Initial assessment of the 1997 labour reform

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Over a year after April 1997's major reform of the labour market in Spain, the Government and employers believe that progress is being made towards creating employment. The trade unions, on the other hand, stress what they see as the inadequacies of the reform and the continuing insecurity of employment. Another round of negotiations on further reform began in June 1998, but the unions have called for demonstrations by workers.

Just over a year after the signature of the April 1997 agreements on the reform of the labour market (ES9706211F), the social partners have drawn up a balance sheet of their results and new negotiations have opened to complete the reform process. The April agreements of 1997 are in fact three pacts covering, respectively, employment stability, the structure of collective bargaining and "filling the gaps in regulation". However, the deal that has had the greatest impact is the pact on employment stability, which has also been the main focus of all the assessments.

Employment stability

The Government's assessment is optimistic. It feels that the important feature of the April pacts is the medium- and long-term trend towards a change in attitude about recruitment. In the first year of application, the results seem to indicate a tendency towards an improvement in the quality of employment. Permanent contracts, as a proportion of all employment contracts signed, have risen from 3.8% in April 1997 to 8.9% in 1998. In other words, 933,177 permanent contracts were registered at the offices of the National Institute for Employment (Instituto Nacional de Empleo, INEM) in the year after the agreements, compared with 350,189 in the previous 12 months (ES9801239F). For the Government, this means that the rate of recruitment on permanent contracts has tripled. Of the total number of new permanent contracts, 75% were signed under the auspices of the labour reform. Another fact supporting government optimism is that the employed population has grown by 4.91% - see table below.

* Data for the first quarter of each year.

Source: Survey of the Active Population ( Encuesta Población Activa ).

The Government also makes a positive assessment of the reduction in unemployment. One of its new means for reducing unemployment is to stimulate part-time employment, which represents only 8% of all employment, compared with an average of 16% in Europe. More part-time employment would in particular lead to a reduction in the high level of female unemployment and have some effect on youth unemployment. Indeed, according to the Government, the results of the labour reform endorse the strategy of making further progress towards a more flexible labour market.

The main employers' body, the Spanish Confederation of Employers' Organisations (Confederación Española de Organizaciones Empresariales, CEOE) also makes a positive assessment of the reform and considers that the main impact has been in the area of employment, because the pact was supported by legal regulation and by a policy of grants for permanent contracts. The president of the CEOE,José María Cuevas, has called the agreements "frankly good". He maintains that the new form of permanent employment contract introduced by the pact is the "contract of the future" and therefore calls for its characteristics to be extended to all permanent contracts. The employers' organisation feels that two questions should be dealt with: reducing the compensation per year worked paid in the event of dismissals; and reducing social security contributions. Moreover, it considers that the continuing high rates of temporary employment and labour turnover are largely due to the disappearance of the former "contract for launching new activities", which has led employers to use other types of contract with a shorter duration. Also, the employers value the pacts in political terms: they have led to greater stability, which favours the creation of companies. In one year, 90,000 companies have been created, though this is also associated with tax reform and economic growth.

The trade unions are far more critical of the pact on employment stability. In general, they consider that the signing of the pact was positive because it represented a step towards improving the quality of employment. However, the rate of creation of permanent jobs has practically stagnated since the beginning of 1998. Permanent employment created in 1997 corresponded largely to the conversion of temporary jobs into permanent jobs (about 350,000). However, the central problem is that the rate of temporary employment is still very high, at 33% of all contracts, which shows the persistence of insecurity. In fact, nine of every 10 contracts registered at INEM today are temporary. Also, for each new job that is created, 80 contracts are signed, which gives an idea of the extent of labour turnover. Consequently, the unions believe that the objectives proposed in the pact for employment stability have not been fulfilled. They have thus planned and begun to carry out a series of demonstrations that will continue until autumn 1998. The trade unions call for sanctions against unjustified temporary contracts and an increase in the monitoring of the use of this type of contract. Nevertheless, they recognise that a positive aspect of the pact is a certain upwards trend in recruitment. However, the unions maintain that temporary contracts are still used abusively, and temporary employment agencies are not sufficiently controlled.

