The Spanish Labour Market: Reforms and consequences (original) (raw)

The Pros and Cons of the Latest Labour Market Reform in Spain

2012

: In this paper, I analyze the main novelties of the new labour market reform approved in Spain in 2012 in relation to the changes that were already introduced in the preceding short-lasting reforms of 2010 and 2011. On the positive side, it is argued that the new reform goes in the right direction in achieving higher internal flexibility as a means of adjustment to business cycle fluctuations. However, on the negative side, it fails to be transformational enough in other relevant areas, like suppressing dualism, improving the effectiveness of active labour market policies, enhancing productivity and maintaining the overall level of social protection of Spanish workers. Given these limitations, it is unlikely that this will be the ultimate reform curing once and for all the Spanish labour market “disease”. Keywords: Labour market reform, dualism, severance pay, political economy, Great Recession. JEL codes: H29, J23, J38, J41, J64

Labor contracts and flexibility: evidence from a labor market reform in Spain

1999

This paper evaluates the effects of a labor market reform in Spain that removed restrictions on fixed-term or temporary contracts. Our empirical results are based on longitudinal firm-level data that cover observations before and after the reform. We posit and estimate a dynamic labor demand model with indefinite and fixed-term labor contracts, and a general structure of labor adjustment costs. Experiments using the estimated model show important positive effects of the reform on total employment (i.e., a 3.5% increase) and job turnover. There is a strong substitution of permanent by temporary workers (i.e., a 10% decline in permanent employment). The effects on labor productivity and the value of firms are very small. In contrast, a counterfactual reform that halved all firing costs would produce the same employment increase as the actual reform, but much larger improvements in productivity and in the value of firms. (JEL J23, J32, J41) *We would like to thank the comments received from

Evidence from a Labor Market Reform in Spain

2009

This paper evaluates the effects on employment, job turnover and productivity of a la-bor market reform in Spain that eliminated dismissal costs for fixed-term or temporary contracts. Our empirical results are based on a panel of 2356 Spanish manufacturing firms for the period 1982-1993. We postulate and estimate a dynamic labor demand model with indefinite and fixed-term labor contracts, and a general structure of labor adjustment costs. Experiments using the estimated model show important positive ef-fects of the reform on total employment (i.e., a 3.5 % increase) and job turnover. There is a strong substitution of permanent by temporary workers (i.e., a 10 % decline in permanent employment). The effects on labor productivity and the value of a firm are very small. These effects contrast with the ones of a counterfactual reform consisting in halving firing costs of all type of contracts. That policy implies the same increase in total employment, but much larger improvements in pro...

The Impact of the 2012 Spanish Labour Market Reform

Revista Hacienda Pública Española, 2019

This paper studies the impact of the 2012 Spanish labour market reform on the probability of exiting and entering unemployment using a regression discontinuity approach based on duration models. The 2012 reform modified important aspects of hiring and dismissal procedures in Spain. By doing so, it affected the probability of exiting both unemployment and employment. Comparing labour market performance before and after February 2012 and using a competing risk duration model for the exit from both unemployment and employment, we find that the reform contributed to employment creation in two ways. First, it increased the likelihood of exiting from unemployment to employment by increasing the monthly transition to permanent employment from 1.7% to 2.6%, on average, for the first twelve months of unemployment. Second, it reduced the probability of exiting from employment for workers on a temporary contract, particularly at small firms, most likely because the firms were using newly introduced internal flexibility measures to adjust the workforce instead of using external flexibility measures. The direct transition from temporary to permanent positions was also eased by the reform. Finally, we do not find any significant effect of the reform on the dismissal patterns for permanent workers. These findings point to a positive effect of the reform in dampening the widespread segmentation of the Spanish labour market, although the impact is so far small, which means that more effort will be needed to substantially reduce the strong duality of this labour market.

Executive summary The Labour Market in Spain: Problems, Challenges and Future Trends 2

Despite a need for measures to ameliorate the impact of the labour market crisis, Spain is among the EU countries to have introduced the least number of improvements in recent years. On top of that, the severe structural reforms implemented have considerably worsened labour market access in the country, particularly for the most vulnerable groups, such as young people. The lack of accompanying measures to soften the effects of economic adjustment has worsened the position among the workforce and the unemployed alike. The immediate effect has been to accentuate Spain's economy was hit particularly hard by the financial crisis. After severe austerity measures have been implemented in recent years to contain a strong public debt increase, first signs of economic recovery are emerging. However, as SIM Europe results show, very few measures to soften the social consequences have been enacted. Spain scores second to last in the 'Labour Market Access' dimension of the Social Ju...

An analysis of wage flexibility: evidence from the Spanish regions

The Annals of Regional Science, 2006

The theory of Optimum Currency Areas poses that one of the most important costs that EMU may entail for countries belonging to it is the loss of some instruments of political economy (exchange rate and monetary policies) in response to shocks. The aim of this paper is to analyse real wage flexibility, which is one of the main alternative adjustment mechanisms to these policies. For this purpose, the case of the Spanish regions for the period 1985-1999 is reported. First, we develop a nonparametric approach to show that unemployment and productivity growth rates have reduced effects on wage evolution in the period of study. Second, semiparametric estimation techniques are applied to provide more econometric evidence regarding regional flexibility of real wages in Spain. Additionally, some suggestions are developed on the topic of EMU's ability to improve the degree of regional wage flexibility. The general conclusion that we draw in the study is that regional wages are very rigid and the impact of EMU, though favourable, will be reduced.