1998 Annual Review for Spain

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This record reviews 1998's main developments in industrial relations in Spain

Introduction

In 1998, the tendency towards economic growth and macroeconomic stability that began in the mid-1990s continued. The year closed with a growth rate of 3.7% of GDP, slightly higher than the 1997 figure of 3.5%. The macroeconomic stability indicators also improved: the public sector deficit fell from 2.6% of GDP in 1997 to 2.1% in 1998; inflation continued to hit record lows (1.8% at the end of the year); and interest rates continued to fall. The government's forecasts for 1999 are for continued economic growth (3.8% of GDP), reduction of the deficit (to 1.6% of GDP) and stable prices and interest rates. The unemployment rate stood at 18% in December 1998, according to Eurostat.

The government and the employers' organisations see these figures in a very optimistic light. In the current situation of political stability and economic expansion, the main objective of economic policy has been to consolidate macroeconomic stability and to accelerate convergence with the rest of the EU. With this goal in mind, the policies of limiting social expenditure and privatising public companies were reinforced in 1998, and economic growth was encouraged through a sharp increase in public investment and a tax policy that favours companies and those in higher income brackets (ES9812290F).

However, these figures are not interpreted with the same optimism in all quarters. The trade unions see the current economic situation as positive, especially the evolution of employment, which rose by 3.5%. Another positive point for the unions is the increase in employment on open-ended contracts, though the rate of temporary employment is still very high. However, they refuse to accept that economic policy should place the objectives of growth and stability before cohesion and social welfare. Budget cuts in education, health and unemployment cover (ES9810286F), as well as the regressive nature of the government's tax reform (ES9803250N) have caused great unrest, threatening serious problems for social dialogue and concertation.

The conservative People's Party (Partido Popular, PP) is in government, with the support of conservative nationalist parties from Catalonia and the Basque Country.

Key trends in collective bargaining and industrial action

The intersectoral bargaining and dialogue agenda was dominated by employment issues in 1998 (see below).

According to figures from Spain's two main trade union confederations - the Trade Union Confederation of Workers' Commissions (Comisiones Obreras, CC.OO) and the General Workers' Union (Unión General de Trabajadores, UGT) - collective agreements concluded in 1998 produced an average pay increase of around 2.6% (inflation stood at 1.8% at the end of the year). The UGT figures find an average annual collectively agreed working time of some 1,756 hours (down from 1,765 in 1997). Although the figures from the two confederations vary, it seems that around 4,000 agreements were signed in 1998, covering over 7 million workers. According to the UGT statistics, there were 2,785 company agreements, covering some 830,000 workers, and 869 sectoral agreements covering over 6.6 million workers. CC.OO finds that there have been changes in the structure of bargaining: while provincial-level sectoral bargaining remains the most important level, national sectoral bargaining is gaining ground.

In 1998, clauses on employment continued to become increasingly important in collective bargaining in large companies, converting temporary contracts into open-ended contracts in line with the April 1997 intersectoral agreement on employment stability (see below), or into "permanent-discontinuous" contracts to fill vacancies or when temporary contracts expire. Figures published in 1998 indicated that clauses on employment featured in 7% of company agreements and affected 18% of the workers subject to company-level collective agreements (ES9809280F). Clauses on net creation of employment: affected only 4.1% of relevant workers. Clauses on conversion of contracts affected 11% of workers and those on maintaining employment 17%. Other trends in company bargaining included: the negotiation of early retirement, phased retirement and voluntary redundancy in exchange for recruiting young people; more provisions on collective rights, consultation, control of overtime, trade union guarantees and the involvement of unions in continuing training and health and safety; and restrictions on access to certain bonuses and the erosion of some rights and social benefits.

Notable bargaining developments in 1998 included: a sectoral agreement in metalworking on rationalising the the structure of bargaining - the first such agreement to be signed following 1997's intersectoral agreement on bargaining (ES9805153F); an innovative agreement on dismissals for objective reasons in the Vilafranca del Penedès wine-making sector (ES9802244F); the conclusion of a first unified agreement for the 100,000 non-civil service staff of the central state administration (ES9812190F); and an innovative agreement on starting salaries and occupational classification in the chemicals industry (ES9810185F).

High-profile industrial disputes included those at: the Ford Almussafes plant (ES9811288F); Miniwatt (ES9809180F); ENATCAR (ES9806267N); and the nationalised coal mines (ES9802245F). The year also saw the establishment of the Intersectoral Mediation and Arbitration Service (Servicio Interconfederal de Mediación y Arbitraje, SIMA), with the role of implementing the social partners' 1996 agreement on resolving labour disputes out of court and the regulations accompanying this agreement (ES9809181F).

Industrial relations, employment creation and work organisation

Job creation and the improvement of existing jobs continued to be the main focus of dialogue and social concertation. In 1998, 440,900 jobs were created and the number of persons in employment grew by 3.5%, almost the same rate as the economy (3.7%). This was an even better result than that in 1997, which closed with a 3% increase in employment and an economic growth rate of 3.5%. However, in Spain the "employment crisis" is still a crucial problem because employed people represent only 40% of the active population and almost a third of them do not have stable jobs. It is therefore to be expected that in the next few years, even at the present rate of job creation, unemployment and unstable employment will continue to be major problems.