Collective bargaining

The reform of the structure of collective bargaining is progressing slowly. An agreement has been reached only in the metalworking sector, which is of special importance because it covers a great number of workers and a dispersed range of companies (ES9805153F). The reform sought both to rationalise the structure of bargaining and to "articulate" the various levels, making the application of agreements more effective in small and medium-sized companies.

In other sectors some progress has been made but much work has still to be done. Therefore, employers and unions feel that it is necessary to start a process of negotiation to reach or to complete agreements. To this end, they have requested reports from their respective sectoral or branch organisations on the situation in each.

Filling gaps in the legislation

The agreement on "filling the gaps in regulation" lays down rules on a number of issues - notably work organisation and the definition of job grades - to apply in those sectors which do not have their own collective agreement. The aim is that bargaining in each of the sectors will replace these rules over time. In this area, an agreement has been reached within the joint commission formed for this purpose by employers and trade unions. The signatory organisations urge the government to promote a new regulation on the process of extension of collective agreements, based on a text that has already been agreed among the partners.

However, the problem is that the topic has not been dealt with in many regional sectoral agreements owing to the lack of representatives authorised to negotiate collective agreements that replace the April agreement in 22 subsectors (as mentioned, this agreement is provisionally in force until new agreements are negotiated). There is still a lack of representatives in dispersed sectors of activity, where it is very difficult to represent the interests of employers' organisations and trade unions.

New negotiations to complete reform

A new phase of social dialogue aimed at furthering the labour reform has begun between CEOE/Spanish Confederation of Small and Medium-Sized Enterprises (Confederación Española de la Pequeña y Mediana Empresa, CEPYME) and the two main union confederations, the General Workers' Union (Unión General de Trabajadores, UGT) and the Trade Union Confederation of Workers' Commissions (Comisiones Obreras, CC.OO). At the first meeting in June 1998, there was a rapprochement on the ancillary questions - overtime, temporary employment agencies and development of collective bargaining - but profound disagreement on the basic questions - reducing working hours, increasing unemployment cover and increasing social expenditure.

The CEOE refuses to negotiate on the unions' demand for a 35-hour working week (ES9804251F), especially introduced by means of a general law, since it would involve an increase in labour costs and reduce the competitiveness of companies. The employers maintain that this topic should be dealt with through collective bargaining in line with the specific situation of individual companies and their productivity. This refusal by the CEOE has led to friction with the Government, because the Minister of Labour considers that the CEOE has failed to fulfil an aspect of the April agreements. At that time the trade unions accepted a reduction in the compensation for dismissal to 33 days' pay per year worked in exchange for future negotiations to reduce working hours. The Government therefore believes that the employers should not take such a hard line on this point.

There is also a dispute between the trade unions and the Government with regard to unemployment insurance cover. The unions demand an extension of cover because only 50% of unemployed people benefit from it. The Government, on the other hand, gives priority to active employment policies over passive policies. Its intention is to devote the available resources to improving vocational training and stimulating permanent employment.

The subjects of pensions, public investment to generate employment and an increase in social expenditure are pending negotiation with the Minister of Economy. An agreement in principle has now been reached on a pay rise for civil servants in lower grades who have had their wages frozen over the last two years (ES9803143F).

Commentary

An important aspect of the proposed new agreement, which is at an initial phase of negotiation, is the reform of the part-time employment contract. This reform falls within the framework of the Government's employment plan (ES9712235F) and could be a path towards generating employment and reducing the large amount of overtime that is performed at present. At the moment, 1,032,000 people work part-time on reduced wages, of whom 75% are women. The development of part-time employment will have an increasingly female component, but the same is currently true of unemployment. An agreement among the social partners is to be expected on this topic, but not on the reduction in working hours, on which the positions are very far apart. (A Martín Artiles, QUIT-UAB)