The adjustment following the crisis has been particularly painful in Southern European countries, including Spain. Several years of fiscal consolidation, adjustment in private sector balance sheets, low confidence and impaired credit supply have left Spain with a double-digit unemployment rate and no clear sign of a rapid turnaround. Addressing the job market legacy and restoring competitiveness remain key policy objectives, even though significant progress has been achieved in particular on the latter.
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Previous Going for Growth recommendations include:
- Improve active labour market policies by introducing comprehensive monitoring and evaluation of services and programmes at the regional level, by monitoring more closely benefit recipients’ job search efforts and linking benefit payments to results, and by extending training measures for the unemployed.
- Make wages more responsive to economic and firm-specific conditions notably by considering abolishing legal extension of collective wage agreements.
- Consider moving to a uniform contract with initially low but gradually increasing severance pay so as to reduce the gap in job protection between temporary and permanent contracts.
- Reform secondary education and tertiary education to improve overall skills level and productivity.
- Lower entry barriers in services industries to enhance productivity and job creation.
Actions taken: Notable reforms in these areas over the past two years include:
- An easing of licensing for small service outlets and partially also of shop opening hours as well as a simplification of regulatory requirements for businesses across regions. Furthermore, reform of the professional associations is in the pipeline.
- Collective agreements at the firm level are given more priority over those at the sectoral level.
- There has been a broadening and clarification of dismissal criteria and compensation for unfair dismissal for all new contracts has been decreased.
- As part of a reform of VET a framework for gradual establishment of new vocational programmes with a closer cooperation with businesses is being established. Also, a clearer vocational track is being established at the secondary education level.
The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, rebalancing current account and reducing income inequality). In the case of Spain, narrowing the gap in job protection between temporary and permanent contracts would help integrating young and immigrant workers in the labour market, while reducing the number of school drop-outs by fully implementing reform the secondary and VET education would improve income prospects for the most disadvantaged youth, hence reduce inequality.