Excessive complacency

There was one positive piece of news from the appearance on Thursday of Labor Minister Fátima Báñez when she discussed the results of the government’s labor reform. The minister announced that the 41 current different types of job contracts would be simplified to just five. Any move to reduce bureaucracy is always welcome; in this case the wide variety of different incentives for hiring will be slimmed down. But, when compared with the simpler single contract with a rising scale of compensation, which has been recommended by a number of economists, it is not that extraordinary. Báñez’s plan is an ersatz solution, and, as is usually the case, brings with it fewer benefits and at the same time fewer risks.

This latest announcement — along with the expected refusal by the government to follow the recommendations of the IMF by cutting salaries further, which would see consumer demand and growth fall — brings to an end this review of the labor reform, which was expressly requested by the European Commission so it could keep tabs on Spain. They do so because it is hard to unravel just how much of this is a forced argument, how much of it is down to genuine improvements, how much is carefully calculated, and how much the figures offered by a complacent Báñez are being justified retrospectively. What’s more, she made a rhetorical call for less complacency herself. The evidence suggests that there is a mixture of propaganda, willfulness and genuine improvement at work here.

Báñez has failed to explain why it is that her reforms have apparently avoided the destruction of 225,800 jobs. It also appears excessive to cite the success of Spain’s exports to justify the notion that the labor reforms “are being shown to work,” given that the rise in exports began very strongly under the previous government. And attributing the recovery in competitiveness that has been lost since 2005 to the labor reforms sounds very subjective, given that losses in competitiveness relative to the improvements in the EU started well before in the early stages of the previous Popular Party government under Aznar.

It makes a lot more sense to highlight what constitutes a certain improvement in the efforts to reduce the duality of the labor market, with its solid permanent contracts and precarious temporary conditions. Having said that, the figures are still too modest to be presented as being strictly due to the reforms, while the increased legal protection for workers she claims the reforms offer has in fact deteriorated. There is no reason to doubt that there have been improvements in flexibility, although the rise in contracts for young people could be down to several different factors; as is the case for certain advances in competitiveness, which are not all attributable to the rise in unemployment.

The fall in absenteeism, of 14 percent, is significant, but that figure also reflects concerns about the recession, given that one of the more excessive aspects of Báñez’s reforms are possible penalties for workers who get sick. The minister is right: less complacency is needed. And for that, there is nothing better than greater modesty.