First two years of the agreement for employment stability assessed

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In summer 1999, at the half-way point of the Spanish social partners' four-year pact for employment stability, later endorsed by parliament, the parties have evaluated its results. After two years, employment - and especially stable employment - has increased significantly. However, there has been no substantial decrease in the level of temporary employment and contract turnover continues to increase.

In April 1997, Spanish trade unions and employers' confederations signed an important intersectoral agreement on employment stability (ES9706211F). The agreement, which was later endorsed by parliament, attempted to address Spain's very high level of insecure employment, with few open-ended employment contracts being signed and temporary employment at very high levels by EU standards. In order to encourage more permanent employment, the agreement notably created a new type of contract called the "permanent employment promotion contract" (contrato para el fomento de la contratación indefinida). Under these new contracts, the compensation payable for dismissal is reduced in some circumstances, while employers' social security contributions are cut in respect of the workers' concerned. The agreement runs for four years and in mid-1999 the social partners have been assessing its results.

Employment trends since the agreement

As indicated by the table below, in the first two years of the agreement's validity (one year and nine months for statistical purposes) employment grew by 563,000 permanent jobs and 110,200 temporary jobs, making a total of 673,200. If the first quarter of 1999, were added to make up a full two years, the figure would probably be 800,000. More than 80% of the total are permanent jobs. There has therefore been a significant growth in employment, and particularly in stable employment. This growth has been above the average in the priority groups targeted by the agreement: women and young people. This has had a clear effect on the rate of unemployment, which fell from 22% in April 1997 to 17% in April 1999. However, on the whole the rate of temporary employment has fallen very little, and is far higher than the EU average.

Stable and temporary employment among wage earners in Spain, 1997-8
Stable contracts (000s) Temporary contracts (000s) Temporary contracts as % of total
1997, 2nd quarter 6,387.6 3,238.5 33.6%
1998, 4th quarter* 6,951.2 3,348.7 32.5%

* No official data for the second quarter of 1999.

Sources: Survey of the Active Population, INE; INEM figures (elaborated by CC.OO and UGT).

The above is only one aspect of the phenomenon. The second aspect is the number of employment contracts signed during the period of the agreement. In 1995-6, a total of 15,957,600 contracts were signed, of which only 721,000 were permanent (4.51%). In the following two years, during which the agreement was in force, 22,912,785 contracts were signed, of which 2,011,741 were permanent (8.78%). This increase in the total number of contracts is spectacular, and the proportion made up by permanent contracts has practically doubled. The ratio of permanent contracts to temporary contracts has improved almost every month in favour of the former, and 11% of the contracts signed in April 1999 were permanent. It should also be pointed out that most of the permanent contracts are in companies with fewer than 50 workers.

However, the most striking phenomenon is the turnover of contracts for the same job. In 1998, contracts with a duration of less than one month represented 58% of the total number of contracts, and contracts with a duration of less than three months represented 82%.

Positions of the social partners

In June and July 1999, trade unions, employers' associations and the government have given their assessments of the first two years of the agreement (EIRO is grateful to CEOE-CEPYME, CC.OO and UGT for permission to consult the reports that they drew up on the second anniversary of the agreement). Although all parties stress that the increase in employment and in stable employment is positive, they differ in certain aspects that are essential to the future of the agreement or of similar pacts.

Trade unions

The trade unions see the growth in employment and the considerable increase in permanent contracts - in both relative and absolute terms - as a success. They say that the employment stability agreement has not been the only factor, but that it has been one of those that has most contributed to increasing permanent employment. The fact that a large number of permanent jobs are created through the conversion of temporary jobs is seen as a good indicator of the positive operation of the agreement.

The weak points for the unions are temporary employment and turnover. Temporary employment as a proportion of the total has fallen only 1.1 percentage points, and that only in the private sector, whereas in the public sector it has risen from 15.6% to 18.7% of all employment. The rate of temporary employment is still unacceptable in comparison with other countries of the EU - at 32.5%, an average of 22 points higher.

For the CC.OO union confederation, it is necessary to study why the agreement has had little effect on turnover and to find remedies for this. It also states that: the high level of temporary employment is to a large extent due to the weakness of the Spanish production structure and radical measures are thus needed; temporary employment must be reduced drastically in the public sector; and the new law on temporary employment agencies must be modified (ES9907140F). In the areas where the results of the agreement are poor, the CC.OO general secretary attributes this in large part to the government's labour policies.

The UGT confederation makes an even stronger criticism, describing the continuing high level of temporary employment as a failure and the increase in turnover as a disappointment. It states that "causation" is often not fulfilled with regard to temporary contracts, because "companies continue to maintain an excessive number of temporary workers", owing to lack of control by the government. It believes that the use of temporary recruitment should be regulated more restrictively, eliminating any type of economic advantage for employers (ES9906137N).

Employers

The CEOE employers' confederation is emphatic in the conclusions of its assessment: "all the commitments made in 1997 have been scrupulously fulfilled." It emphasises the job creation and the reduction in unemployment that have been achieved in the past two years, in both cases in proportions higher than the EU average. Regarding temporary employment, CEOE mentions only the change in the overall tendency, whereby the rate has risen in the public sector and fallen in the private sector, but does not refer to the high overall level. On the other hand, the employers are critical of the results of the new part-time work contract (ES9811289F) and the new "discontinuous permanent" work contracts, and claim that they differ from the concept of these contracts in the rest of Europe. Nor does CEOE agree with the recent increase in employers' unemployment insurance contributions in respect of employees on temporary contracts.

Overall,CEOE makes a positive assessment of the employment stability agreement and believes that the dialogue between the social partners should continue. It is therefore critical of proposals that do not, in its view, involve such dialogue, such as changes to the law on temporary employment agencies(ES9907140F) or a reduction of working hours by law, as demanded in some quarters (ES9902297F). It also rejects agreements between the government and the trade unions that exclude CEOE, such as that on improving part-time employment.

Government

The government presents a very positive view of the two-year period, arguably ascribing much of the credit for the results to the government's economic and labour policy. The Ministry of Labour states that the government is disposed to give its approval to all agreements that the social partners reach on labour issues and the employment market, but is less favourable to employment policies that require major public investments.

Commentary

The increase in employment and the reduction in unemployment are undeniable and positive results of this period. It would be hazardous to attribute them primarily to the employment stability agreement, since a series of far more complex factors are involved. These include the improvement in the European and international economic situation, the increase in domestic demand and Spanish exports and the improvement in the social climate, as well as the benefits arising from the agreement. Part of the growth in employment, according to many experts, must also be attributed to the emergence of undeclared jobs that are now being legalised in the better economic climate.

However, the increase in contract turnover and the maintenance of temporary employment are phenomena with a great negative potential for the labour market and working conditions. They hinder professional development, make planning difficult and contribute to dividing society into two parts. All the analyses demonstrate that the wages and working conditions of temporary workers continue to get worse. The large extent and persistence of such a situation is inadmissible from the viewpoint of social justice, and its striking presence in the public sector arguably denotes a lack of sensitivity on the part of the government.

Some type of regulation seems appropriate, whether by law or through bargaining - or better both - in order to reduce the level of temporary employment, which is the central problem of the labour market and the clearest indicator of the current crisis in employment. Measures should also be taken to stop abuses and exploitation by temporary employment agencies. The employment crisis is the greatest obstacle to well-being in Spain, above all for the weakest social groups. Until it is remedied, the trade unions have few reasons for celebration. (Fausto Miguélez, QUIT-UAB).

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