For the first time in many years, 1998 began with a certain degree of consensus between the social partners on employment policy. This consensus had been laid down in the intersectoral agreement on employment stability signed by the main employers' associations and trade unions in April 1997 and later converted into a law (ES9801239F). The agreement criticised the abuse of temporary recruitment in both social and economic terms, and presented stable job creation as a priority objective. It marked the beginning of a policy of stimulating permanent recruitment through economic incentives and a reduction in the cost of dismissal. The agreement also established commitments to set up bargaining committees on other subjects related to employment.

However, the process of social concertation deteriorated in 1998 and on many questions bargaining came to a standstill, or only partial agreements were reached (ES9812291F). The National Action Plan (NAP) for employment presented by the government in response to the EU Employment Guidelines was welcomed by the employers but severely criticised by the unions (ES9805152F), which claimed that there was insufficient public funding and a reluctance to negotiate topics such as a 35-hour working week or penalising the use of temporary contracts. In the second half of the year, the process of concertation was renewed within three bargaining committees examining the promotion of stable employment, part-time contracts and unemployment cover. However, none of these committees reached a tripartite agreement.

The key issues in the employment and work organisation debate in 1998 were thus:

• promoting stable employment;

• reorganising and reducing working time;

• part-time employment; and

• unemployment insurance cover.

The social partners all agree on the positive impact of the 1997 intersectoral agreement for employment stability. In 1996, before the agreement, 204,200 open-ended employment contracts were concluded in Spain; after the agreement, this figure rose to 707,500 in 1997 and 971,000 in 1998. This increase in permanent recruitment has not yet had a great impact on the rate of temporary employment but it marks the beginning of a trend that is bringing promising results. The agreement's incentives for permanent recruitment have also encouraged bargaining in large and medium-sized companies, where pacts to stabilise employment have been reached (see above).

Despite the successes, various points of conflict on this topic have also arisen. The trade unions favour penalising economically the use of temporary contracts and not merely providing incentives for permanent contracts. This proposal met with strong opposition from the employers and hesitant backing from the government: the 1999 state Budget included a 0.5% increase in employers' unemployment insurance contributions in respect of employees on temporary contracts, a far lower increase than was demanded by the unions. Differences have also arisen in the promotion of permanent recruitment: with the backing of the employers, the government has considerably increased the general subsidies to companies that provide permanent jobs, whereas the trade union proposal was to establish more selective criteria and to introduce greater control in order to prevent the incentives from becoming indiscriminate subsidies to companies

Despite the commitments made in 1997 to begin a dialogue on reorganising and reducing working time, social concertation at national level has not shown results. The employers continue to favour collective bargaining on this issue at a sector and company level, while the government refuses to act unless the social partners first reach an agreement. However, a number of pacts for employment at regional level have made progress in this direction in 1998 (ES9811188F). In Catalonia (ES9805154F) and Castilla-León, decrees have come into force to promote job creation by reducing and reorganising working hours, and 10 other autonomous communities are studying this question or have reached agreements. Some autonomous regional governments have urged the bargaining parties to reach an agreement and, if they fail to do so, have taken the initiative of unilaterally establishing incentives for job creation. These are innovative measures that pave the way for worksharing, but the funding is insufficient for them to have a major impact. Furthermore, in collective bargaining there has been no widespread reduction in working hours in favour of job creation.

The government and the employers have long seen the promotion of part-time employment as a measure in favour of employment which is an alternative to the union demand for shorter normal working hours. In Spain, part-time employment has been growing slowly but steadily since the early 1990s, but it still represents only 8% of the total - far below the EU average. Paradoxically, it was the trade unions rather than the employers which reached an agreement on this issue with the government in November 1998 (ES9811289F). The deal introduces a new form of part-time employment contract and aims to to reflect the content of the 1997 EU Directive on part-time work (97/81/EC), combining labour flexibility with guarantees of non-discrimination and equal treatment. The new part-time contract thus introduces two important new features: a regulation of working hours that - particularly in the case of temporary part-time contracts - seeks to avoid abuses of the system; and a level of social protection comparable to that of full-time contracts. However, the effectiveness of this agreement is doubtful because the employers have opposed it, considering that the new contract is too inflexible for companies.

The social partners all give priority to active employment policies, but the unions feel that this should not involve a reduction in unemployment insurance cover. However, in the 1999 Budget, the government has reduced the amount assigned to unemployment benefit by 9.5% over the previous year, stating that this level of funding is sufficient due to the positive trend in employment. This measure has caused great unrest among the unions, which consider the current system of unemployment cover to be too restrictive: at present , only one in two unemployed people receives unemployment benefit, and in slightly over half the cases the benefits are non-contributory and represent only 75% of the minimum wage (ES9810183F).

