FACTBOX-Spanish job reform to confront two-tier system

May 20 (BestGrowthStock) – Spain’s government is expected to
announce the details of a labour market reform by the end of May
to streamline an inflexible jobs market criticised as
inefficient, unproductive and uncompetitive.

Spain’s Socialists say their top priority is reducing the
country’s unemployment, which rose to 20 percent in the first
quarter and is seen as a major obstacle in the government’s
efforts to tackle a ballooning public deficit.

Markets are waiting for details of the reform as a signal
Spain will take steps to improve its economic base after limping
out of a year-and-a-half recession in the first quarter.

Following are details on Spain’s labour sector and measures
that could be proposed.

* The reform under discussion will focus on reducing the
number of temporary contracts, overhauling hiring and firing
rules, encouraging the use of part-time contracts and bringing
the long-term unemployed and the young back in to the jobs

* Unemployment has risen from 1.76 million at its low in the
second quarter of 2007 to 4.6 million in the first quarter of
2010. Spanish unemployment is the highest in the euro zone at 20
percent in the first quarter.

* Over 40 percent of Spain’s under-25s available for work
are unemployed.

* The collapse of Spain’s construction industry following
the burst housing bubble has spread to the country’s main
economic pillar, services. Around 65 percent of all jobs lost in
the last year have been from these two sectors.

* The labour market functions as a two-tier system, split
between around 11.5 million permanent and 3.7 million temporary
contract holders. Over 90 percent of layoffs over the last year
have held temporary contracts.

– Permanant contracts offer holders full workers’ rights
including one of the highest severance pay packages in the
developed world, of as much as 45 days per year worked.

Business groups say companies are discouraged from employing
workers under these terms because lay-offs are prohibitively
expensive when the economic situation demands workforce

– Temporary contracts offer little or no workers’ rights and
their flexibility has made them the favoured contractual
agreement for young people and immigrants.

* Spain has one of the lowest number of part-time workers as
part of its total workforce in Europe. In Spain, only 13 percent
of workers are part time compared to around 25 percent in


* The government has said a reform of the labour market
should be agreed through three-way talks with business
representatives and unions and has set a deadline for an
agreement at the end of May.

If a deal cannot be reached in that time, the government has
suggested it will take a unilateral decision on the reforms’


* Spain’s Prime Minister Jose Luis Rodriguez Zapatero
reiterated on Monday the best reform would be one with the most
support, echoing comments by the Bank of Spain which says
sustainable reforms must be reached through consensus.

* The unions have called a public sector strike June 8 to
protest against the government’s austerity plan which aims to
cut public functionaries’ wages by an average of 5 percent in
2010 and freeze them in 2011. [ID:nMDT009026]

The labour representatives said they will not consider any
proposals which make it easier and cheaper for companies to fire

* Business representatives have called for new contracts
which will reduce firing costs and for a cut in social security
payments companies must pay for each employee on their books.

Negotiations broke down in the summer last year after
business leaders insisted on a cut in social security payments.
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(Reporting by Paul Day)

FACTBOX-Spanish job reform to confront two-tier system