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A waitress serves customers on a cafe terrace in Valencia. EFE
Half of all new permanent jobs in Spain go up in smoke before the first year is out

Employment

Employment
Half of all new permanent jobs in Spain go up in smoke before the first year is out

The Bank of Spain warns that the turnover in workers on permanent contracts has doubled after the most recent labour reform although it admits there is more job stability

Lucía Palacios

Madrid

Tuesday, 7 May 2024, 23:11

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Nowadays, signing a permanent contract of employment does not guarantee you a stable job for life. What is more, there is a greater chance after a year of that person no longer being in that job than of them still being in post despite the job, in theory, being a permanent one. This is the warning given in a recent report published by the Bank of Spain , which pointed out that the turnover rate of permanent contracts has doubled by the end of these two years of labour reforms. Moreover, more than half of these new permanent jobs do not even last for one year.

The new employment legislation approved by the coalition government, employers and trade unions at the end of 2021 has completely overturned the recruitment paradigm that existed until then in Spain. The aim of this regulation was very clear: to put an end to the high rate of temporary employment that had plagued the country for decades. There's no denying it, this labour reform has achieved this goal, and in record time - something that the seven previous labour reforms had failed to do.

As a result the temporary employment rate in Spain has fallen sharply in just two years. Prior to this reform, the percentage of workers with an employment contract bearing an expiry date was around 25%. It now stands at 15.7%, the lowest rate in history and much more in line with the European average.

It fell further in the private sector, cut by almost half to 12.3%. The employers themselves were the ones pushing for this sharp drop. In contrast the public sector employers have maintained the same rampant, temporary employment rate - around 30% - according to the latest data published by the INE (Spain's national statistics institute).

Squeeze on temporary contracts

This fall is a direct consequence of three changes brought about by the labour reform: firstly, the abolition of the contract for labour and services rendered for a given period, which accounted for 40% of temporary contracts; secondly, the squeeze placed on temporary contracts, limiting what could be offered; and, finally, the greater flexibility allowed for certain types of permanent contracts, especially for such as fixed-discontinuous contracts plus the new ad hoc contract (a once-off contract) for the construction industry.

Slightly more than half of the temporary contracts no longer available have been converted into full-time permanent contracts, while more than a quarter have been converted into part-time permanent contracts and the rest into fixed-term contracts according to INE estimates given in the Bank of Spain's report. The concept of the 'intermittent worker' that, until the labour reform came in, was negligible, has more than doubled. It has gone from accounting for 2.4% of job signings to 5.7% in 2023.

Job signings

5.7% are fixed-discontinuous workers

The concept of the 'intermittent worker' rose from 2.4% of job signings to 5.7% in 2023.

Although the decline in temporary employment has occurred across all sectors in general, it has been more intense in construction, hospitality, the arts, administrative work, agriculture and other industries and services. "In all these sectors, except in the case of construction, a significant part of the fall in temporary employment is explained by the increase in permanent contracts", concluded the Bank of Spain's analysis.

The key question is: has this sharp reduction in temporary employment actually translated into greater employment stability, which was the ultimate goal in this reform? Contrary to some theories, yes, the report's author considers that in general terms there has been a decline in job turnover in Spain, with the rate going from 1.33% on average over the period 2015-2019 to 1.12% on average over the period 2022-2023, based on social security data as workers sign on and off active employment.

However, this is exclusively due to the fall in the turnover of temporary contracts (from 3.40% to 3.19%), as the turnover of permanent workers has more than doubled, increasing from 0.25% pre-reform to 0.61% post-reform.

More comings and goings

In other words, there is now a higher number of entries to, and exits from, the labour market by workers with permanent contracts, especially those with fixed-term contracts. In fact, exits made by these intermittent employees have risen sharply after the new labour law came into play.

Previously, the rate of their termination was halfway between that of all other types of permanent contract and that of temporary contracts. Since 2022, however, it has almost doubled to the same level as that of temporary contracts. What has also happened is that the survival rate of new permanent jobs has been reduced: between 2017 and 2018 52.3% of these jobs lasted more than one year; by 2022 they already stood at less than half, 48% to be precise.

Despite this, the Bank of Spain sees a "slight increase" in employment stability in the labour market, albeit at the cost of a "slight" increase in the instability of newly-created permanent jobs. In any case, the report's author stresses that "there is still room to increase employment stability in our country."

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