Nobody likes Spain’s new labor law. Cue protests

MADRID, Spain — Spain’s prime minister worried earlier this year that his labor-reform plans might “cost me a general strike.”

Turns out he was right. In response to Mariano Rajoy’s sweeping labor reform law, which has been in effect since February, unions are organizing a nationwide strike, to be held on Thursday, to protest the “worst labor reform Spanish democracy has seen.”

Spain has the highest unemployment rate in Europe, at 23 percent. To curb it, Rajoy approved by decree an emergency law to make its antiquated labor laws more flexible, and bring the market more into line with the rest of those in Europe. It’s also essential, he says, to help pull Spain from its deep economic crisis.

“It’s probably the most important reform ever done in this economy in the last three decades,” said Alberto Nadal, of the CEOE business confederation, which represents employers in the private and public sector.

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But it may be a tough sell. More than 60 percent of Spaniards oppose the reform, according to a recent poll. They believe it hurts workers’ rights and gives employers too much power over employees, without effectively tackling their biggest worry: unemployment.

The main thrust of the reform is to make it easier and less expensive to fire workers. On March 8, the Congress of Deputies approved the measure, which is open to amendment until the end of the month. With the government holding a congressional majority, the result of the vote was seen as a formality. Previously, workers on permanent contracts could receive up to 45 days’ pay per year worked in severance when laid off, among the most generous rates in Europe.

Under the new legislation, severance has been reduced, with that top rate being cut to 33 days’ pay.

“The main problem for the business community has been that companies don’t want to hire new people because severance costs are very, very high,” said Nadal, who said Spain’s labor market was a legacy of the 1970s, when the country was still under a dictatorship. “Workers in the core of the market knew they couldn’t be fired.”

In addition, collective bargaining has swung in favor of companies, which can now unilaterally reduce workers’ salaries if revenues drop over a prolonged period, a move the government hopes will boost competitiveness.

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Spanish labor relations have traditionally been delicately balanced, with unions and business leaders negotiating legislation before it goes through Congress. But this time, unions say their suggestions were barely acknowledged.

“This is a step backward, because it takes away workers’ rights,” said Carolina Bermudo, a 26-year-old engineer. “Now, the companies have all the power — and what’s more, you can get fired more easily.”

Despite having studied two Masters degrees and speaking four languages, Bermudo earns just 1,000 euros ($1,300) per month as a researcher at the University of Malaga, in the south of Spain. The unstable nature of her contract and the weak state of the economy, which is falling back toward recession, mean she knows she could lose her job any moment.

She says reducing the severance packages for those at the top end of the job market makes sense, but that the instability of those on temporary contracts has not been tackled.

“The Spanish labor market is extremely precarious. It doesn’t allow you to get settled in a job,” she said.

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Young people have been particularly vulnerable to being shut out of the Spanish labor market as firms fire those on cheap, temporary contracts in a bid to cut costs. Youth unemployment is at over 50 percent, and many young Spanish professionals are going abroad to seek work.

Rajoy has only been in government for three months, and ahead of the general strike he has already faced a series of street protests against his economic policy. The conservative has embarked on a severe austerity drive and recently agreed with the European Commission to slash the public deficit from 8.5 percent of GDP in 2011 to 5.3 percent by the end of this year.

With the Spanish economy forecast to contract 1.7 percent in 2012, the government has admitted that unemployment is likely to keep rising throughout the year before the labor reform’s effects are fully felt.

Many in Spain blame the European Commission and Germany for the country’s difficulties as much as their own government.

“Since 2010 we have seen the imposition of policies with the only objective being to reduce the public deficit in a short time, while forgetting growth and employment,” said Javier Doz of the Comisiones Obreras Union, which advocates boosting public-sector investment to create jobs. “This policy is an imposition by the German government.”

“We’ve got to tackle unemployment and forget about what Brussels says,” said Carlos Lopez, a 39-year-old lawyer who has been unemployed for four months. His wife has been out of work for two years.

“These reforms are fine for countries like Germany, but they don’t work in Spain,” he added.

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Economist Ismael Sanz said that with the euro zone crisis focusing so much on Spain, the new reform does boost confidence in the economy. However, he said it will need time to take effect and that other measures are also required to create jobs.

“Banks need to be encouraged to start giving credit to businesses,” he said. “The government is doing that up to a point but it needs to do more.”

While employers and employees appear to be divided over the value of the new labor law, one thing they and many analysts do seem to agree on is that in Spain, legislation alone won’t pull the country out of crisis. Labor habits also have to change.

Many workers, such as Carolina Bermudo, complain that their output is not valued by their superiors. Employees are simply expected to turn up for work and put in the required hours, but results don’t matter as much as in other countries, she says.

CEOE business leader Alberto Nadal agrees: “The guarantee of prosperity, the guarantee for Spanish workers that they will have a better living in the future is not legislation, it is in productivity.”