Rise in permanent employment due to labour market reform
Foilsithe: 7 March 2007
A major reform of the Spanish labour market came into force in July 2006 (*ES0605019I* [1]). According to the signatories of the agreement on the reform, the main objectives of the reform are to increase permanent employment and to reduce temporary employment; the latter was identified as one of the main problems of the Spanish labour market (*ES0409104F* [2], *ES0602105F* [3], *ES0604049I* [4]). The measures included incentives to employers for recruiting certain groups of workers on permanent contracts as well as reduced social security contributions and subsidies for converting temporary contracts into permanent ones. This follows the trend of the 1997 labour reform, which reduced the cost of unfair dismissals of people on certain types of permanent contracts.[1] www.eurofound.europa.eu/ef/observatories/eurwork/articles/social-partners-agree-on-new-labour-market-reform[2] www.eurofound.europa.eu/ef/observatories/eurwork/articles/temporary-employment-examined[3] www.eurofound.europa.eu/ef/observatories/eurwork/articles/figures-show-high-rate-of-temporary-employment-and-fall-in-unemployment[4] www.eurofound.europa.eu/ef/observatories/eurwork/articles/new-measures-to-reduce-temporary-employment
In July 2006, the main trade unions, the government and the employer organisations reached agreement on the reform of the labour market in order to reduce temporary employment. The social partners have analysed the effects of this reform six months after it came into force. Data from the National Institute of Employment attests to a significant rise in the number of permanent employment contracts since the reform came into force.
A major reform of the Spanish labour market came into force in July 2006 (ES0605019I). According to the signatories of the agreement on the reform, the main objectives of the reform are to increase permanent employment and to reduce temporary employment; the latter was identified as one of the main problems of the Spanish labour market (ES0409104F, ES0602105F, ES0604049I). The measures included incentives to employers for recruiting certain groups of workers on permanent contracts as well as reduced social security contributions and subsidies for converting temporary contracts into permanent ones. This follows the trend of the 1997 labour reform, which reduced the cost of unfair dismissals of people on certain types of permanent contracts.
Evaluation of reform
The monthly figures provided by the National Institute of Employment (Instituto Nacional de Empleo, INEM) show an upward trend in the development of employment contracts since the the reform came into force and a real improvement in the situation compared with 2005.
| No. of permanentcontracts2005 | No. of permanentcontracts 2006 | Relativevariation (%) | Total no. of contracts 2006 | |
|---|---|---|---|---|
| July | 116,265 | 168,285 | 44.74% | 1,670,892 |
| August | 92,117 | 139,997 | 51.98% | 1,322,920 |
| September | 138,892 | 200,688 | 44.49% | 1,674,735 |
| October | 148,234 | 239,673 | 61.69% | 1,819,192 |
| November | 142,901 | 231,908 | 62.29% | 1,660,449 |
| December | 108,480 | 235,122 | 116.74% | 1,386,283 |
| Year total (accumulated) | 1,542,838 | 2,177,245 | 41.12% | 18,526,772 |
Source: Ministry of Labour and Social Affairs
In the first few months after the labour market reform came into force, there was an increase of almost 50% in permanent recruitment in comparison with the same months in 2005, rising to an increase of over 60% in October and November 2006, and of over 100% in December 2006. This significant rise in permanent employment contracts was clearly the result of the government subsidy offered to employers to convert temporary contracts into permanent ones before the end of the year.
However, the increase in the number of permanent contracts must be evaluated against the total number of contracts registered. As permanent recruitment represented only 11.75% of all recruitment in 2006, it is evident that, despite government incentives for permanent employment contracts, the increase in employment was mainly achieved through temporary contracts.
Evaluation by social partners
The social partners differed in their evaluation of the labour market reform. The government expressed its satisfaction with the increase in permanent recruitment, and was particularly pleased that there were more than 600,000 extra permanent contracts in 2006 than in 2005. It considers that there is a downward trend in temporary recruitment due to the measures taken, and that progress is being made towards a labour market model based more on permanent recruitment and less on temporary recruitment.
Two of the largest trade unions, namely the Trade Union Confederation of Workers’ Commissions (Confederación Sindical de Comisiones Obreras, CC.OO) and the General Workers’ Confederation (Unión General de Trabajadores, UGT), are pleased with the increase in permanent employment. However, both organisations feel that this increase is not important enough since temporary employment still represents around 30% of total employment. They consider that the employers are failing to take advantage of the subsidies for introducing permanent contracts and that many temporary contracts remain unjustified.
Finally, the Spanish Confederation of Employers’ Organisations (Confederación Española de Organizaciones Empresariales, CEOE) holds a positive view of the increase in permanent contracts. Nevertheless, it stresses that temporary employment is a consequence of the continuing high costs of the dismissal of workers holding a permanent employment contract, and therefore considers that further reforms are necessary in this area.
Martí López, QUIT, University Autònoma of Barcelona (UAB)
Molann Eurofound an foilsiúchán seo a lua ar an mbealach seo a leanas.
Eurofound (2007), Rise in permanent employment due to labour market reform, article.
