August 15, 2022

Spain Approves Measure to Free Up Labor Market

MADRID — The Spanish government approved Friday measures intended to reduce chronically high unemployment by introducing more flexibility in labor relations, despite failing to get support from employers and unions for the changes.

With Spain hampered by a 21 percent jobless rate — twice the European average — the government chose to make the ruling by decree after four months of negotiations between the biggest labor unions and the Spanish Confederation of Employers’ Organizations, known as C.E.O.E., broke down last week.

Both sides have voiced their discontent with the government’s compromise, while outside experts suggested so much had been diluted or left open that the package would have little effect on the labor market.

“I sadly don’t believe this reform will have any real impact on job creation,” said Federico Durán, head of the labor department at Garrigues, one of Spain’s biggest law firms. “Everything will now be left to further mediation and arbitration, and we know from past experience that it’s hard to get any progress that way.”

The reform aims to loosen Spain’s rigid system of industry-wide collective bargaining and allow greater leeway at the company level.

Union leaders are angered by a part of the package that will allow employers to adjust working hours according to the workload. However, the legislation as approved did not define under what circumstances working hours could be altered, suggesting that the issue should instead be left to a case-by case negotiation.

Business groups, meanwhile, say the changes do not go far enough.

Juan Rosell, the president of the C.E.O.E., said earlier this week that the government’s plan would do little to encourage company bosses who have become “panicked” about hiring more people because of inflexible terms of employment.

Easing collective bargaining agreements was meant to be one of the major — and likely final — achievements of the Socialist government Prime Minister José Luis Rodríguez Zapatero of Mr. Zapatero. A general election is expected by March, in which Mr Zapatero will make way for a new Socialist candidate.

“I am afraid this is it,” in terms of reforms from the current government, said Luis Garicano, a professor at the London School of Economics and expert on the Spanish economy, “all we can hope is that the pension reform, which was negotiated with the unions months ago, does pass the parliament as soon as possible.

He described the new rules as a “minor reform” that does not resolve the main problem facing the labor market: wages rates that are higher than warranted by the demand and supply conditions of economy. Collective bargaining agreements pushed up wages even during the height of crisis as unemployment rose, he said.

The World Bank and others have identified the country’s rigid labor market as one of the main reasons why Spain’s jobless rate has more than doubled since the onset of the world financial crisis.

According to the European Union’s statistics agency Eurostat, the Spanish unemployment rate was 20.7 percent in March, comfortably the highest level in the Union. Youth unemployment stood at 44.6 percent.

Under pressure from creditors to introduce structural changes to the economy as well as clean up its finances, the government in Madrid a year ago pushed through a plan that, among other things, cuts severance payouts to 33 days per year of employment, from the norm of 45 days.

A government-managed fund also was set up to cover a part of the severance pay for indefinite work contracts — a move that was intended to discourage companies from relying on temporary workers.

Last year’s package, however, left some key elements untouched, including any change to the system of collective bargaining agreements.

The Socialist government had hoped that changes could be negotiated directly by employers and unions, thereby also reducing the likelihood of resulting labor unrest.

After meeting with union leaders on Thursday, Valeriano Gómez, the labor minister, defended the proposals as an adequate compromise.

“Each side has a vision of its role in labor relations,” he said. “The role of the government is to impose order, to impose peace.”

The government’s own bargaining position, however, has been considerably weakened after the Socialists suffered last month their worst-ever results in regional and municipal elections.

At the same time, high youth unemployment has fueled a protest movement that started on May 15 in Puerta del Sol, a square in downtown Madrid, before spreading across the country.

Demonstrators in Madrid have voted to dismantle their Sol encampment on Sunday, but further actions are expected, notably after a scuffle last Wednesday between police and protestors in Valencia, Spain’s third-largest city.

Matthew Saltmarsh contributed reporting from Paris.

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