Spain | The labor market reform in perspective

The labor market reform approved at the end of 2021 has had clear effects. Increased restrictions on the use of temporary contracts and greater flexibility in the use of permanent contracts, especially those for permanent seasonal employees, have reduced temporary employment in the private sector.

Key points

• Key points:
• The 1Q2023 Labor Force Survey (LFS) shows that, discounting the seasonal component, the percentage of people employed on temporary contracts in the private sector was 13.7%, almost half the figure for 1Q2019 and in line with the European average.
• However, the reform has had no impact on the temporary employment rate in the public sector, which exceeded 31% in 1Q2023, four points higher than four years earlier, due to the increase in temporary employment, as we show in the latest Quarterly Labor Market Observatory carried out jointly with FEDEA.
• The greater restrictions on hiring temporary workers do not seem to have hindered job creation, in line with what has occurred in other EU countries. Companies have made do quite well. Indefinite-term contracts, both permanent and, above all, permanent seasonal, have seen notable growth.
• The data also show a slight upturn in the labor turnover in permanent employment — and that the part-time permanent employment, which is partly involuntary, has increased.
• In the medium term, the success of the reform will depend on its impact on productivity, as well as on the intensity, duration and stability of employment. Will it put an end to the problem of job insecurity? Probably not. Job insecurity is a multidimensional phenomenon that goes beyond contractual instability.

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