement "has been driven predominantly by an expansion of low productivity employment". That is, there has been no change of model. As many jobs have been destroyed in construction, where workers have little training, there has simply been a shift of workers from one sector of low qualification to others. From the scaffolding to the bar, suggested another study by the Bank of Spain.

"The Spanish labor market continues to suffer, despite the profound regulatory changes observed, excessive temporality and turnover, which negatively affects not only productivity, but also inequality of labor income, which suggests the convenience of enhancing the attractiveness of indefinite hiring, without detriment to the creation of employment ", concludes the quarterly report of the Bank of Spain. Or what is the same, without raising the costs of dismissal of temporary so as not to harm your hiring. Another labor reform

Labor reform did not bring improvements in recovery

"In the current expansion there are no large changes in the creation and destruction of jobs compared to what was observed between 2006 and 2007," concludes the Bank of Spain. And he adds that both hiring and employment adjustments are still based on the eventual. The posts that are created are mostly temporary and those that are destroyed, too. Does that mean that the labor reform was useless? The Bank of Spain and the OECD have studied what happened during the recession. And both argue that the 2012 reform prevented more layoffs. They compare the evolution of the economy with that of the destruction of the employed, and find that since the reform, layoffs have moderated in relation to GDP. In combination with the wage moderation agreement that they agreed with employer delay and unions, it helped companies to adjust by cutting hours and wages instead of layoffs, they argue. That is, the reform did help during the recession. While it seems that not so much during the expansion.

To solve the precarious situation, the IMF is committed to the unique contract and the Austrian backpack. The Ministry of Economy looks favorably on the latter, which is that the company is periodically paying the cost of dismissal in a worker account, and this can take it to another job, use it if you go to unemployment or take it for retirement. However, parliamentary fragmentation will make it very difficult to agree on something that solves once and for all the heavy burden of temporality.


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