Spain: Latest working life developments – Q4 2016

The installation of the new government, a joint communiqué from the social partners, salary recommendations for 2017 and proposed reforms of the pension system are the main topics of interest in this article. This country update reports on the latest developments in working life in Spain in the fourth quarter of 2016.

New prime minister appointed

After more than 300 days of a temporary acting government, Mariano Rajoy, leader of the Popular Party, was appointed as prime minister in October 2016. The main challenges faced by the new government include high unemployment, low employment quality and reform of the pension system.

Social dialogue gains strength

In November 2016, government representatives held a meeting with representatives of the Spanish Confederation of Employers’ Organisations (CEOE), the Spanish Confederation of Small and Medium-Sized Enterprises (CEPYME) the Trade Union Confederation of Workers’ Commissions (CCOO) and the General Workers’ Union (UGT). The government declared its public budget and public deficit commitments as non-negotiable. Employers’ representatives argued that any measures agreed should not harm economic recovery or business competitiveness. Trade unions demanded greater purchasing power and increased salaries for workers. Despite their differences, the social partners published a joint communiqué setting out the main issues (PDF) that required urgent action. These matters included:

  • employment quality improvement;
  • boosting r employment activation;
  • increased unemployment protection with special attention to the long-term unemployed;
  • improvement of the functioning of the Youth Guarantee Plan;
  • reform of the pension system;
  • determination of the 2017 statutory minimum wage.

Issue of low salaries

In November 2016, the National Institute of Statistics (INE) published for the first time the Index of Work Prices (PDF) for the period 2008–2014. The aim of the index is to measure changes in the price of labour. It showed an average decrease of 0.7% in the hourly wage between 2008 and 2014.

Trade unions claimed that these figures were a clear indicator of the dramatic salary devaluation suffered in Spain. Additionally, the president of the Spanish Economic and Social Council (CES), Marcos Peña, said it was essential that salaries increase, so as to reinforce social cohesion and enhance the revenue from the social security system.

Various stakeholders, particularly left-wing political parties and trade unions, believe that the 2012 labour reform led to the worsening of working conditions, including decreasing salaries. Since the formation of the new Popular Party government in October, the Socialist Party has started to look for a way to abolish the 2012 reforms.

Salary recommendations for 2017

The Agreement for Employment and Social Dialogue 2015–2017 (PDF), signed by Spanish social partners in May 2015, recommended a 1.5% pay rise in 2016. In practice, provisional data show that average agreed increases in 2016 were around 1.1%. In December 2016, the debate about salary recommendations for 2017 was ongoing. CCOO supported a salary increase of 1.5% for 2017 and UGT proposed a 4% increase. Employers supported a more moderate increase, as salary moderation is one of the factors that has helped Spanish companies to recover competitiveness lost during the financial crisis.

Proposed pension reforms

In the third quarter of 2016, the unemployment rate was below 20% for the first time in six years. However, the growing income from new jobs’ social quotas is not likely to be enough to compensate for the increase in retirement pension costs.

To address the issue of pension costs, various political, social and economic stakeholders reactivated the Commission of the Toledo Pact in November 2016. The Toledo Pact was an ambitious reform, approved by the Spanish parliament in April 1995, based on a broad social arrangement designed to streamline and guarantee the future of the Spanish social security system. As part of this Commission, the Popular Party announced its intention to allow employees to work (with full salary) while receiving 100% of the retirement pension. This would have modified the 2013 pension reform which allowed combining employment with 50% of the retirement pension. Most members of the Commission did not accept this proposal. Alternative proposals included introducing taxes to finance pensions.


Looking ahead at 2017, the Spanish debate is likely to be dominated by three main topics:

  • the expected economic recovery and its effects on employment (in both quantitative and qualitative terms);
  • the debate about salary increases after more than five years of freezing or reducing salary levels;
  • possible future negotiated changes in the labour reform approved in Spain in 2012 by the ruling Popular Party (with the opposition of all political parties).
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