Entradas Etiquetadas con ‘Spanish labor market’

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    [post_date] => 2011-11-01 15:53:47
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    [post_content] => By Gayle Allard

As Spanish unemployment rates climb toward 25% for the third time since the 1980s, the dilemma over how to respond becomes a key issue for the upcoming election.



Neither party is making radical proposals, for obvious electoral reasons, but also because none of the options are attractive.

If the PSOE does as its candidate indicates and opts for fiscal stimulus via public spending without a labor market reform, the economy could reactivate, but markets would react negatively to the higher deficit, pushing up interest rates. If there were no labor market reform to accompany the stimulus, Spain would find itself in the same situation it has encountered so often in the past: little job creation until pressure on demand became so great that new workers had to be hired. At that time, firms would create temporary jobs and the unemployment rate would fall, but the structural problems would remain intact.

If the PP were in office, its candidate's comments indicate that there would be no fiscal stimulus but extensive reform to encourage job creation, including (unspecified) changes in collective bargaining and a unification of contracts to reduce the temporary/permanent dualism that has become traditional in Spain. But while these reforms are urgently needed, it is not clear what their immediate impact would be. If severance pay were reduced on all contracts, companies would likely take advantage of the situation to shed even more jobs, boosting the unemployment rate past 25% in just a few quarters. The result would be an economy that would be better prepared for a solid, more equitative recovery in the medium to long term, but the short-term effect would be a more severe crisis.

Spain has dallied over labor-market reform for so long that there are no longer any attractive options left. To transform its labor markets in the depth of the most serious crisis in decades is rash and will have a very high political cost. But if the economy is to regain competitiveness and offer options to the youth, it has no other choice
    [post_title] => Spanish unemployment and general elections
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By Gayle Allard

As Spanish unemployment rates climb toward 25% for the third time since the 1980s, the dilemma over how to respond becomes a key issue for the upcoming election.

Neither party is making radical proposals, for obvious electoral reasons, but also because none of the options are attractive.

Seguir leyendo…

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    [ID] => 7180
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    [post_date] => 2010-06-17 10:05:48
    [post_date_gmt] => 2010-06-17 08:05:48
    [post_content] => The Zapatero government´s long awaited labor market reform is a step in the right direction. Unfortunately, the time for yet another partial reform is long past.

It´s no secret that the Spanish labor market is dysfunctional. The combination of overly rigid dismissal regulations, overly generous and laxly administered unemployment benefits and overly politicized and unrealistic collective bargaining are a recipe for disaster, as Spain has demonstrated once a decade since the current labor legislation was passed in 1980. The cycle has repeated itself again: Europe´s fastest job creator in good years becomes its biggest job destroyer in bad years. Anyone who believes that the current institutions are workable is simply in denial.

The question is, at a time of deep crisis, high unemployment and contagion in debt markets, what is the right response? To me, it seems clear: the only right reform is one that infuses markets with confidence and a conviction that this time, Spain is really going to be different. To do that, the right reform will 1) sweep away the old rather than adding subsidies and conditions to an old, unworkable law; 2) make the needed changes in all labor-market institutions, not just severance pay; 3) be agreed on by a broad coalition, at least in Parliament, and 4) be as simple as possible, so that businesses need few or no lawyers to figure out what to do.

Zapatero´s reform does not fulfill these conditions. It adds a welcome change, which is an Austrian-style severance payment system which allows workers to "carry" their dismissal pay with them from job to job and even collect it as retirement. That is a positive development that could add mobility, which is good.  (On the downside, it adds more fiscal cost to dismissals.) It gives some severance pay to temporary workers (while taking some flexibility away from companies), which was needed. It makes it easier for companies to opt out of overly generous collective bargaining agreements. And it makes it possible for firms to pay the "low" 20-day severance payment if they are losing money for six months (but they still need a lawyer to prove it). All of these changes are welcome.
But they are not enough. Rather than more patches on an old coat, Spain needs a brand-new coat, a clear, simple and rational law that will give companies the confidence to create jobs, while giving workers the level of security that society demands. A single type of contract that accumulates some severance pay each year would be nice. A better administered unemployment benefits system, tied to "activation" measures to get the jobless trained, prepared and back on the market, is desperately needed. More and better training courses, preferably administered by firms and not unions, are essential. And a complete redrawing of the union role in collective bargaining and even in politics could inject new life into the Spanish economy and political life.

The underlying problem is simple: the link between pay, security and productivity is broken in Spain, thanks to existing institutions. Until it is restored, Spain will continue to be a low-productivity economy, with chronic competitiveness problems that only devaluations can solve. We´ve spent 30 years applying band-aids to institutions that have never worked. It´s time to throw them out and start over.
    [post_title] => The Spanish labor market: Too late for partial reforms
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    [post_modified] => 2023-12-13 13:43:01
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The Zapatero government´s long awaited labor market reform is a step in the right direction. Unfortunately, the time for yet another partial reform is long past.

It´s no secret that the Spanish labor market is dysfunctional. The combination of overly rigid dismissal regulations, overly generous and laxly administered unemployment benefits and overly politicized and unrealistic collective bargaining are a recipe for disaster, as Spain has demonstrated once a decade since the current labor legislation was passed in 1980. The cycle has repeated itself again: Europe´s fastest job creator in good years becomes its biggest job destroyer in bad years. Anyone who believes that the current institutions are workable is simply in denial. Seguir leyendo…