Social partners consider agreement on wage moderation and reform of collective bargaining

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In late 2001, the Spanish economy is beginning to suffer the effects of the international economic downturn. In response, the Ministry of the Economy has encouraged employers' organisations and trade unions to conclude a central agreement on wage moderation and the reform of collective bargaining structures, and such a pact seems on the cards The first to suffer in the current 'crisis of expectations' have been employees on temporary contracts, which have not been renewed, underlining fears about the vulnerability of temporary employment to variations in the economic cycle.

In late 2001, Spanish companies are feeling the effects of the global economic slowdown. However, so far this seems to be less a crisis, than a crisis of expectations, so no very radical redundancy measures have yet been taken. However, the Survey of the Active Population from the National Institute of Statistics (Instituto Nacional de Estadística, INE) shows a sharp fall in the rate of job creation from 2000 to 2001.

Large-scale redundancies have been limited to sectors such as airlines, which were directly affected by the aftermath of the terrorist attacks on the USA on 11 September 2001. Elsewhere, workforce cuts have begun with the non-renewal of temporary contracts (which make up 32% of all employment), as happened in the previous recession between 1991 and 1994. This is why the General Workers' Confederation (Unión general de Trabajadores, UGT) has called the current developments a process of 'silent redundancies', because there are relatively few dismissals - companies can adapt rapidly to economic circumstances simply by failing to renew temporary contracts. This will be the main fear of the trade unions if the economic situation worsens.

Situation by sector

Another way to reduce the workforce is pre-retirement (prejubilación - ES0011221F) of employees from the age of 52 or over, without replacement by younger workers. This measure has been widely used in the banking sector. BBVA wishes to pre-retire 1,500 employees, SCH 1,300 and Banco Popular 200. Another 'gentle' form of reducing the workforce is flexible working time, which in recent years has been introduced through the annualisation of working time, the introduction of irregular working hours, the application of 'availability clauses', and the compensation of overtime with time off. The introduction of flexible working time has adapted workforce management to variations in demand and situations of uncertainty. However, these measures may be insufficient in certain sectors.

The airlines, which are so far most affected by the downturn, have begun to make redundancies. Iberia has prepared a redundancy plan involving 2,526 workers out of a total workforce of 29,124 (ES0112243F), while Air Europa plans to make 450 of its 3,000 employees redundant. The crisis has also affected Gamesa, an aerospace company working for the American market, which plans to make 115 workers redundant.

The telecommunications sector also seems to be suffering the effects of the crisis, though in this case the problems date from before 11 September. This crisis is related to the high level of borrowing to purchase expensive 'universal mobile telephone services' (UMTS or 'third-generation' mobile telecommunications - FI0108100F) licences. Redundancy procedures have been applied in companies such as Lucent and its subsidiary Agere System, with 1,548 jobs; Alcatel with 1,300 jobs; Ericsson with 855 jobs; and Xfera with 424.

The motor industry is also feeling the effects of the economic slowdown. Companies have reduced production and stopped overtime. Nissan has presented a redundancy procedure affecting 4,000 workers, while Opel has temporarily suspended 9,000 jobs. This process has also affected companies that make car components, such as Robert Bosch and Delphi (ES0101231F), which have also begun to present redundancy procedures.

The construction sector, which has been very dynamic in Spain in recent years, is also showing signs of a slowdown in the small and medium-sized enterprise part of the sector, where 426 jobs will be lost. In the jewellery sector, Perlas Majorica has initiated a temporary redundancy procedure for its workforce of 550, with the possibility of 188 job losses.

Government response

The government takes the view that the current crisis is a 'crisis of expectations', rather than a real crisis of the Spanish economy. In fact, other indicators show that the Spanish economy, with growth of between 2% and 2.5% foreseen in the government's stability programme for 2002, can still create employment. In 2001, the number of workers contributing to the social security system has still been growing (see below), which shows a continuing growth of employment despite the moderate growth forecasts for 2001.

