This OECD assessment highlights Spain’s resilient labor market through a price crisis and the uncertainty sparked by 500 days of conflict. It notes that employment growth remained strong in both quantity and quality, even as external shocks persisted. Analysts praise the government, employers, and unions for reaching a labor reform aimed at improving the quality of work in Spain. Yet the OECD questions whether the new system of permanent fixed contracts will provide lasting job security under this model. It calls for ongoing supervision and possibly tighter regulation to ensure the reforms keep pace with economic changes.
Since the labor reform took effect on January 1, 2022, temporary or intermittent contracts have persisted as a noticeable feature of the Spanish labor market. In the year and a half since, more than 2.5 million such contracts have been signed, a trend that observers had not fully anticipated. Having an uninterrupted fixed contract means being employed for several months each year while other periods remain outside the social security system.
In practice, a common pattern in the hospitality sector is a staff member who is registered to work for three summer months and several weeks during the Christmas season. This arrangement often leaves the worker without pay for the rest of the year but guarantees future calls. If kept at arm’s length, a company would need to terminate the worker and pay severance.
To strengthen job protection, the OECD notes the possibility of higher severance pay for this group without providing further details. Such measures could deter employers from relying on intermittent contracts alone. The OECD also emphasizes the need for a minimum annual period of employment, a safeguard reflected in some collective agreements. Strengthening labor inspections is listed among the tools to enforce these safeguards.
This is a slight decrease in unemployment in 2023
The labor market, mirroring slower economic growth in the second half of the year, shows signs of cooling. The forecast suggests a modest decline in unemployment in Spain, with the rate staying above the 2022 level, as estimated by the OECD and aligned with INE data, at about 12.6 percent in 2023. Historical patterns show a heavy burden on the Spanish economy from high unemployment, even after a three-year run of steady job gains. Across the 38 countries analyzed, the OECD projects Spain to end the year around 12.6 percent, placing it among higher unemployment rates in the region.
High unemployment has weighed on the economy for years. While broader European averages hover near 5 percent, Spain’s rate remains elevated. The OECD’s forecast for the year points to a persistent but improving labor picture, underscoring a need for policies that support sustainable hiring and wage growth without triggering inflationary pressures.
Companies should increase salaries
If 2022 was tough on households, 2023 is seen as less damaging. In the first quarter, real wage losses narrowed to 1.2 percent, compared with a 3.8 percent decline across the OECD when inflation is considered. The difference reflects comparatively moderate price increases in Spain rather than unusually high wages. Spain also records some of the lowest inflation rates in the euro area, which helps cushion workers.
Beyond the broader price environment, the OECD notes there is room for profits to absorb modest wage increases, particularly for low-wage workers, without forcing price hikes for goods and services. The organization emphasizes the importance of monitoring wage dynamics in the coming years to prevent a price-wage spiral. In parallel, the European Central Bank’s leadership has urged firms to raise wages in a way that supports household purchasing power without fueling further price rises. Cited: OECD report 2024.