CEOE competitiveness report calls for industrial relations reform

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In December 2003, the Spanish Confederation of Employers' Organisations (CEOE) published a report on the competitive situation of the Spanish economy in the light of increasing globalisation. The report's recommendations include changes to labour market regulation and the industrial relations system.

In December 2003, the Spanish Confederation of Employers' Organisations (Confederación Española de Organizaciones Empresariales, CEOE) published a 'Report on the situation of the Spanish economy: challenges and competitiveness' (Informe sobre la situación de la economía española, retos y competitividad). The general aim of the report was to analyse the current challenges of competitiveness facing Spain. For CEOE, the enlargement of the European Union in 2004, the general process of globalisation and the application of the 'Kyoto protocol ' to the 1992 United Nations Framework Convention on Climate Change (which sets legally binding targets by which developed countries must reduce their combined emissions of 'greenhouse' gases) raise the need for countries to specialise in certain types of production, which requires policies and measures that improve the framework in which companies operate. The global context is also seen as requiring new reforms in industrial and social relations, a new concept of taxation, the development of research, special attention to communications and urban development, and above all production with a high added value. CEOE is in favour of a continuation of the growth of the last few years, stressing the contribution of the construction and service sectors, in the belief that the success of the Spanish economy is based on 'endogenous' factors such as interest rates and family policy funding.

CEOE places its faith in growth governed by policy. It therefore disagrees with fears that Spain's 'real estate bubble' will burst, as has been predicted by some international economic institutions, and with the risks of ecological disasters predicted by economists who are in favour of sustainable development. It also disagrees with the criticism from labour market experts that there is a contradiction between Spain's highly unstable employment situation and the need to base productivity on highly qualified human resources.

Below we examine the policies that the report proposes with regard to work and industrial relations.

The 'labour environment'

According to the CEOE report, the Spanish employment situation has moved in recent years towards convergence with the other Member States of the EU, though there is still some way to go. The unemployment rate has fallen and the employment rate has risen, and 'knowledge society' jobs are replacing traditional industrial ones. The report states that the changes that have taken place in recent years in the labour market, often as a result of social concertation, should now be reinforced 'in order to combine flexibility for companies, more employment and greater job stability and the viability of the model of social protection'.

Labour market

The report states that Spain is the EU Member State that created most employment in between 1994 and 2002 and that, though unemployment is still four percentage points higher than the EU average, there are sectors and areas in which labour shortages are beginning to be noted. Several policies should be developed in order to overcome this situation. First, the integration of women into the labour market, still below the EU average (ES0402104F), should be fostered through policies that reinforce social services providing support to the family (ES0303105F) and that orient women towards traditionally male sectors. Second, the efficiency of public and private employment services (ES0402102F) should be improved by modernising them, coordinating them at all levels and fostering active employment policies. It is also essential to increase the geographic mobility of workers, which the report claims is currently hindered by cultural factors, the difficulty of finding housing (ES0302106F), and the lack of connection between employment services.

There is also a reference to immigrants from abroad (ES0310107F) who do many jobs that unemployed Spanish national do not wish to do. The CEOE report is in favour of allowing in as many immigrants as are necessary, but in an organised way - ie in accordance with the needs expressed by the companies.

The report stressed the importance of training. It states that education has become polarised between those who obtain university degrees and those who hardly finish compulsory education, leaving no room for the intermediate levels that are so important in the labour market. Therefore the challenge is to reinforce the intermediate levels of education by getting more people past the earlier levels. Another challenge is for universities to join the 'European Higher Education Area' in conjunction with the other countries. Lifelong learning forms a fundamental part of this process, and must be adapted to the needs of the production system through a national qualifications system.

Stability and flexibility

The Report claims that the type of contract largely determines the possibilities of flexibility in companies. Companies show a clear preference for temporary contracts because the cost of dismissal is still high for those on open-ended contracts. However, the report states that employers are also highly interested in stability because it is a factor in competitiveness. This cannot be achieved by increasing the already strict regulations on the duration and termination of temporary contracts and the social security contributions applied to them, but by making open-ended contracts more flexible along the lines established by the 1997 agreement on labour market reform (ES9706211F). Instead of selective incentives for particular types of contracts, employers' social security contributions should be reduced for all types in order to favour an increase in employment. The report describes part-time employment as a highly suitable way of managing working time, and feels that more research should be done to discover why it is not more widespread in Spain (ES0106245F).

Collective bargaining

Work organisation and collective bargaining are key factors in the adaptation of companies. The CEOE report mentions several 'good' points of collective bargaining, but points out as 'bad' points: wage guarantee clauses (providing compensation if inflation is greater than the agreed pay increase) (ES0109204F), which may have an inflationary effect; and the principle of 'ultra-actividad' (literally 'ultra-activity'), which means that gains obtained by workers in past collective agreements must be a basis for future agreements (ES0201207F), which could be an obstacle to competitiveness. The report calls for greater autonomy for the bargaining parties to reach decisions and the possibility of individualised labour relations.

Non-wage labour costs

In terms of competitiveness, the report states that certain non-wage labour costs such as compulsory social contributions are increasing excessively. This pressure could be reduced without affecting social expenditure, because the social security system has shown a surplus in recent years, which is currently being used to fund actions that should be paid for by taxation. The reduction in the social costs of companies would stimulate employment and competitiveness, as recommended in the 1995 'Toledo Pact' on the social security and pensions system reform (ES0311201N and ES0306207F).

Commentary

The CEOE report is of great topical importance, though it raises a few questions. Many experts are not sure that the current model of growth is the right path, particularly with regard to the viability of the Spanish social protection model. The report fails to stress the serious situation of precarious employment. It is true that 4 million jobs have been created in recent years, but many of them - more than 30% of the total - are still highly precarious in terms of stability, pay and health and safety at work. They may merely be contracts for a few hours or a few days, without any prospect of stability. This is why Spanish workers have few possibilities of mobility and many of the jobs are taken by immigrants. The report claims that geographic mobility is hindered by cultural factors, the difficulty of finding housing, and the lack of connection between employment services. However, if one bears in mind that until the mid-1970s Spain was a country with much internal migration, it seems that these are not the only real barriers, and that there is another, more obvious factor: the precariousness of many jobs, which makes mobility insecure because there is no guarantee of continuity in pay.

The cost of dismissal (ES0201202N) is not so high today if one bears in mind that 30% of the occupied population are temporary workers and that many processes of restructuring have rejuvenated the workforce.

Despite the regulations on recruitment, in comparison with much of the rest of the EU, the reality for Spanish workers is one of total flexibility and high deregulation. More autonomous collective bargaining with fewer guarantees, as proposed by CEOE, would make it difficult to maintain fair working conditions, considering the weakness of trade unions in most companies. Finally, the Spanish government's use of the social security surplus has neglected many shortcomings of the employment system that create insecurity for workers. (Fausto Miguélez, QUIT-UAB)

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