Health and safety remained a key industrial relations issue in 1998. The industrial accident rate in Spain is still the highest in the EU, and even since the Law on Prevention of Occupational Risks came into force, the rate has continued to increase (ES9806157F). This situation has been a continuous source of conflict, particularly in the sectors with the highest accident rates (ES9810187N and . At the end of 1998, a summit on industrial accidents was organised by the Ministry of Labour in order to approve an emergency plan to deal with this problem. Although the plan was welcomed by the social partners, there were differences of opinion: the employers stressed the lack of a culture of prevention among employers and workers; whereas the unions consider that the problem lies in the employers' failure to comply with the existing regulations.

Developments in representation and role of the social partners

The UGT union confederation held its 37th congress in March (ES9804251F). At the congress, UGT set out the main lines of its strategy for the coming years, focusing on employment and the fight for the welfare state. The most noteworthy proposal was perhaps the call for a 35-hour working week established by law and without a reduction in wages. Another point discussed at the congress was organising unemployed people, resulting in the creation of a services structure (information, guidance and training) and a commitment actively to encourage unemployed people to join UGT's sectorial federations. A specific union was also set up for self-employed workers, with its own identity but closely linked to the confederation.

Organising unemployed workers was also a wider theme in 1998. In February, a National Commission of Associations of the Unemployed for Employment (Mesa Nacional de Asociaciones de Parados para el Empleo) was founded by 15 associations of unemployed people, with the objective of claiming "the right to work and social care". The establishment of the committee had a considerable impact, but its activity during the year received less attention.

In February, leadership elections were held in the Spanish Confederation of Employers' Organisations-Spanish Confederation of Small and Medium-Sized Enterprises (Confederación Española de Organizaciones Empresariales-Confederación Española de la Pequeña y Mediana Empresa, CEOE-CEPYME). The employers supported continuity and José María Cuevas won a fifth term as chair of the organisation. The strategy outlined by the leadership included: support for fiscal reform involving a reduction in employers' social security contributions and in the tax on economic activity; calls for the reform of public expenditure on pensions, health and unemployment and criticism of job creation in the public sector as artificial; rejection of the 35-hour working week because it would not solve the problem of unemployment; and renewed criticism of the role of the courts in industrial relations, and particularly in the field of termination of contracts, with a call for the non-intervention of the courts in dismissals and the repeal of legislation dealing with this matter.

Debates on European-level worker representation issues had relatively little impact in Spain during the year. Discussions on the European Company Statute had no great resonance, with worker participation on boards of directors in Spain limited to public or recently privatised companies. The development of European Works Councils in multinational companies operating in Spain is not yet a widespread practice and is largely limited to the automobile and chemicals sectors.

Industrial relations and the impact of EMU

Trade unions, the employers and the government are in favour of the EU single currency because they feel that the monetary strength and stability that it involves will lead to improvements in the Spanish economy. However, each partner emphasises different aspects and different effects that it will have on the social system and on industrial relations.

The employers and the government have stressed the advantages that this new situation will bring for companies and for the competitiveness of the Spanish economy. The forecasts are optimistic: if the current policy of budgetary restriction continues, it will be possible to accelerate the convergence process with the EU and to raise income levels in Spain to the European average in the next four to five years.

The unions have stressed the "other face" of convergence, which is not considered - or only indirectly considered - in the Maastricht Treaty. They have thus demanded that the government make a great effort to bring Spain further into line with Europe in areas such as employment and social protection. The topics of the employment crisis and the welfare state are those that caused the greatest differences of opinion and conflict between the social partners in 1998.

Conclusions and outlook

The themes of job creation and the improvement of existing employment dominated in 1998 and are likely to do so again in 1999. The government's budget cuts in education, health and unemployment cover and its tax reform continue to cause great unrest, threatening serious problems for social dialogue and concertation.

The social partners' proposals for the 1999 collective bargaining round reveal greater than usual differences amongst the partners and clearly divergent positions on two important topics - the new form of part-time employment contract (see above) and pay increases. There are thus indications that bargaining in 1999 will be quite problematic. CC.OO and UGT want to focus more than ever on employment, highlighting stable employment, shorter working hours and the regulation of temporary employment agencies. CEOE is recommending that employers should reject the new type of part-time employment contract. The disagreements between the unions and the employers on this question - and on the social dialogue process in general - have lead to considerable friction and may have repercussions on bargaining. As for pay, conflict may be expected in 1999, because a number of trade unions (and especially UGT) believe that the time has come to obtain a widespread improvement in purchasing power by putting an end to the wage moderation of the last few years. For its part, CEOE is recommending an increase of 1.1%, which is the projected rate of European inflation for 1999 (considerably lower than the official inflation forecast for Spain), The employers' organisation claims that the European figures should be used as a frame of reference to contribute to the process of convergence of the Spanish economy, although it is willing to accept higher increases if they are compensated by significant increases in productivity. (CIREM)