The reduction in the working day from 40 to 37.5 hours per week agreed between the PSOE and Sumar in the investiture agreements may have a negative impact on economic growth and employment, if corrective measures are not taken. BBVA Research estimates that the measure will subtract around six tenths from the annual increase in GDP (everything produced by the Spanish economy) next year and in 2025. Regarding employment, the expected effect is that the average increase in new jobs of work is 8 tenths less than expected in the absence of the reduction in working hours.
The negative effect is due to the expected increase in labor costs resulting from employees working fewer hours for the same salary. The BBVA research service estimates that the aforementioned increase in costs will be equivalent to 1.5% of GDP. If working hours are reduced, two effects can occur. The first is that employees produce the same thing in less time or, the second, which is that companies must hire more staff, which would increase costs.
The estimates appear in the latest BBVA Research Spain Situation report. The bank’s research service has maintained its GDP growth forecast for Spain in 2023 at 2.4%, but has revised that for 2024 downward by 0.3 percentage points to 1.5%.
Instead, the forecast is an acceleration of growth in 2025, up to 2.5%. For the next two years, a strong effect is expected from the uncertainty regarding the deterioration in activity in the eurozone, the complex geopolitical context and the doubts generated by the potential scope of the economic policies outlined in the agreements to form a government in Spain. among which is the reduction of the day.
In the report, BBVA also criticizes the agreement for partial debt forgiveness because “it would introduce moral risk without first agreeing on a credible institutional framework that prevents regional governments from accumulating imbalances again in the future.”
