The Spanish Labor Market in a Cross-Country Perspective
IMF Working Papers, January 1, 2011
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Bibliographic details
- Authors: Florence Jaumotte
- Published: January 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455211890.001
Key findings
- "The Spanish labor market is not working": the unemployment rate is structurally very high.
- Wages are "not very responsive to labor market conditions," causing a high cyclicality of unemployment.
- The labor market is "highly dual."
- Compared with the EU15, Spanish labor market institutions and policies stand out by:
- the structure of its collective bargaining, which occurs mostly at an intermediate level; and
- very high severance payments for permanent workers.
- Based on a quantitative analysis, the paper shows that moving away from the intermediate level of bargaining would go a long way toward bringing the unemployment rate closer to the EU15 average.
- The key reform needed to reduce the share of temporary workers is reducing employment protection of permanent workers.
- "Substantially reforming the collective bargaining system and reducing the protection of permanent workers are likely to be highly complementary to secure a substantial reduction in the unemployment rate."
- The recent 2010 labor market reform attempts to address these issues, although "its effects are still to materialize."
Quantitative analysis and implications
- The paper bases its conclusions on a quantitative analysis that links:
- the level of collective bargaining (intermediate) to the unemployment gap with the EU15; and
- employment protection of permanent workers to the share of temporary workers.
- The quantitative work indicates that reforms in collective bargaining and in employment protection are complementary and jointly important to achieve a "substantial reduction in the unemployment rate."
Policy recommendations
- Move away from the intermediate level of collective bargaining to help bring Spain's unemployment rate closer to the EU15 average.
- Reduce employment protection of permanent workers to lower the share of temporary workers.
- Pursue substantial reform of the collective bargaining system in conjunction with reductions in protection for permanent workers, given their complementarities.
- Monitor and evaluate the effects of the 2010 labor market reform, since its effects "are still to materialize."
Subject tags and keywords
- Subject: Commodity markets, Employment protection, Tax wedge, Unemployment benefits, Unemployment rate
- Keywords: equilibrium unemployment, labor market, share of temporary workers, wage agreement, WP