Disagreement between government and unions on unemployment cover

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Unemployment cover - that is, the number of eligible people who may claim unemployment benefit - is the cause of a serious controversy between the government and the trade unions in Spain. In the draft state Budget for 1999, released in autumn 1998, funds allocated for unemployment benefit have been cut by 9.5%. The government maintains that, because of the positive development of employment prospects in the economy, the amount allocated is sufficient. The unions, however, feel that this is in sharp contradiction with their demand to increase unemployment cover, a central topic in the negotiations between themselves and the government.

In autumn 1998, the draft of the Spanish state Budget for 1999 has led to a serious disagreement between the government and the trade unions on social and employment policy, which may represent a major setback in the recently renewed process of dialogue and social "concertation". The draft budget of the National Institute for Employment (Instituto Nacional de Empleo, INEM) has been one of the most seriously criticised points: the unions consider that the budget allocated for unemployment cover is insufficient and sharply contradicts their demand to increase the cover, a high-priority objective of the unions in negotiations with the government.

Evolution of the unemployment cover system

In Spain there are two types of benefit for unemployed people:

  • contributory. This type of benefit is for people who have lost their employment and have made contributions for a certain period of time. It is governed by actuarial principles - the amount of benefit bears a certain relationship to previous earnings. Its duration depends on the period of contribution; and
  • non-contributory. This type of benefit is for people who have lost their employment, cannot obtain contributory benefit (because they have not contributed for sufficient time to be eligible, or because they have come to the end of the period for which they were eligible) and do not have a certain income level. The amount is not related to previous earnings but to the National Minimum Wage (Salario Mínimo Interprofesional, SMI). Its duration depends on a period of contribution (shorter than that for contributory benefit) and the beneficiary's situation with regard to criteria such as age or family responsibilities. There is also a special type of non-contributory benefit for casual agricultural workers in the autonomous communities of Andalusia and Extremadura.

The current Spanish system of unemployment cover originated in 1980 with the Basic Employment Law, which separated unemployment cover from the general social security system. Reforms in 1984 and 1989 extended the levels of cover, particularly for non-contributory benefit. However, from the early 1990s, restrictive approaches were adopted in order to reduce expenditure on unemployment. This change of direction was captured in a 1990 reform, which affected casual agricultural workers, and above all in reforms of the general unemployment system in 1992 and 1993. These reforms limited eligibility and duration, transferring a large number of people from contributory benefits to non-contributory benefits, and reduced the amounts of both types of benefit. The expenditure on unemployment benefit fell from 3.4% of Gross National Product in 1993 to 1.8% as forecast in the 1998 state Budget.

Analysis of the number of beneficiaries of unemployment benefit clearly shows the impact of this new political direction - as indicated by the table below. The number of beneficiaries of non-contributory benefits grew steadily until 1993, when it reached almost 900,000. From then on it decreased to slightly above 500,000 in 1998. The number of recipients of contributory benefits fell similarly over this period. Amongst casual agricultural workers, between 1990 and 1998 the number of recipients fell by about 100,000. The impact of the reforms is therefore clear: in 1993 almost 2 million people received some type of benefit and the rate of cover of registered unemployed people was 67%, whereas by 1998 only around 1 million people received benefit and the rate of cover had fallen to 49%. Furthermore, if, instead of taking the INEM's data of registered unemployed people, the unemployment data of the Survey of the Working Population are used, then the level of cover is far smaller.

Levels of unemployment cover in Spain, 1990-8
. Beneficiaries of the unemployment cover system (000s) Gross rate of cover (2) (%)
Year Total(1) Contributory benefit Non-contributory benefit Non-contributory benefit for casual agricultural workers .
1990 1,301.8 498.6 508.5 294.7 42.9
1991 1,428.0 613.1 575.5 236.3 51.9
1992 1,630.3 728.3 700.6 201.4 63.2
1993 1,933.0 834.4 871.2 223.9 67.2
1994 1,758.7 738.4 793.1 227.2 57.9
1995 1,458.5 626.6 615.8 216.1 50.7
1996 1,342.1 592.4 557.4 192.3 50.5
1997 1,240.6 530.5 517.4 192.7 49.5
1998 (3) 1,191.3 492.4 514.2 184.5 49.3

1) The total does not include recipients of contributory benefit for partial unemployment, which is not strictly unemployment cover and is hardly used at present.

