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May 2012 SPAIN - A LABOUR REFORM IN VAIN
José Mª Bové, auditor and lawyer, partner of HLB Bové Montero y Asociados The new Spanish labour reform does not seem to tackle the excessive inflexibility and scarce mobility of workers that the Spanish labour law market has been suffering for many years and negatively affects the creation of employment. We feel disappointed because once again we have missed a good opportunity! The electoral programme of the Spanish party, PP, which won the last elections in November 2011, included among other measures, the creation of a severance payment system based on individual funds for each worker, inspired by the Austrian model. Basically the Austrian model, in force since 2003, consists in a system of compulsory individual saving accounts funded by employers via monthly payments based on a proportional part of the salary of workers for each year of job seniority. In the event of dismissal, workers have the option of receiving severance payment drawn from their savings account or taking their accumulated balance to the next job. Upon retirement, employees can also claim the payment. In addition, under certain circumstances, they can be used for training purposes of unemployed workers. This model has the advantage of avoiding the full payment of conventional severance payment system by companies (especially during these difficult economic times in which they are suffering so much from cash difficulties), and at the same time encourages indefinite hiring. The truth is that the new Spanish reform does not follow the Austrian model at all, although PP indicated during the last elections that an individual fund system would be implemented in line with the economic recovery. The period of uncertainty in the implementation of this measure -therapy- is precisely the problem if we wish to solve the situation on time. Has the Spanish Government taken a step backwards?
"Are we missing a historic opportunity if we do not implement a labour system similar to the Austrian model?" Let's remember that according to Eurostat, the unemployment rate in Spain in January 2012 amounted to 23.3%. Austria had 4%. A big difference! If we go back to the second quarter of 2007, the best unemployment rate in Spain before the crisis was 7.95%. But, which was the Austrian rate for the same period? Average rate 2007: 4.4%. However, do not think that Austria has not been suffering from the crisis. Its GDP decreased by 3.8% in 2009. How can we then explain the stability of the Austrian labour market compared to the terrible Spanish evolution? The key lies in the characteristics of their different labour systems. It is for this reason that we can affirm that without the implementation of a system similar to the Austrian model we are missing a historic opportunity. Our Government should bear in mind that a therapy provided too late can only delay the "anointing of the sick"!
José Mª Bové HLB Bové Montero Y Asociados http://www.bovemontero.com/
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