Spanish Jobs Numbers Mask Deeper Insecurity

Temporary, fixed-term contracts are on the march
  • Vast majority of new jobs created this year were temporary
  • Rise of non-permanent work feeds into inequality debate

Spain's unemployment took a record tumble in April, but the recovery hides an uncomfortable truth: most new jobs are still temporary and short-lived.

Jobless claims for the month, published Thursday, fell by about 129,000 people, taking the total number of unemployed Spaniards to 3.6 million compared to a crisis-high of 6 million.

Even so, on closer inspection, the data point to a persistent weakness in the labor market: temporary contracts account for the vast majority of new jobs,rather than permanent contracts that are often better paid and offer more stability.

Of the total, more than 90 per cent of new jobs were temporary, including seasonal work that disappears after the summer vacation and part-time contracts which are often taken on by staff that would otherwise want to work more hours. Just under 6 per cent were permanent, full-time contracts.

 “Temporary work in Spain is higher than the European average, part of it responds to the seasonal demand for workers, but also the duality by contract type,” said Sandalio Gomez, emeritus professor at the IESE Business School in Madrid. “The current system makes a clear distinction between workers by contract type – with severance pay being at the heart of the matter. Temporary contracts are still too high.”

In short, temporary workers have less bargaining power, and can be fired more easily. While business leaders often support such changes, it can have long-term implications for social cohesion. The phenomenon of an increase in temporary and part-time work at the expense of more secure jobs is being repeated elsewhere in the euro area – even in Germany, where unemployment is at a record low.

And that feeds into a broader debate about income inequality, a factor fueling political populism in Europe and the U.S.

ECB President Mario Draghi in April described employment growth as the best way to tackle income inequality in the 19-nation bloc. Spain's experience shows that even when there are more jobs available, insecurity can remain.

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