Abstract
From the outset of the Spanish democracy up to the current crisis, the different Spanish governments have unsuccessfully tried to change the existing set of poor institutions. This fact, matched up with adverse shocks, has led to a high and persistent unemployment, especially in certain regions. From an economic policy perspective, such bad institutions call for policy measures aimed at improving labour market flexibility conditions which are thought to speed up the adjustment process in response to adverse shocks, thereby preventing upward shifts in unemployment from becoming permanent. Our Granger-causality analysis appears to confirm these claims, as many institutional variables (EPL, unions, unemployment benefits, minimum wage, labour cost pressure, mismatch, low productivity, insufficient ALMPs) explain well the evolution of the common factor driving regional unemployment.
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Notes
- 1.
Jimeno and Thomas (2011), by means of a one-sector Mortensen-Pissarides model with firm-specific productivity shocks, calibrated with typical continental European data, point out that the company-level bargaining system yields better results than those accomplished via sectorial collective agreements, being the efficient opting out of sector-level agreements also a good alternative to it. The 2012 labour reform aims to prioritise the applicability of collective agreements at the company level, consequently pushing for a greater decentralisation. The small size of many Spanish firms may clearly hamper this process.
- 2.
The current (as of October 2013) Spanish Government reckons that the reforms have helped cushion the employment destruction and that they will foster employment once recovery sets in. On the contrary, unions rebut that these reforms facilitate lay-offs and deteriorate the quality of the new jobs generated.
- 3.
Roughly speaking, it is worth noting that, in essence, the dismissal cost on permanent contracts drops from 45 days’ pay per year worked (with an upper limit of 42 months) to 33 (with an upper limit of 24 months). As regards redundancy for economic reasons, the dismissal cost remains in 20 (with an upper limit of 12 months). As for the fixed-term contract, the dismissal cost increases –gradually– by 4 days’ pay per year worked (from 8 to 12). Thus, the severance payment gap between permanent and temporary contracts clearly tends to shrink. However, it should be mentioned that the debate over the introduction of the single open-ended labour contract still goes on.
- 4.
- 5.
For example, the 1994 labour reform brought in some mechanisms akin to those present in the most recent reforms. It should be stressed that these mechanisms were hardly brought into play in practice.
- 6.
In Spain it is customary that labour courts tend to favour workers regarding the interpretation of the existing rules.
- 7.
Another component of the 2012 labour reform is the one intended to remove the principle of “ultraactivity”, which facilitates the inertia of collective agreements until another new agreement is reached. Now, under the new rules, if a new agreement is not achieved after one year, other options are explored. This issue is leading to legal confrontations since the summer of 2013.
- 8.
Unfortunately, mark-ups and other factors have not adjusted as much, thereby rendering the overall competitive gain moderate.
- 9.
The consensus among economists on the economic recovery –and on the labour market improvement– is for it to be sluggish –see for instance García-Cintado and Usabiaga (2013).
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García-Cintado, A., Romero-Ávila, D., Usabiaga, C. (2014). Policy Considerations Drawn from Our Results. In: Spanish Regional Unemployment. SpringerBriefs in Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-03686-1_4
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DOI: https://doi.org/10.1007/978-3-319-03686-1_4
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