Spanish Government Cuts Firing Costs, Changes Labor Rules

Spain’s government cut firing costs, changed wage-bargaining laws and decided that jobless people on benefits will have to offer community service in an overhaul of labor rules aimed at tackling the 23 percent unemployment rate.

The decree, which comes into effect immediately, gives priority to wage deals made within companies, rather than at industry or regional level, and makes it cheaper and easier for struggling companies to fire workers, the government said yesterday.

Businesses won’t have to seek government approval for group firings, while unions will no longer be able to cling during a downturn to wage agreements made during a boom. The decree bolsters training and offers tax rebates for small companies that hire from among Spain’s 5.3 million unemployed.

The People’s Party won the national election on Nov. 20 on a pledge to create jobs in a country that’s home to a third of the euro region’s unemployed and where 49 percent of young people are out of work. Prime Minister Mariano Rajoy is risking the ire of unions as he tries to convince voters and investors he can cut the highest jobless rate in the European Union and steer the shrinking economy back to growth.

The European Central Bank, the European Commission and the International Monetary Fund have all called for changes to laws that allowed labor costs to rise as much as 5.8 percent in 2009 even as unemployment surged. New rules are the only way to improve productivity as the nation can no longer devalue its currency, Bank of Spain Governor Miguel Angel Fernandez Ordonez said on June 21. Spain’s economy is in a recession and the Bank of Spain expects a contraction of 1.5 percent this year.‘

The plan also aims to reduce benefit fraud and stop people claiming jobless pay while working at the same time, the Labor Ministry said. Forcing those receiving subsidies to offer “services” may make it harder for them to work in the underground economy, while allowing towns and regions to offer services they can’t otherwise afford amid plunging tax revenue. The government didn’t say what tasks unemployed people will be asked to do.

 Source: businessweek