Wednesday, June 16, 2010

Not Such A Good Day To Reform The Labour Market

There are many who suspect that it was no accident that the Spanish government chose today to approve the decree reforming the labour market. The idea being that both the Spanish people and their media organisations would be too busy with Spain's first game in the World Cup to pay much attention to the detail of the government's reform. With the Spanish team losing unexpectedly to Switzerland such a plan no longer seems such a good idea, with no feel good factor to distract attention.

The reform contains few surprises, most of it had already been leaked as part of the fruitless negotiating process involving employers, unions and the government. The already existing contract that provides for 33 days pay for each year worked in the event of dismissal is now set to become the standard for those who are hired on indefinite contracts. What's more the government intends to pay 8 of those 33 days out of a state fund. There is also a relaxation on the amount that must be paid by companies that are in economic difficulties, although it's not at all clear how such circumstances will be assessed to stop companies from faking their situation through accounting tricks.

Of the other measures that have been talked about, such as the adoption of the "Austrian" model of a fund which workers carry from job to job, there is still no sign although the government says it will introduce a law expanding the measures adopted. The reform as it stands at the moment is not going to get the backing of employers who are continually seeking to reduce the rights of employees. Although I see no signs of anything that stops them from continuing to make massive use of temporary contracts anyway. Nor is it accepted by the unions, although the decision to postpone strike action on the measures until after the summer only helps to reinforce the impression that this will be a token protest.

As for the all powerful markets I suspect it's only a matter of days before we get some well paid "analyst" to tell us that the next increase in the cost of financing Spain's debt is because the markets think the reform doesn't go far enough. Apart from the way in which such explanations are dreamt up over a good lunch, it wouldn't make any difference to the treatment Spain receives at the moment if they were to stick the severed heads of workers onto the factory gates. Despite all the fuss made about the need to introduce these measures, they are of little relevance in a moment when the possibility of any economic recovery taking place at all is more than just an open question. It might be a better strategy to choose some good news for the day of Spain's next match.

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