Current affairs

More permanent contracts, but not better salaries

Friday, 10 de March, 2017

By Esther González, lecturer on the Master in Human Resources Management and MBA at EAE Business School

In view of the latest statistics on the positive pace of permanent contracts in our country (data from the Randstad Report 2016), the first conclusion is that not all of the highly controversial 2012 Employment Reform was bad. In fact, in that year, Spain headed the list of countries in which it was most expensive to fire an employee, alongside Greece. In the year that the Reform was passed, the number of permanent contracts began to rise steadily. The causal relationship is evident.

A second conclusion can be drawn from these statistics: there is a clear link between expensive dismissal and higher unemployment, as shown by studies such as BBVA Research 2015. The countries with the highest unemployment rates are also those in which it is most expensive to fire an employee.

With respect to Spain, reducing the cost of dismissal and the measures designed to promote permanent contracts have led to many companies choosing this type of contracting. However, we should certainly not be breaking open the champagne just yet. The ILO Report 2017 reveals extremely moderate growth in terms of employment throughout Europe, as well as a substantial increase in part-time contracts. The future of employment is part-time contracting.

The flipside of the coin with respect to the higher number of employees with permanent contracts in Spain is that an extremely high level of productivity is demanded of them in return for very low salaries. The average pay rise in 2016 was just 0.68%. Moderation in relation to salaries remains at the levels of the worst years of the recession.

Employment stability is extremely high valued by workers in Spain, as revealed by the statistics in the report Employer Branding Randstad 2016. Companies offer stability but in exchange for salaries far below the EU average (26,259 euros on average compared to 47,042 in Germany). We are not the worst paid, but we are once again among the bottom of the list (with only Bulgaria, Romania, Lithuania, Portugal and Greece behind us).

Meanwhile, unemployment in our country continues to fall at a painfully slow rate for a number of reasons:

- The high proportion of workers whose professional qualifications are not aligned to the demand in the labour market: our young people who neither work nor study, the workers from sectors in decline and other people who, for various reasons, have seen their professions disappear and urgently need to retrain in order to remain employable.

- Employment contracting in Spain remains highly inflexible: We still have too many contracts, despite the Employment Reform. An employment contract has to provide the greatest possible flexibility to the employee and the employer. The idea that everybody wants a 40 hour per week contract simply is not realistic. We just have to look around is to see that the countries with better employment rates (United Kingdom, Germany, Scandinavian countries) place much greater emphasis on customized contracts, both in terms of the duration and the hours worked. Part-time work is gaining ground.

The Davos Report each year could not be any clearer: unqualified work in Europe is disappearing. It is estimated that almost 13 million unqualified jobs will disappear over the next few years (Davos Report 2017).

Only the most highly qualified and specialized professionals can find jobs and escape precariousness. Faced with such shocking statistics, what are our governments doing to improve the quality of our education and guarantee our young people have a chance to compete in such a future? I find it very significant that one of the education levels with students that get more permanent contracts is the Intermediate Qualifications. Our education system has to promote technical degrees as much as possible.

Another interesting statistic is that the rise in the use the robots is exponential, meaning that unqualified jobs disappear, while highly qualified technicians are need to maintain and repair these robots. How may robotics programs are on offer in the brochures of professional colleges, public and private universities or at the job centre? The answer is very few. There is a clear gap between what companies need and the professionals they can find. There is not just a single solution but it must involve a clear commitment from both companies and governments to promoting high quality specialized training.

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