Agreement signed on growth, employment and guaranteed pensions

After a period marked by the failure of social dialogue to achieve agreements on employment policies and labour market legislation reform, the government and the most representative social partners reached some significant compromises and signed an agreement in February 2011 on pensions, active labour market policies and industrial policies. Social partners have also undertaken to conclude an agreement on collective bargaining reform in the upcoming months.

Divergences among social partners

In 2010, major differences emerged between unions, employer organisations and the government as conflicts grew over the government’s plans to cut the public deficit, enacted in May 2010 (ES1006011I), and labour market legislation reform unilaterally approved by the government in June 2010 (ES1007011I).

Both measures led the unions to call a public workers’ strike in June and a general strike in September (ES1010011I). At the same time, the first draft of the pension system reform announced by the government in January 2010 was harshly criticised by the unions, who called for public demonstrations between 22 February and 7 March 2010 against the main measures of the reform. Their main criticism was over raising the retirement age from 65 to 67 years (ES1002029I).

Divergences also widened between unions and employer organisations over labour market legislation reform, with the Spanish Confederation of Employers’ Organisations (CEOE) being in favour of increasing external flexibility in the labour market, whereas the unions believe the unemployment problem cannot be solved by means of legislation reform, and have adopted a defensive or reactive position, aiming to safeguard workers’ rights.

Finally, the labour market legislation reform was well received by CEOE, although its previous president Díaz Ferrán criticised its weakness regarding some issues such as the objective dismissal regulation and reforms on compensation paid for dismissal.

Social dialogue practices changed at the beginning of 2011, when negotiations between the social partners and the government regarding pension system reform reopened, focusing on new topics such as industrial policy and active labour market policies. This resulted in the signature of a tripartite set of agreements called the Social and economic agreement for growth, employment and guaranteed pensions (in Spanish, 166Kb PDF), which covers pensions, active labour market policies and industrial, energetic and innovation policies. The social partners involved included the Trade Union Confederation of Workers Commissions (CCOO), the General Workers’ Confederation (UGT), CEOE and the Spanish Confederation of Small and Medium-Sized Enterprises (CEPYME).

Agreement on pensions

The main aspects of the agreement on pensions include the following provisions.

  • Delayed retirement age: The retirement age will be raised to 67, applied progressively between 2013 and 2027, increasing one month per year until 2018, and two months per year from 2019 to 2027. Workers will be able to retire at 65 and benefit from maximum pension rights if their social security contributions amount to 38 years and six months.
  • Computation period: The number of years of social security contributions taken to determine the regulatory basis of the pension will rise from 15 to 25 years. This rise will be applied gradually, increasing by one year each year from 2013 to 2022.
  • Scale of calculation to access 100% of the regulatory basis of the pension: The scale will evolve from 50% of the regulatory basis after 15 years to 100% of the regulatory basis when a person has contributed to social security for 37 years (previously 35 years). The rise will be applied from 2013 to 2027.
  • Early retirement: The legal age of early retirement will be increased to 63 (previously 61), provided that the worker’s social security contributions amount to at least 33 years.
  • Incentives to remain on the labour market: New incentives have been calculated for every additional year that workers decide to remain in the labour market once they reach official retirement age. If the number of work years is less than 25, a 2% annual coefficient will be applied; if the number of work years is between 25 and 37, a 2.75% annual coefficient will be applied; and if the set number of work years has been completed, a 4% annual coefficient will be applied. This means that, for instance, workers with a complete labour career who decide to remain in the labour market will enjoy a 4% annual increase in their pension.
  • Women and young people: Women who have interrupted their careers as a consequence of a birth or adoption will be able to claim nine months of contributions per child before the age of 67 years, up to a maximum of two years. With a view to improving the protection of current young workers, research grant and apprenticeship beneficiaries will be entitled to pension rights for a two-year period.
  • Sustainability factor: In order to maintain proportionality between contributions and payments, the parameters of the system will be revised after 2027 to take into account the evolution of life expectancy.

