FAES Foundation publishes the report “Reflexiones sobre el mercado de trabajo: continuar la reforma” in which experts of the field present their analysis FAES presents ten proposals to improve the situation of the Spanish labour market

01/07/2014

    _ 1-Deepening the simplification of contract modalities by converging dismissal costs of all the contracts in a more moderate level, including dismissal costs

    _ 2-Possible minimum wage reduction could be complemented with State aid in order to facilitate the hiring of specific groups, ensuring their welfare standards

    _ 3-Settling a substantial amount of the unemployment benefit throughout the first months of its validity, while maintaining or even increasing the total amount of the benefit

    _ 4-Advancing in the reduction of the general costs related to hiring, through the evaluation of the effectiveness of the current multiple bonus

    _ 5-Increasing the participation of Private Employment Agencies and Temporary Employment Agencies in the mediation to activate unemployed people

    _ 6-Ensuring an adecuate wage to workers' ongoing training as an incentive to investment in human capital

    _ 7-Improving transparency and assesment of active policies and incrementing workers' freedom of choice through training cheques

    _ 8-Strenghtening the legal certainty of collective bargaining

    _ 9-Opening a general reflection on the Spanish public employment model aimed at an incentive scheme that offers more efficiency

    _ 10-Adjusting labour market reforms with others that tend to eliminate bureaucracy and administrative burdens which can make markets more flexible and dynamic

FAES Foundation launched a report on the labour market in Spain, in which its current situation is analysed and ten proposals for improvement are developed. Some of them are: simplifying contract modalities and supporting hiring, adopting incentives to job search by modulating the unemployment benefit or to training and breaking the link between salaries and CPI.

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The report, titled Reflexiones sobre el mercado de trabajo: continuar la reforma, besides the concrete economic cycles, is based on the existing structural problems that affect our labour relations and on the importance of maintaining a permanent reform attitude. In order to do so, the new general proposals suggest globalising and incorporating macroeconomic elements in each labour reform.

Miguel Marín, Economy and Public Policies Director of the FAES Foundation, was in charge of the launch of the report and directed the work together with Valentín Bote, Strategy and Promotion of Labour Director-General of the Community of Madrid, who coordinated it. The authors of the articles included in the document also took part in the event: Rafael Pampillón, from IE Business School; Cristina Mingorance, from CEU University; Felipe Sáez, from Autónoma University of Madrid; Mar Alarcón, from the Community of Madrid; Matthias Schäfer, from Konrad Adenauer Foundation; Annemarie Muntz, from CIETT; Jordi García Viña, from CEOE; y José Luis Moreno Torres, from Democracia y Gobierno Local Foundation.

COST REDUCTION

The first proposal of the report published today is “to advance in the reduction of costs related to hiring in general, and this has to go through evaluating the morass of measures to promote hiring in certain groups of population”. The document advocates for simplifying contracts and for depositing compensation for dismissal to individual saving accounts systems similar to the Austrian model, which resulted successful. We could implement it in Spain “in its pure form or complemented with some moderate dismissal cost modes, but which are increasing for the employer”.

CONTRACT SIMPLIFICATION AND DUALISM

Labour contracts “favour the cyclical behaviour of the labour market, increment its dualism and decrease labour force productivity”. With regard to this, the report suggests: simplifying contract modalities and the bonus aimed at privileging certain groups as well as facilitating the convergence of dismissal costs of all the contracts in a more moderate level.

MINIMUM WAGE

In order to prevent minimum wage from becoming a barrier for entering the labour market, it is recommended to pay attention to the measures that were successful in other countries, such as Germany, where incentives for long-term unemployed people were increased to accept less well-paid jobs through the compensation of these lower wages.

In this regard, possible minimum wage reduction could be complemented with State aid in order to facilitate the hiring of specific groups, ensuring their welfare standards. Said State aid could be awarded through employers’ contributions or through wages.

EMPLOYMENT SERVICES

Another suggested point is strengthening the collaboration between employment pubic services and private employment agencies and temporary employment agencies in order to stop wasting their experience. The report also states that it is important to continue requiring private agencies and temporary employment agencies “to have a high level of transparency, professionalism and engagement as well as to eliminate normative restrictions such as those concerning the type of contract through which they can operate or to eliminate sectorial limitations that are still operating”.

MODULATING THE UNEMPLOYMENT BENEFIT

The report suggests improving the design of the unemployment benefit so that it is no longer considered as “a right to receive an amount of money for having worked, such as the retirement pension” and starts to be considered as an insurance that covers contingencies. The international experience suggests “modulating the amount of the unemployment benefit throughout the months of its validity, assembling a substantial part during the first months, when it genuinely acts as insurance, and valuing decreases of the maximum periods, while maintaining or even increasing the total amount of the benefit”.

It is also necessary to “strengthen the activation and job search actions required to justify in order to receive the total amount of benefits”. Finally, it is recommended to redefine the concept of “suitable job”, this is, the job that an unemployed person should accept when it is offered by the employment service.

COLLECTIVE BARGAINING

Despite the undeniable effort of modernising the collective bargaining in Spain, which led to the 2012 labour reform, some cases of legal uncertainty can still be noted. For this reason, it is essential to “strengthen security in aspects such as the validity of conventional provisions signed before the reform that provided the indefinite ultra-activity of agreements”. In terms of non-application of agreements, it is necessary to clarify the limits of collective autonomy.

 

The report also suggests implementing the dispositions of the “II Acuerdo para el Empleo y la Negociación Colectiva” (agreement on employment and collective bargaining) in terms of maximum wage increases, which should contribute to break the link between wages and CPI in order to adapt them to the economic variables of each company. 

WAGES AND TRAINING EFFORT

In Spain, “investment in human capital does not receive the convenient remuneration so as to act as an incentive for workers to improve their training”. Wages for high-skilled workers are very similar to those received by lower-skilled workers, according to the report. It is necessary to expand the wage range in collective bargaining, so that workers who make a training effort find the convenient incentive and the market reacts to more training.

ACTIVE POLICIES

It is true that active employment policies have had some positive impacts on employability in Spain. However, for them to be more effective, it is suggested to improve the transparency system and evaluation of said active policies and their results as well as the system’s response to ineffective policies such as bonuses in Social Security quotas for specific groups. It is also suggested to give more freedom to unemployed people when it comes to choosing their training, “as would result from establishing modalities such as training cheques” or vouchers for a specific amount of training for unemployed people to decide where to receive it and whether they want to complement it with their own resources.

PUBLIC EMPLOYMENT

The Spanish public employment system is too rigid and suffers from the inexistence of professional careers, a remuneration system that lacks incentives and an inefficient management of temporariness; therefore it would be desirable “to apply incentive schemes to mobility or training for the rest of workers”.

DEREGULATION

The report advocates for continued, mid and short-term economic actions in order to reduce bureaucracy, administrative barriers and regulation of product markets so as to facilitate innovation as well as to promote specific R&D programs.