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The Surge in Short-Duration Contracts in Spain

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Abstract

Until the outbreak of the recent economic and financial crisis, Spain was leading the ranking of countries with the largest share of temporary employees. During the crisis this share has fallen to its lowest level in decades, but this does not mean that working conditions in Spain have improved. The flow of new temporary contracts is larger than ever before. A particularly striking feature is the steep growth in the volume of fixed-duration contracts lasting less than a week or a month. We document these trends and analyse how this phenomenon has affected the transition from temporary to permanent employment.

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Fig. 1

Source: Own elaboration with data from the OECD Employment Protection Database

Fig. 2

Source: Spanish Labour Force Survey (EPA, INE) and Estadística de contratos (SEPE)

Fig. 3

Source: employed (EPA, yearly averages), contracts (SEPE, total)

Fig. 4

Source: Estadística de contratos (SEPE) and the Spanish Labour Force Survey (EPA, INE)

Fig. 5

Source: Estadística de contratos (SEPE)

Fig. 6

Source: own computations

Fig. 7

Source: own computations.

Fig. 8

Source: own computations

Fig. 9

Source: own computations

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Notes

  1. For a detailed account of these reforms, see Bentolila et al. (2008) or Felgueroso et al. (2017).

  2. Prior to the 2012 reform, firms could avoid the need to pay interim wages by acknowledging the unfair nature of a dismissal and by paying the worker the corresponding redundancy payment within the first 48 h. The 2012 reform has eliminated this fast-track dismissal procedure, but the parties can still reach the same outcome during the mandatory conciliation phase during which no interim wages are due.

  3. The economic sanctions for the improper use of temporary contracts are independent of the frequency of violations and are often waved once these contracts are converted into open-ended positions.

  4. One example is the need for proportionality between the economic problems of the firm and the number of dismissals. The reform aimed to leave this decision in the hands of employers subject to the new definition of objective causes, but the court rulings have severely restricted this freedom.

  5. The only exception is the period between 2006 and 2008 in which firms were entitled to strong financial incentives for the creation of open-ended jobs.

  6. Individuals may optimally decide not to exercise their right to unemployment benefits or may be unaware of their entitlements. In both cases we are treating the individuals as if they are not entitled.

  7. We could have alternatively used the extreme value distribution. As explained in van den Berg (2001), this distribution allows the model to verify the mixed proportional hazard assumption. Our approach departs from the proportionality assumption, at the cost of imposing more structure, because we want to allow the potential impact of duration and of both observed and unobserved heterogeneity on the exit from employment and unemployment not to be proportional.

  8. Accordingly, two employment spells with the same firm which have an intervening unemployment spell lasting less than 30 days are treated as a single employment spell.

  9. High skill includes college and junior college graduates (groups 1–3 in the Social Security classification), medium-high skill includes top and middle managers (groups 4–6), medium-low skill includes administrative assistants and so-called first- and second-level officers (groups 7 and 8), and low skill includes third-level officers and unskilled workers (groups 9 and 10), see García-Pérez (1997).

  10. As explained before, contributory benefits are measured by the remaining months of entitlement in each month. The latter is computed from each individual’s employment and insurance claim history (since residual benefits not claimed in one unemployment spell can be claimed in a later spell). Workers having access to two different sets of benefit entitlements must choose between them. We assume that they choose the one with the higher length. For more information see Rebollo-Sanz and García-Pérez (2015).

  11. The period “2008–2016” includes the double-dip recession (2008–2013) and the start of the recovery (2014–2016). However, for the sake of brevity we refer to this period as recession.

  12. Results for permanent employment are available from the authors upon request.

  13. We think the proper way to deal with this issue could be the time-to-event approach as developed in de Graaf-Zijl et al. (2011).

  14. Apart from the average survival rates reported in the top row, the survival rates are constructed by varying one characteristic at a time and fixing all other variables at their average value.

  15. To avoid problems of endogeneity we do not include any control related to intermediate spells. Furthermore, the model is estimated without controls for unobserved heterogeneity.

  16. The coefficient estimates are reported in Table  11.

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Author information

Authors and Affiliations

  1. FEDEA, Madrid, Spain

    Florentino Felgueroso

  2. Universidad Pablo de Olavide, Sevilla and FEDEA, Madrid, Spain

    José-Ignacio García-Pérez

  3. IZA, Fedea, Universidad Autónoma de Madrid, Madrid, Spain

    Marcel Jansen

  4. Universidad Pablo de Olavide, Sevilla, Spain

    David Troncoso-Ponce

Authors
  1. Florentino Felgueroso
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  2. José-Ignacio García-Pérez
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  3. Marcel Jansen
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  4. David Troncoso-Ponce
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Corresponding author

Correspondence to Marcel Jansen.

Appendix

Appendix

Fig. 10
figure 10

Source: own computations

Survival rate until first permanent contract by level of qualification, mean characteristics 2001–2015 (%).

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Fig. 11
figure 11

Source: own computations

Survival rate until first permanent contract by level of education, mean characteristics 2001–2015 (%).

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See Figs. 10, 11 and Tables 1, 6, 7, 8, 9, 10 and 11.

Table 6 Exit from unemployment to a temporary contract
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Table 7 Exit from unemployment to a permanent contract
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Table 8 Exit from temporary employment to unemployment
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Table 9 Exit from temporary to permanent employment
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Table 10 Unobserved heterogeneity estimates, 2001–2016
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Table 11 Exit to the first permanent contract
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Felgueroso, F., García-Pérez, JI., Jansen, M. et al. The Surge in Short-Duration Contracts in Spain. De Economist 166, 503–534 (2018). https://doi.org/10.1007/s10645-018-9319-x

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