If Germany stands out as the paragon of the conservative welfare state, Spain can be considered the paragon of ‘selective flexibilization’ (Toharia and Malo 2000; Bentolila and Dolado 1994; Eichhorst et al. 2010). It had one of the highest employment protections for regular employment in the OECD (until the reform in 1997). Therefore, temporary employment became the favourite means of increasing external flexibility, and Spain introduced temporary employment as early as 1984. Subsequently, temporary employment expanded rapidly, and in 1991 a third of employees held a temporary contract (Polavieja 2006).

Just as in Italy, the need to stick to the Maastricht criteria led to reforms in the labour market and welfare state in Spain in the 1990s, but in a retrenching and further dualizing way. Conditions for unemployment benefit entitlements were tightened in 1992 from 6 to 12 months of previous contributions (Guillen 2010). Accordingly, coverage rates fell, and it is safe to assume that they fell particularly among the temporarily employed who had more difficulties in meeting the tightened requirements. Expenditure growth on activation policies also slowed for the rest of the decade (Gutierrez and Guillen 2000). It was only in 2000 that an active integration subsidy was created for older long-term unemployed. The 1990s witnessed not only two further waves of labour market flexibilization but also in 1999 an equalization of social rights between atypical employment forms and standard employment. Among other measures, the flexibilization reforms from 1993—1994 included promoting job creation through new tax and social contribution exemptions for employers contracting outsiders (young adults, the long-term unemployed and old or disabled workers). The measures also fostered work-experience, job-training contracts and the reduction of barriers for certain kinds of redundancies. On this occasion, and in contrast to the 1984 reform, parttime contracts were more vigorously promoted by providing them with more public subsidies. The 1996 reform promoted the creation of open- ended contracts, modified part-time contracts and reduced the cost of redundancies (Guillen 2010). These flexibilizing reforms had the simultaneous effects of lowering the old labour market risk of unemployment and increasing the new labour market risk of temporary employment.

In the early 2000s, the rate was still twice as high as the OECD average, and 80 per cent of newly created jobs were assigned on a temporary basis (Polavieja 2006: figures 1 and 2).

After coming back to power in 2006, the Socialist PSOE (Partido Socialista Obrero Espanol) undertook another attempt at limiting the use of temporary power by limiting the subsequent renewal of temporary contracts. One year later and following EU legislation, the PSOE government enacted the ‘Law on Gender Equality’ to reduce labour market inequality between men and women.

In Spain, the deep and perturbing employment crisis that followed the bursting of the housing bubble in 2008 led not only to sky-rocketing unemployment rates (see Fig. 9.2) but also to a profound reform of labour market policies in 2010 and 2012. The reforms in 2010 aimed to reshape the overall functioning of the labour market and, especially, to reduce the privileges of insiders by smoothing differences in dismissal costs between temporary and permanent contracts (Wolfl and Mora-Sanguinetti 2011; Pavolini et al. 2015). The reform in 2012 improved the flexibility of the collective bargaining system, decreased employment protection for regular employment and introduced a new contract as a bridge between temporary and permanent employment reform (Sola et al. 2013). Although the OECD expresses some optimism about Spain’s potential to reduce labour market inequalities and suggests that the reform was responsible for the creation of about 25,000 new jobs per month in 2012 (OECD 2013), it is too early to analyze the impact of the reform.

From this section, I develop the following expectations: because of the profound flexibilization and the economic upswing, I expect labour market risks to be less unequally distributed in Germany, while labour market inequality is expected to increase in Italy and Spain. In France, I expect labour market inequality to remain constant although at a high level. Atypical employment is a common feature in France. Although the French labour market is not characterized by selective flexibiliza- tion as in Italy or Spain, it combines strong employment protection for standard employment with a means for flexible adjustment of the labour market supply of temporary employment and therefore needs no special promotion. At the same time, I expect labour market risks to be particularly concentrated among the younger cohorts in France, Italy and Spain.

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