Analysis: Spain on the verge of reversing post-crisis labor reforms

Workers set up scaffolding as a Spanish flag flies over Colon Square in Madrid, Spain on November 2, 2021. REUTERS / Sergio Perez

MADRID, Nov. 25 (Reuters) – Spain’s left-wing government nears major shake-up in pro-business labor reforms put in place after the sovereign debt crisis, but which critics say have eroded rights of employees and held back wage growth.

The new rules taking shape after months of negotiations with unions and employers would give more wage bargaining power to workers and revamp temporary contracts widely used in the country’s services and construction-dominated economy.

They are part of a package of reforms Spain is due to provide to the European Commission by the end of 2021 for the release of EU stimulus funds in the event of a pandemic.

An EU political source said Brussels was monitoring the arrangements to make sure they did not make Spain’s labor market, whose September unemployment rate of 14.6% was the highest in the EU, too rigid .

The 2012 reform by the center-right government of Mariano Rajoy was imposed by Spain’s EU creditors and the International Monetary Fund in the wake of the debt crisis.

It has favored employers in the collective bargaining process, allowing companies to pay wages below the industry standard – something the tourism sector has benefited from. It also made it possible to reach agreements on wages and internal conditions that Spanish car assembly plants quickly adopted.

Reforming the reform was a key condition of the radical left junior partner of Socialist Prime Minister Pedro Sanchez, Unidas Podemos, who joined the government last year.

But the negotiation generated some of the most tense exchanges to date between the Social Democratic and Communist streams of government who control the economy and labor ministries respectively.

“The (new) reform aims to prevent company agreements from having primacy in setting wages,” Joaquin Perez Rey, deputy labor minister, told Reuters.

Currently, companies are able to set wages below those agreed by collective bargaining at sectoral level where unions are strong, a method traditionally used in Spain. They also have the option of changing working hours if there is an economic justification.

“We want to restore the balance in labor relations which deteriorated during the previous reform,” Unai Sordo, head of CCOO, Spain’s largest union, told Reuters.

But Sordo said the reform will respect other aspects of company-centric collective bargaining and that the option to opt out in the event of a company’s crisis will be retained.

ABUSE OF TEMPORARY CONTRACTS

Rosa Santos, chief negotiator of the Spanish employers ‘association CEOE, told Reuters that a deal on labor reform was still a long way off as some key issues under discussion could impact companies’ internal flexibility.

But she said employers agreed that a new wage setting formula was needed to stamp out “unfair competition”, adding: “collective bargaining cannot aim to make wages more precarious.”

Other measures on the table aim to strengthen job security and end the precariousness that critics say means millions of people in Spain lose their jobs every time there is a downturn economic.

Spain has the highest share of temporary workers in Europe, which at 20% is double the EU average. These workers receive lower severance pay and are invariably the first to be made redundant in the event of a reduction.

The government wants to abolish the temporary contracts that are often misused in the construction and service sectors and create a new version that can only be used on an ad hoc basis in very specific circumstances.

According to the government’s latest proposal, these new contracts would last up to three months and cover peak periods such as the end-of-year holiday season and the busiest periods of the highly seasonal Spanish economy, dependent on tourism. and agriculture.

“We have to make a distinction between seasonal and temporary,” said Perez Rey.

For seasonal workers, the government wants to promote the use of an existing form of open-ended contract that allows workers to receive unemployment benefits during the months of inactivity without leaving their company, something already widely used in Spanish Balearic Islands, where the hospitality industry closes for about five hours. -month of season.

A second possible arrangement would create a permanent mechanism similar to leave schemes implemented around the world during pandemic lockdowns. This would involve anticipating anticipated ecological or digital transitions within companies.

Employers want the program to be “flexible and straightforward,” said CEOE’s Santos. Together with the unions, they rejected the government’s initial proposal.

“We would like a more flexible model like Germany’s,” union leader Sordo said, referring to the “Kurzarbeit” system under which workers are subject to reduced hours as part of labor protection programs. use.

Some labor market analysts say plans are insufficient to address Spain’s aversion to permanent contracts.

“Temporary and permanent contracts are communicating vessels, if you tighten one you have to make the other more flexible. Otherwise, companies lose flexibility to compete in an increasingly globalized world,” said Ignacio Conde-Ruiz, professor of economics at the Complutense University of Madrid.

A source with knowledge of the matter said the European Commission would more easily agree to a deal – and release 2022 stimulus funds – if employers were on board, even if that would sacrifice more market flexibility than it wants.

Reporting by Belén Carreño, editing by Mark John, Aislinn Laing and Toby Chopra

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