Spain: Latest working life developments – Q2 2017

Ongoing talks on a national pay agreement, the rise in precarious employment and social inequalities, and a new government measure to promote the hiring of NEETs are the main topics of interest in this article. This country update reports on the latest developments in working life in Spain in the second quarter of 2017.

Ongoing social dialogue negotiations

Changes to the Agreement for Employment and Social Dialogue 2015–2017, signed by Spanish social partners in May 2015, were still under discussion as the agreement for the 2017 pay increase had not been reached. At the beginning of the year, negotiations were at an impasse; the General Union of Workers (UGT) and Workers’ Commissions (CCOO) demanded a pay increase of between 1.8% and 3%, while employer organisations – the Spanish Confederation of Business Organisations (CEOE) and the Spanish Confederation of Small and Medium-Sized Enterprises (CEPYME) – proposed a maximum increase of 2%.

However, at the end of March 2017, the social partners held an emergency meeting to try to reach an agreement by 1 May (Workers’ Day) and employer organisations accepted that the pay increases would have to be higher. However, one month later, the agreement was still to be signed, and on 1 May unions called for protest action in the form of demonstrations.

The key issue in these negotiations was inflation, together with the purchasing power lost by workers (-2.2% in 2016) which unions wanted to recover. The unions then made a formal demand for the activation of a wage guarantee clause to compensate for the increase in the 2017 Consumer Price Index (CPI). In June, there appeared to be a consensus among UGT, CEOE and CEPYME to set the pay increase range between 1.2% and 2.5%, while CCOO wanted the top rate to be 2.75%. The agreement would also include a clause guaranteeing the purchasing power of wages (only to be activated if the end-of-year CPI exceeds 2%).

Increasing social inequalities despite economic growth

During the second quarter of 2017, Spain maintained its economic growth and reduced unemployment to 3.46 million people (an 18.75% unemployment rate), the lowest level since 2009. Conclusions from different studies reflect this positive trend. For example, 25% of SMEs planned to increase their workforce in 2017, while employment in large companies increased by 3.7%. Moreover, 69% of employed workers expected to keep their current job for the next six months, the highest percentage in four years.

Although Spain is in the process of financial recovery, there were some negative aspects to take into account – five out of the ten (PDF) European regions with the highest unemployment levels are in Spain. Spain also has the second highest temporary employment rate in the EU (26.1%), affecting mostly young employees; 33% of the contracts signed in May 2017 lasted fewer than 15 days. Part-time workers also did triple the amount of overtime as in 2008. Furthermore, Spain has the second highest proportion of people in underemployment across all Member States. Some studies also concluded that the Spanish middle class was shrinking and that social inequalities were becoming more acute (PDF).

Ministry for Employment announces new measures for NEETs

In June 2017, the Ministry for Employment announced its intention to give direct aid to people under the age of 30 who are not in education, employment or training (NEETs). This comprises a payment of €430 per month for 18 months linked to a training contract. To be eligible, NEETs will have to be enrolled in the Spanish Youth Guarantee system.

As this system is 90% funded by the EU, the European Commission requested that the Spanish government show evidence of the measure’s potential effectiveness. One crucial aspect of the evidence was the nature of the measure: whether it was a salary supplement or a subsidy. The government insisted that it was a subsidy to be added to ordinary pay (which, at the least, had to be at the level of the minimum wage), as only then would Spain receive the European funding.

Commentary

During the second quarter of 2017, it was expected that the Spanish social partners would reach an agreement on pay, but this was not possible despite their positions getting closer. However, the economic recovery was leading to an increase in more temporary and precarious work, and to the increase of social inequalities. Finally, the Spanish government announced a new subsidy to promote the hiring of NEETs, which would need to meet the European Commission’s requirements.

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