Agreement on active labour market policies

The agreement on active labour market policies has been translated into a Royal Decree on ‘urgent measures to promote transition to stable employment and the professional requalification of the unemployed’, enacted on 24 February 2011 by the Spanish Parliament (although the main political party in opposition, the People’s Party, did not support it). The decree incorporates the following measures included in the tripartite agreement.

  • Exceptional plan for the transition to stable recruitment: This plan aims to encourage more young people (up to 30 years of age) and long-term unemployed into work. It will offer enterprises with more than 250 employees a 75% discount in their social security contributions (up to 100% for businesses with fewer than 250 employees) when they hire workers belonging to either group on part-time contracts of between 50% and 75% of the working day. This programme will be implemented for a period of 12 months.
  • Professional requalification programme for people whose unemployment benefit ceases as of 16 February 2011: The programme includes an allowance of €400 a month, which will be granted for a maximum of six months. Beneficiaries are obliged to participate in active labour market programmes.
  • Actions to improve employability: The Public Employment Service (INEM) will develop job ‘itineraries’ which combine orientation services and training, aimed at young people up to 30 years of age and long-term unemployed people aged over 45, as well as for all workers from the construction sector.
  • Inclusion of unemployed people in training programmes catering for employed workers; INEM services will guarantee that between 20% and 40% of unemployed people will participate in training programmes provided for employed workers.

Moreover, the agreement includes the government’s commitment to enact a ‘global employment strategy’ for older workers before 30 September, once social partners have been consulted. The strategy will comprise measures on employment, training and working conditions, aiming to favour the employment tenure of older workers as well as encouraging unemployed people back into work.

Agreement on industrial, energy and innovation policies

The agreement on industrial, energy and innovation policies does not include concrete measures, as in the other agreements, but rather a set of guidelines and common commitments aiming to:

  • increase the weight of industry in the Spanish economy;
  • promote a sustainable energy policy that will reduce energy dependence and encourage economic competitiveness;
  • foster an economic growth model based on innovation, knowledge and added value.

The most significant concrete measures are the launch of a Risk Capital Fund in order to encourage entrepreneurship and the commitment to reinforce Industrial Observatories. These are tripartite bodies that look at sectors of the economy from an entrepreneurial, labour and technological perspective, analyse their strengths and recommend ways to improve them. They will be given a greater role in the assessment and formulation of industrial policies.

Commentary

The agreements have revitalised social dialogue practice, which had not occurred since 2006, when the social partners and government signed an agreement on labour market legislation. The main aim of that was to promote stable employment and reduce the temporary employment rate in the context of a growing economy (ES0605019I).

The current agreement has been achieved under very different circumstances. The public debt and deficit crisis and the high unemployment rate have conditioned the agenda, leading the government to do its utmost to conclude an agreement on sensitive topics, such as the pension system, in a very short period of time.

In this sense, most observers argue that the government has been under pressure from two sides. Firstly, pressure from the financial markets, which demanded public pension reform similar to other European countries, intended to raise confidence among investors regarding Spain’s ability to pay its debt commitments. And secondly, the pressure from the unions, which were threatening the government with a second general strike that could have weakened the impact of measures in international markets because of a lack of social consensus.

Under these circumstances, all parties involved in the negotiations have put aside some of their initial views. This is particularly true of the unions, which have accepted the raising of the retirement age thanks to the inclusion of new clauses (especially those concerning women and young workers) and a set of active labour market measures, some of which will increase the social protection of unemployed people.

Nevertheless, consensus on these measures is not so clear. It must be borne in mind that the left-wing political parties have not endorsed either the pension reform or the active labour market policies while the People’s Party, the main opposition party, has not supported the active labour market policies put in place by Royal Decree.

Pablo Sanz de Miguel, CIREM Foundation

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