European Central: Spain’s Government Attacks Temporary Contracts
dreamstimes
Spain's Labor Party Cabinet is taking steps to help protect worker rights. The cabinet approved a measure which would significantly limit the ability of companies to hire employees with temporary contracts. This may significantly help workers in Spain, which is the EU member state with the most workers working on temporary contracts. The parliament will need to approve of it, which may be a challenge. The Labor party and its allies needed to work hard to get the support of smaller parties to get budget passed. Now they will have to use the same strategy to get this legislation passed as well.
While this legislation may be opposed by companies particularly as the pandemic persists, it will certainly be useful as in 2017, 26.8 percent of workers only had a temporary contract. In the 12 years preceding 2017, temporary employment in the European Union was between 12.7 and 14.5 percent. This particularly impacts young Spaniards between the ages of 15-24. 73.3 percent in this age group had temporary contracts, compared to 43.9 percent in the European Union. This can negatively impact the financial future of young Spainiards and citizens of other member states in the EU.
It has been shown proven that temporary contracts are harmful to employees in the longterm. Similar to Spain, many EU countries have seen an increase in temporary employment since 2008 which gives employers more flexibility over hiring employees when needed but gives employees less benefits. Employees with temporary contracts often have lower wages, less sick days and training, and have less access to unemployment benefits when these contracts end. Keeping employees in a precarious economic situation can be bad for companies in the longterm, along with being bad for the future of Spain and other nations in the EU.
Currently every EU member state has a fertility rate lower than 2.0, which means the population is not replacing itself naturally. Besides less couples interested in having children, others may be concerned that they cannot afford to have them if their financial future is not secure. In Spain these employees are justified to be concerned as over 20 percent become unemployed compared to only a little over 10 percent obtaining full time employment when their short term contract ends in 2014. While in 2014 it was not certain whether this was a result of the business cycle or was likely to become a longterm trend, we can see that it has unfortunately become the norm for a high percentage of employees to be hired on short term contracts. While companies in the EU may be helping themselves remain profitable in the short term by reducing labor costs, this may cost them in the long term due to a shortage of labor. This may have been beneficial shortly after the financial crisis in 2008, but companies have continued to take advantage of the reforms in Spain in 2012 which allowed for wider use of short term contracts. Before 2012 Spain had labor reforms in 1984 to allow for wider use of temporary contracts as well. These companies are also hurting themselves in the longterm as short term employees typically receive less training and as a result are less productive. When the EU labor productivity rate was 100 last year, Spain's was 95.7. While last year was an off year due to the pandemic, Spain's labor productivity has continued to decrease after peaking at 105.7 in 2009. Spain's labor productivity is currently lower than other EU member states which can hurt the ability of Spanish companies to compete in the single market. Companies need to consider their productivity as well and how this can impact them long term, rather than surviving the latest economic crisis. While some EU countries may be able to rely on migration for workers this may not be the case in Spain. Spain has the second worst unemployment rate in the EU the median hourly wage is below that of the EU.
Short term contracts already hit a speed bump after the Spanish Supreme Court limited the ability of companies to subcontract work through short term contracts. Short term contracts will not be allowed if the work is not temporary. This is a step in the right direction as short term contracts should not be allowed for a job that is permanent in nature.
There may be hope the legislation is passed this year as reducing temporary employment is also part of Spain's national Plan for Recovery and Resilience. It should be noted that member states will only receive all of the money to fund the plans from the EU for their national plans after they successfully complete reforms they promise in the plans. While Spain's labor party does not have enough members in parliament to pass the proposed legislation, the opposition will be motivated to reform short term contracts in order to receive the rest of the funds from the EU.
Spain's short term contract crisis will not be solved over night, but the proposed legislation is a step in the right direction. Short term contracts should be allowed in certain circumstances but is clearly a problem when it is used for a large portion of the work force and majority of young employees. While Spain also plans on making it easier for Spanish workers to obtain more skills online to improve their career prospects, companies also have to be willing to train employees otherwise they will continue to suffer from lower output from short term employees.
