Spain | Proposal to reduce the maximum legal working hours: incidence and potential impact

The objectives of this study aim to gauge the impact of the reduction in the legal maximum working hours, pinpoint potentially affected workers, estimate the macroeconomic repercussions, and propose economic policy measures to amplify the positive effects of the reform while mitigating the negative ones.

Key points

• Key points:
• Between the fourth quarter of 2022 and the third quarter of 2023, eight million wage earners had an actual and agreed-upon workweek exceeding 37.5 hours, according to the Spanish LFS. The 'excess worked hours,' defined as the difference between the actual working hours and the proposed new limit, amounts to 29.1 million weekly hours, representing 5.5% of the total actual weekly working hours.
• Which wage earners are more prone to work more than 37.5 hours per week? Men, aged 30 to 34, of foreign nationality, residing in the Balearic Islands, Canary Islands, or Catalonia, with primary education or lower, working in the private sector, particularly in industrial activities such as machinery and equipment operation, with a permanent contract, and a tenure in the company between 5 and 10 years.
• Preliminary estimation results show that, without compensatory measures to alleviate the estimated increase in labor costs, the reduction in working hours would subtract around 0.6 percentage points from the average annual GDP growth over the next two years and 0.8 percentage points from employment growth.
• Before approval, a comprehensive assessment of the potential effects of the proposal would be necessary, involving social partners in both its design and future implementation.
• Policies aimed at reducing non-wage costs, such as social security contributions, and fostering collaboration between companies and workers would not only help accentuate the positive effects of the reform but also alleviate the negative impacts, thereby enhancing the competitive position of the Spanish economy.

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