Iñigo Sagardoy de Simón, professor of employment law at the University of Francisco de Vitoria, reflects on the recent changes made to the Spanish labour laws and analyses the impact that these will likely have on Spain’s precarious labour market.
As we enter 2015, armed with the latest labour market data and observing the evolution of employment in Spain, we should reflect on the employment market and the efficiency of the recent legal measures. Everything has changed.
The first thing to ask is: was the labour reform necessary? Almost all experts would say yes. And I agree, but I would also add that it’s a nuanced argument. The reform of the labour law was necessary not only due to Spain’s economic and employment crisis, but also because it had to adapt to a changed market.
The original legislation was based on an outpaced model in which employment was more or less uniform, with low turnover, fixity in the workplace and a strong hierarchical structure. Now, though, we have moved over to a kind of multiform work structure, usually based on projects, with high labour dynamism and flexible employees whose priorities straddle multiple areas; in other words, 21st century employment. If we add such factors as new technologies, globalisation, the interrelation between companies and the lack of employment in the Western developed world, we can observe without too much difficulty that legislation which was approved in the earliest stages of our democracy was unprepared for such developments. The legislation regulated a different environment: one that’s almost the polar opposite of what we see today. We must say yes to the labour reform because we must adapt to new eras and models – we are not just responding to the crisis.
Three things can explain the controversy of the new regulation. The first is a resistance to change. What’s necessary is often unpopular, and change is seldom well received by either employees (who, it’s worth remembering, vote for the politicians promoting these rules) or companies (whose corporate cultures are sometimes anchored in the past).
The second is the fact that labour laws possess an almost magical capacity to solve all problems (especially economic issues), but it definitely shouldn’t be that way. We need other factors – mainly relating to trust and economic growth – to solve the main problems of unemployment. This is especially true if we remember that Spain has its own idiosyncracies, and measures that work well in other countries are not necessarily right for ours.
Finally, we sometimes forget – consciously or unconsciously – the virtues whose influence on job creation and company transformation often exceeds that of the law: the value of agreements between companies, the business culture and the social role played by Spain’s business people. When society is focused on the members of its business community – recognising their contribution to the common good and the responsibility with which they have met their obligations – it prioritises people’s employability, corporate dynamism and job creation (whether direct or indirect).
Another question to ask is: what did the labour reform do and how is it working? It has highlighted the wishes of any modern labour market regulation: to promote a company’s flexibility and transformation in a changing era. This is in marked contrast to the previous culture, where dismissal was a company’s first move, in the absence of any other legal instruments. That is why, in recent months, we have observed – and will continue to observe – positive signs in employment matters. According to the most recent data, there are 435,000 fewer unemployed people than a year ago. Permanent hiring has increased by 25 per cent since last year, and the average number of individuals affiliated to Social Security has increased by 330,000 people year on year. These changes are definitely positive.
Nevertheless, there is still a lot to do in Spain’s precarious labour market. The path is neither easy (attitudes need to change significantly) nor quick (it takes time to see the effectiveness of labour reforms) but the path taken is the right one – although there are challenges. The aim is to have a labour law which takes into account the necessary protection of an employee’s most basic and fundamental rights. A law which does not obstruct but rather enables job creation, along with other necessary economic measures. A 21st century law, for the employment needs of our era.
Certain important structural problems still need solutions, such as the dual labour market (a topic recently broached by the European Commission) and the working population becoming older. We will have to pay serious attention to both matters.