Labor market

More jobs but less security as Spain struggles to shake off crisis

Record number of employment contracts in 2017 but goal of permanent work elusive for many

Manuel V. Gómez
A waiter serves customers in a bar in Ronda, Andalusia.
A waiter serves customers in a bar in Ronda, Andalusia.paco puentes

Nearly 20 employment contracts were signed in Spain in the first 11 months of 2017. The total for the year will be around 22 million – a new record. Few figures better explain the dominant trend in the Spanish job market in recent years: robust recovery offset by a large number of temporary jobs and plenty of part-time employment among people who want to work more hours, as well as by stagnant wages.

Only 36% of employment contracts signed every month are actually new contracts; the rest are contract renewals

Overall, 2017 has seen significant improvement in the Spanish job market with the number of people signed on with the country’s social security scheme – a key indicator of net job creation – up by over 630,000, a rise of 3.58%. And the unemployment rate is down more than 10 percentage points since the peak of the country’s economic crisis, although at 16.4% it remains among the highest in the European Union and among developed countries in general.

“At this stage of emerging out of the crisis this is within normal limits. The growth of temporary work is a characteristic feature,” explains Josep Oliver, professor of applied economics at the UAB university in Barcelona. At the beginning of 2014, job destruction meant just 23% of employment contracts in Spain were for part-time or temporary work, but that figure was already back up to 27.4% by summer of that year.

“Spain lost 18% of its jobs [during the crisis]: this has recovered by 10 percentage points but there is way to go. Basically, we are still absorbing the impact of the crisis,” Oliver notes, admitting that the key role played by precarious employment in the recovery process has been highly persistent.

The total number of new employment contracts signed in Spain in 2017 will be around 22 million – a new record

The nature of temporary work in Spain is also changing with the number of very short-term contracts on the rise: in 2017, contracts of five days or fewer made up close to 26% of the total, according to the Spanish public employment service (Sepe). Florentino Felgueroso, researcher with Spanish applied economics institute Fedea, says this phenomenon could be linked to the development of new technologies which permit “more rapid adjustment” and the signing of contracts via mobile phones.

Felgueroso adds that access to stable employment has become more difficult. While the number of permanent contracts is on the rise, growth is not strong enough to reduce part-time and temporary employment levels. At the same time, the total number of such jobs that workers – and especially young people – have before they find a permanent, ongoing position is also growing.

The researcher highlights data from his Nada es gratis (Nothing is free) blog to demonstrate this. From 2008 to 2016, people had to spend 94 months in part-time or temporary employment before finding a permanent position. From 2001 to 2007, this figure was 57 months. The other key figure is that only 36% of employment contracts signed every month are actually new contracts. The rest are contract renewals signed by people who are still hoping for to find permanent work.

And landing a permanent job does not always equate to stability. As Inmaculada Cebrián, economics lecturer at the Univesity of Alcalá, point out, just 40% of permanent positions in Spain last more than two years. While she does note this figure is from 2015 and the economy recovery may improve this situation, she believes “rough data” shows that employment quality has seen little improvement. “There has been little change in the pattern in Spain,” she says.

Basically, we are still absorbing the impact of the crisis Josep Oliver, professor of applied economics, UAB

The one segment of the labor market which appears to have weathered the economic crisis is part-time work. This was the only type of work which withstood the peak of the crisis, even seeing growth. There has now been a slight reduction in part-time work but chronic under-employment continues to exist: some 60% of people on part-time contracts would like to work more.

But the high percentage of temporary contracts hides the drop in under-employment. Carlos Martín, head of economics at the Spanish general workers union, the CC OO, notes the percentage of casual and temporary workers is already higher than it was before the crisis among young people and in the manufacturing, retail, transport and hospitality sectors – precisely those industries which have seen higher than average social security affiliation in recent months.

The labor cost issue

While the Spanish government tends to highlight data which shows a rise in permanent contracts, it is also working to improve job quality, with one proviso: any rise in employment costs must not jeopardize the current rate of employment creation of around half a million jobs a year.

After the holiday period, the government plans to continue negotiations aimed at a creating a single model for temporary contracts. It is also looking at punishing firms that abuse the system by imposing higher social security contributions on them. In addition, the government has announced that the national minimum wage, currently €707 a month, will rise to €850 a month by 2020.

In 2017, contracts of five days or less made up close to 26% of the total

Oliver with the UAB university believes this is an important step in showing businesses that recovery of lost competitiveness cannot be achieved by low labor costs alone. “They have to make productive investments,” he argues. This year Spain registered its fifth straight quarter of falling competitiveness against fellow EU members despite falling unit labor costs.

For Martín, the rise in the minimum salary comes too late. He decries the fact that Spain is coming out of this crisis more slowly than was the case with the previous two crises, putting this down to the fact that “internal demand is less important.” With exports doing more to drive growth, the role of the Spanish workforce is less important.

English version by George Mills.

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