LABOR REFORM

Are Spain's temporary workers about to lose again?

Government's plan fails to resolve the problem of employees given short-term contracts

María José is 34 years old and a family doctor by profession, but she could easily find work as a recruitment consultant. After she finished her residency in 2007, she has had more than 100 temporary contracts. "The longest was for six months," she says.

The Madrid regional government has been her sole employer during this period, and she has worked in more than 20 health centers in the capital. "I have had contracts that have lasted just one day, to cover personal days taken by doctors with fixed contracts," she explains. She is currently unemployed, and is waiting for the Madrid government to offer her another contract.

The large number of workers on temporary contracts is one of the big problems in the Spanish labor market. Temporary workers account for over 25 percent of all employees in Spain, compared with an average in the OECD of 12 percent. The percentage is even higher among young people.

The duality of the Spanish labor market is characterized by workers on open-ended contracts, who are entitled to generous severance pay, and temporary workers on low salaries, who are cheap and easy to fire. For that reason the latter are usually the first to be let go during an economic downturn, which explains recent surges in unemployment in the Spanish economy. This is exactly the problem that the labor reform is supposed to address.

The reform reduces the compensation to which permanent workers are entitled in cases of unfair dismissal to 33 days' wages for every year worked up to a maximum of two years, from 45 days and a maximum of 42 months. Temporary workers, however, receive only eight days' severance pay.

Experts believe the reform barely addresses the problem of the high incidence of short-term hiring. The new regulations revive a previous ban on extending temporary contracts that was temporarily lifted, limiting the period to 24 months from the end of this year.

Since 2007, I have had more than 100 temporary contracts," says one doctor

"In reality, this is something that was already in place," says Javier Andrés, professor of economics at the University of Valencia, pointing out that the ban on extending temporary contracts indefinitely was in place last summer.

Companies, however, managed to find ways around it. "They changed the centers where I worked, and they hired me for days with different duties," María José says.

"The labor reform doesn't have any direct measure for tackling the problem of temporary work," says Carlos García Serrano, a professor of economics at the University of Alcalá.

"I don't think the labor reform will have a big impact on the problem of temporary work," adds Javier Andrés. "It is possible that it will fall during times of economic recovery."

Temporary contracts were introduced in a labor reform approved in 1984 by the Socialist government of Felipe González, and they have remained in favor ever since - even more so during times of crisis, such as those currently being seen in Spain, where 93 out of every 100 contracts signed of late have been temporary. "It's very expensive to fire a permanent worker and very cheap to sack a temporary one," says Andrés. "That is why that for as long as temporary contracts exist, during times of recession such as at present, employers will make use of them."

In an attempt to reduce the duality in the market, the reform introduced a new form of indefinite contract with a trial period of up to a year, during which workers can be dismissed without any compensation or justification. "This contract can be used as a temporary contract," García Serrano says.

Javier Andrés acknowledges that the reform does narrow the difference between those on temporary and permanent contracts by reducing the cost of sacking permanent workers. "There has been some progress but in the wrong way," he says, arguing in favor of a single type of contract with incremental severance entitlement over the course of service.

During the first year of the current crisis, more than 1.5 million jobs were destroyed, almost all of them temporary, and many in the public sector, particularly healthcare. "It is surprising that different governments have carried out reforms aimed at addressing the problem of temporary work, while the public sector's use of this form of hiring has increased," García Serrano notes.

Having high numbers of workers on temporary contracts reduces productivity, as employers intend not to invest in training them. Javier Andrés notes that hourly labor productivity in Spain is very low, and therefore employees end up working longer hours. In Holland and Germany the average number of hours worked a year is 1,700 compared with 2,000 in Spain.

García Serrano suggests that one way to encourage employers to take on more workers on a permanent basis would be to make social security contributions higher for temporary employees.

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