CEOE evaluates competitiveness of Spanish 'labour model'

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In October 2002, Spain's CEOE employers' confederation issued a report examining the country's competitiveness and making proposals for improving it. In this article we highlight the report's findings and recommendations related to industrial relations and the labour market. CEOE focuses on issues such as training, internal flexibility of companies, collective bargaining and work organisation.

In an important document published on 28 October 2003, entitled 'Competitiveness in Spain. Problems and proposals for improvement' (Competitividad en España. Problemas y propuestas de mejora), the Spanish Confederation of Employers' Organisations (Confederación Española de Organizaciones Empresariales, CEOE) makes a thorough strategic diagnosis of the Spanish economy and outlines the employers' aim of achieving national competitiveness. The 134-page report deals with: the situation of the Spanish economy; its micro- and macroeconomic levels of competitiveness; foreign trade; productivity; comparative prices and costs; the tourism sector, the tax situation; and several factors that affect competitiveness - the environment, the 'information society', and research, development and innovation. A whole chapter is devoted to the competitiveness of the labour market and the Spanish 'labour model', and we highlight its main findings below.

Contents of report

According to CEOE, the competitiveness of companies is closely related to their adaptation to the market, and to the adaptation of the qualifications and skills of human resources to the companies' resources and costs. The market, the company and industrial relations are linked to transformations in the patterns of individual and family behaviour, which also involve transformations in technology, production, work organisation etc. Guaranteeing employment and any system of social protection subject to it therefore depends, says CEOE, on fostering production, economic growth and the creation of companies. The competitiveness of companies in the market depends on the availability and qualifications of human resources and on the prevailing work organisation, labour regulations and cost structure.

Employment growth

Between 1994 and 2001, a net total of 3,700,000 jobs was created in Spain, which was higher than the European average, and the number of persons paying social security contributions has reached record figures. However, CEOE, based on Eurostat figures, states that the Spanish employment rate in 2001 was 55%, which was lower than the EU average of 64%. Women have increasingly been integrated into the labour market, though their employment rate is 42% compared with an EU average of 55%.

According to CEOE, employment is created by economic activity, which is produced in healthy macroeconomic situations with a climate of confidence and competitiveness. Factors that make a decisive contribution to this are moderate labour costs, a flexible framework for recruitment and the reduction of fiscal burdens on labour.

Unequal structure of unemployment

Unemployment has fallen considerably in Spain over recent years (although, at 10.5% in 2001, its unemployment rate is the EU's highest). However, the unemployment situation of Spain's regions is heterogeneous, CEOE points out. Whereas there is practically full employment in La Rioja, Navarre and Aragon (with unemployment rates of less than 5%), in Andalusia and Extremadura the unemployment figures are three times higher. Across Spain as a whole, the proportion of unemployed people who are long-term unemployed stands 26.9%, though this has fallen by 10 percentage points since 1997. Also, unemployment is concentrated among young people and women.

Employment flexibility and stability

The ways in which workers are recruited depend, among other factors, on the regulatory framework and on the organisation of production, states CEOE. However, as globalisation means that production processes are relatively similar between countries, it is the national regulatory framework which mainly determines the forms of employment used by employers in order to achieve flexibility and a adapt to change. In Spain, given relatively rigid regulation of open-ended employment, it is largely temporary employment which has provided this flexibility, while in other countries it has been part-time work which has played this role.

CEOE claims that Spain's high rates of temporary employment (which prevent a faster development of part-time work, which affected 7.6% of Spanish employees in 2001, compared with an EU average of 17.9%) do not lead to less employment stability or shorter periods in employment, because such stability is not necessarily determined by whether the type of contract is open-ended or temporary. According to the employers' organisation, 'if one analyses the average period in employment, the Spanish situation is not too far from the European average and is similar to that of the UK and the Netherlands'. According to CEOE's calculations, based on Eurostat figures, 68.9% of Spanish employees had been in their job for over two years in 2000 (compared with an EU average of 73.5%), whereas in 1995 the figure was only 66.1% (EU average of 76.7%). In 2000, the proportion of employees who had been in their jobs for less than a year was 20.9% (against an EU average of 16.4%), compared with 28.3% in 1995 (EU average of 14.8%). In short, for CEOE, employment stability is compatible with, or even fostered by, flexible regulatory frameworks, low dismissal costs and instruments to enable part-time employment.

Mobility and skills

For CEOE, adaptation and efficient assignation of human resources is a decisive factor in competitiveness. To achieve this. it is essential to have a qualified population, effective mechanisms of labour market mediation (ie placement services) and flexible occupational and geographic mobility. CEOE insists on the need to modernise Spanish placement services, such as the National Institute of Employment (Instituto Nacional de Empleo, INEM), particularly in view of the current decentralisation of responsibilities in this area to the regions (autonomous communities).

Companies can hardly be competitive if those who work for them are not competent, states CEOE. The fundamental variable is education. This has improved in recent years, but 30% of the active population still has only primary education. The number of university graduates has increased to a level higher than the European average, but though the number of vocational training students has increased recently, it is still low, particularly in view of the demand for workers with this type of qualification. According to the employers' organisation, further efforts must be made to improve the level of education of the population and particularly to develop vocational training. Careers guidance, which is still disorganised, should be reorganised and promoted. The deficit in foreign-language skills must also be overcome, because only a third of the Spanish population are able to hold a conversation in another language. In short, there is a need to meet the challenge of a culture of permanent learning that allows all workers to remain employable.

Internal flexibility

Another aim for CEOE is the development of internal flexibility within companies and of flexibility in industrial relations. This refers to several areas, including work organisation, collective bargaining, dispute resolution and risk prevention at work. Specific issues include: the organisation of working time; rationalisation of pay structures (and the incorporation of variable pay according to objectives or productivity); the proper use of various types of recruitment; social dialogue; mediation in disputes; and promotion and financial support for introducing preventive measures and developing a heath and safety culture.

Social protection

With regard to social protection, CEOE points out the need to seek a balance between a suitable level of protection, and a level of taxation and social contributions that is acceptable for the active population.

Commentary

CEOE has developed in its new document a discourse based on a strategic diagnosis and solid proposals. Its goal is to achieve competitiveness for Spanish companies. The employers' organisation has thus shown that it takes a long-term view of the Spanish economy.

However, the employers may be placing excessive faith in the autonomous dynamics of business and of a market in which recurring shortcomings have not been corrected. They may, for example, be overlooking the social and economic repercussions of the deregulation of employment conditions. It could also be argued that they are merely paying lip-service to the need for training and education, rather than making an effective commitment to a culture of social responsibility for companies, linked to advanced labour relations. (Daniel Albarracín, CIREM Foundation)