However, the government has responded by urging the employers' organisations and the trade unions to reach an agreement to reduce business costs and reform collective bargaining (ES0107150N). The government has also raised taxes on basic products such as petrol, diesel, butane and rail travel, in addition to personal income tax. However, according to the Minister of the Economy, Rodrigo Rato, paying more taxes is not sufficient. Wage moderation is also necessary. The purchasing power of workers is, he claims, not under threat today, in a framework of stable prices (inflation of 2.5% to 3%) and low interest rates, which means lower mortgage payments. Therefore, Mr Rato considers that wage moderation is the key to overcoming the crisis, because it will allow companies to reduce costs and increase investment.

Wage moderation and reform of bargaining structure

The Ministry of the Economy's call to the social partners to reach an agreement on wage moderation and the reform of collective bargaining structures may be successful. The Spanish Confederation of Employers' Organisations-Spanish Confederation of Small and Medium-Sized Enterprises (Confederación Española de Organizaciones Empresariales-Confederación Española de Pequeñas y Medianas Empresas, CEOE-CEPYME), the Trade Union Confederation of Workers' Commissions (Comisiones Obreras, CC.OO) and UGT hope to reach a new intersectoral agreement for 2002 in a climate of mutual understanding, focusing on the two key issues identified.

The proposed agreement would recommend wage moderation in future bargaining over new collective agreements. The aim is to respond to fears that the downturn will affect employment and reduce the competitiveness of the Spanish economy. No specific figure or pay-growth band is proposed for pay rises, but it is stressed that inflation forecasts are around 2%. Another recommendation would be to take into account increased productivity and to use wage guarantee clauses. Such clauses would maintain the purchasing power of workers and thereby safeguard domestic consumption. This is an important point in Spain due to the high proportion of temporary employment, which makes jobs very vulnerable in times of crisis. The crisis of 1991-4, for example, immediately led to a fall in consumption and major job losses.

A key feature of this possible agreement on wage moderation is the absence of concrete figures for pay rises. In the last major round of wide-ranging concertation between the social partners, leading to the intersectoral agreements signed in April 1997 (ES9706211F), no accord was reached on pay. The last agreement on a pay-growth band was in 1984.

A possible agreement on the reform of the structure of collective bargaining would be an important achievement after many months of bargaining. These tripartite negotiations began in spring 2001, but in the autumn they were considered to have failed because both CEOE and the trade unions disagreed with the government's proposal. The government then threatened to impose a unilateral reform. However, at the last minute the Ministry of the Economy came up with the idea of a 'macro-pact', including both the reform of collective bargaining and wage moderation. The government has agreed to not introduce legislation unilaterally, in exchange for industrial peace and the acceptance of guidelines to streamline the negotiation of collective agreements in 2002 (which will start with the Spanish Presidency of the European Union). The provisional text of the accord represents a call for responsibility in order to foster economic growth and employment. The fears of an employment crisis have encouraged the parties to sign the pact which, in addition to regulating industrial relations, may provide symbolic support to overcoming the 'crisis of expectations' in the Spanish economy.

More people covered by social security

Despite the first signs of an employment crisis, as noted above the number of workers contributing to the social security system continues to increase. The increase started in 1993. The number of contributors rose from 11,016,436 in 1993 to 12,5534,662 in 1996, as the Spanish economy recovered from the economic crisis of 1991-4. During the upward economic cycle between 1995 and 2000, the number of contributors rose to 15,876,290, which was a record level - see the table below. Even in 2001, considered by some analysts as a year of lower economic growth, the number of contributors to the social security system rose by almost 700,000. The growth is particularly high in the general social security system, which in 2001 received 600,000 new contributors, a 5.4% increase over the previous year. The number of self-employed contributors also rose, but only by 1.2%. The number of persons contributing to the special agricultural system fell. Overall the social security system has 4.2% more contributors in 2001 than in 2000.