A little over a year ago the last labor reform came into effect. Although it is still early to have a complete vision of its impact, a first approximation of its effects can be made.
In the first place, it is clear that the reform has had an enormous impact on contractual temporality. The drop in temporary hiring is spectacular. From the first quarter of 2022 to the first of 2023, wage-earners with a temporary contract fell by 1.1 million, while the permanent ones have increased by 1.5 million. Likewise, permanent contracts represent 45.8% of the total. In fact, what is surprising is that indefinite contracts have not increased further given the impossibility of contracting for works and services and the enormous restrictions on temporary contracts. The reason is that temporary employment in the public sector, where there is a huge pool of temporary workers, has been reduced relatively little.
However, the question is to what extent this reduction in contractual temporary employment has been endorsed by a reduction in real temporary employment. On this second point things, today, are not so clear. The transitions from employment to unemployment, or inactivity, among workers who are not yet of retirement age, have not fallen after the approval of the reform, as would be expected. The rate of loss of affiliation among permanent contracts in the general regime has increased significantly in proportion to the total, among those who become inactive from permanent discontinuous contracts, voluntary resignations and those who do not exceed the trial period.
Another noteworthy fact that does not fit with the reduction in real temporality is the large seasonal fluctuation within the month. The large affiliation shocks that occur at the beginning and end of the month, and on Mondays and Fridays, are also problematic for sustaining a significant increase in job stability. It seems that some companies are finding alternative ways to temporary contracts to maintain the flexibility of this type of contract by using other types of contracts.
Thirdly, there are voices tempted to attribute the resilience that employment is showing to the labor reform. This type of affirmation does not yet have sufficient empirical support, especially if we consider that the resilience of employment is becoming a general and surprising characteristic in many countries. For example, the United States, growing by just over 1%, incorporated 339,000 new employees into the job market during the month of May. In the Spanish case, GDP was growing at 5.5% during 2022 and in the first quarter of 2023 it is still growing at 3.8%. These rates, which are significantly higher than those observed in most of the countries of the European Union, could justify the growth in employment without the need to resort to the labor reform as an explanation.
A more substantial reflection has to do with the solution adopted to end temporality in the Spanish case: the generalization of the discontinuous permanent contract. It is true that this type of contract has increased by some 220,000 jobs, a limited amount compared to total employment. With this increase, discontinuous permanent employees become around 3% of wage earners. However, the periods of inactivity of these workers can affect the evolution of measured unemployment if we compare it with the situation of workers with temporary contracts in previous periods, regardless of whether the methodology for calculating the unemployed has not changed in the slightest. . It could be argued that intermittent regulars who are not working are not looking for a job either, but this is not evident in all cases. The Observatory of the EY-Sagardoy Institute defines the concept of effective unemployment as the unemployed plus workers with an employment relationship who are looking for a job. Although it is a very imperfect measure, this indicator shows an increase in effective unemployment since September 2022.
One way of interpreting the discontinuous permanent contract is as an intermediate between the permanent contract and the temporary contract. In this sense, it would be an alternative to the proscribed single contract, but with less job security and certainty about income, although with a high compensation from the beginning instead of increasing. In addition, the discontinuous permanent contract does not have business compensation in periods of inactivity which, together with its flexibility, could become the wild card for the precariousness of workers. In this sense, it could also have a relevant impact on the volume of unemployment benefits. The question is whether it would not be more effective to make the standard permanent contract somewhat more flexible instead of generalizing discontinuous permanent ones.
All in all, and as I pointed out at the beginning, there is a lack of data and time perspective to carry out a detailed analysis of the impact of the labor reform. In some cases the data will not be available until a few months from now (Continuous Sample of Working Lives) and in some data already available, such as registrations and cancellations to social security, a sufficient level of detail is not offered. We are also waiting for the Ministry to offer an analysis of the periods of inactivity of the discontinuous fixed lines.
In any case, it is clear that this labor reform is having a far greater impact than all those previously approved. Perhaps the fact that it was built on the previous reform, instead of the complete repeal that was initially proposed, and that it emerged as a result of the union and employer agreement has a lot to do with these results. It only remains to confirm whether the effect on the contractual temporality has actually been transferred to the effective temporality. I will keep you informed.
