Fewer hours, more jobs?

Some 60,000 Spaniards joined the ranks of the unemployed this November, sending them to the desks of the central dole offices.

This was the social backdrop for a battery of labor market reform measures, which Prime Minister Jose Luis Rodriguez Zapatero unveiled on December 2.

"We believe that within the scope of social dialog, in the spirit of reform and with a conciliatory attitude, it is necessary to re-assess the following aspects of the labor market in the first quarter of 2010," he said.

"The system of collective negotiation, to improve the internal flexibility of companies; the application of reduced work hours as a way to temporarily adjust employment …"

With the last measure, Zapatero referred to cutting employees' working hours instead of cutting jobs.

Working less, but working nonetheless

Zapatero's plan is fashioned on the German 'Kurzarbeit' -- or 'short-time working' model -- and has gone down well in Spain considering the issue of labor market reform has generally antagonized relations between the business community and trade unions in the past.

While employers have used the economic downturn to argue for softer rules for firing workers, the unions have steadfastly blocked any measure that erodes workers' rights.

But Spain's Labor Minister, Celestino Corbacho, thinks reduced working hours model bodes well for social dialogue.

"There is consensus on widening the concept in Spain. In Germany, a company that has to reduce production can reduce their staff's working hours," Corabacho said.

"Right now there are one and a half million people doing this in Germany. The company pays for the hours worked and the government compensates a percentage of the lost hours,” he said.

Observers say it makes sense for the ruling socialists to keep people working. The Spanish labor market's widespread use of temporary contracts meant it was easy for managers to cut staff there - and is one reason why the country accounted for half of the 3.2 million jobs lost in the eurozone last year.

Now 2.7 million people in Spain are claiming unemployment benefits, putting pressure on a public deficit that has risen to 5.6 percent of GDP. And the government trails the opposition Popular Party in the polls.

Psychological benefits

The German short-time model is expected to have positive knock-on effects for the economy as a whole, according to economist Bruno Estrada.

"In terms of maintaining the purchasing power, it's a very different situation, psychologically-speaking, for the worker," Estrada said.

"There is a big difference between a person who is working and one who is unemployed when they are deciding what to buy and how to invest. Uncertainty is much higher for someone out of work than for a worker who sees their hours have decreased but knows there is a guarantee, or a good possibility, of being able to continue working in the company," he said.

So far, the idea has not generated the bitter confrontations that characterized the rest of the year.

The powerful Spanish Business Confederation is yet to oppose the reform and the conservative Popular Party has no plans to block it.

This rare consensus could be a first step for social sectors to work together on finding a solution to Spain's ongoing economic travails.

For now unemployment is slowing. The 60,000 job losses in November are an improvement on the 170,000 lost in the same period last year, and consumer spending is on the rise.

Author: Hazel Healy (sjt)
Editor: Sam Edmonds