2) The gross rate of cover is the total of number of recipients of contributory benefit, non-contributory benefit and non-contributory benefit for casual agricultural workers, divided by the total number of registered unemployed people and expressed as a percentage.

3) The 1998 data refer to the first four months of the year.

Source: INEM, Boletín de estadísticas laborales.

Positions of the government and unions

The reforms of the system of unemployment cover of the 1990s were carried out by socialist governments and were widely rejected by the trade unions, social organisations and left-wing political parties. The policy of the current centre-right government has so far been to continue this line of action and to introduce stricter control of recipients of unemployment benefit in order to avoid fraud. However, it has not undertaken a large-scale reform.

One of the core topics of the process of dialogue and social concertation between the government and the trade unions that was reopened in mid-1998 was the increase in unemployment cover (ES9807281N). For the unions this was a question of top priority: only a few years after the reforms of the 1990s, one in two registered unemployed received no benefit at all, a situation that the claims is not only highly unfair but is also untenable in the medium term. The government's agreement to enter into negotiations on this question seemed to suggest that it was willing to undertake some type of reform in this direction.

In this context, the union proposals were arguably relatively moderate and compatible with the current policy of control of expenditure and the public sector deficit. Their immediate objective was to facilitate eligibility to non-contributory social benefit and to alleviate the situation of the unemployed people in the worst situations: the long-term unemployed and those with family responsibilities. To achieve this they proposed two measures.

  • raising the income requirement from 75% to 100% of the SMI. One of the requirements for eligibility to non-contributory benefit is that the person's income must be less than 75% of the SMI. If this is raised to 100% (as was established before the reforms of the 1990s) a large number of unemployed people will become eligible for benefit; and
  • establishing a new group of unemployed people who are eligible for this benefit - unemployed people with family responsibilities and those over 45 years of age regardless of whether they had contributed previously. At present, in order to be eligible for non-contributory benefit a claimant must have contributed previously.

The unions calculated that these measures would allow 295,000 more unemployed people to obtain non-contributory benefit, at a cost of PTA 230 billion. This is a low figure because the amount of non-contributory benefit is very low, at 75% of the SMI (ES9801240N).

However, the draft of the state Budget for 1999 clearly indicates that the government has no intention of increasing unemployment cover, since it has cut funds by 9.5% - approximately PTA 140 billion - over the previous year. Paradoxically, although INEM will have a surplus next year, about 800,000 registered unemployed people will not receive any benefit. Transfers from the state to the budget of the INEM also continue to fall: in 1999 they will amount to 7.5% of INEM's budget, whilst in 1998 they came to 11% and before the reforms they were around 40%.

Commentary

The reforms of the early 1990s involved a major cut in unemployment cover. Amongst the arguments that the socialist government of the time put forward was the excessive generosity of the Spanish system of unemployment cover in comparison with other European countries and its negative effects on the labour market because it was a disincentive to employment-seeking. These arguments have been repeatedly refuted by the studies that have been carried out on this topic.

The system of unemployment cover in Spain is not overly generous. The contributory benefit is similar to that of other EU countries in the amount paid and eligibility for cover, although the high degree of insecure employment means that many people who alternate between temporary employment and unemployment are not eligible. Also, unlike many other EU countries, Spain has no general system of minimum income, and non-contributory benefit is not available to a large number of people without employment and in a situation of need. Comparisons should bear in mind the specific situation of the labour market in Spain, where unemployment and temporary employment are far higher than in other EU countries. In this context there is no evidence to show that the unemployment cover system has negative effects on the labour market.

The draft of the state Budget for 1999 has blocked the negotiation process between the government and the trade unions. It remains to be seen to what extent public rejection of the cuts in unemployment cover will force the government to reconsider. For the unions, this is a high-priority question and the organisations of unemployed people, which have been reactivated this year (ES9803249F), can also play a major role. (María Caprile, Fundación CIREM)

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