The second quarter of 2022 features the Active Population Survey (EPA) and sheds light on how labor reform has reshaped Spain’s job market. The reform, a pact among the government, employers, and unions, aimed to curb decades of high turnover and the instability that plagued the labor landscape. Implemented in April, the new hiring formulas produced a remarkable drop in temporary employment during the first three months, signaling a shift in hiring dynamics without altering the overall demand for labor.
Transience: a historical downturn
In the initial weeks after reform, the impact was unmistakable: temporary work declined while permanent hiring rose. While there have been occasional dips in temporary staffing, those moments typically coincide with broader economic stress. In tough times, employers prefer the lowest-cost option, which often means more temporary positions that can be ended swiftly. The pandemic illustrated this clearly, as thousands faced unemployment and a large portion of the unemployed were on temporary contracts, with many permanent workers placed in inactive status through ERTE measures.
In the quarter just reported, net job creation reached a positive balance of 375,400 positions, with 616,700 permanent contracts added and 241,300 temporary contracts removed. The provisional unemployment rate tied to temporary contracts stood at 22.3 percent, a decline of nearly two percentage points from the prior quarter. Yet the overall road to convergence with European norms remains long. The EU average for temporary employment sits around 15 percent, while Spain continues to carry the highest rate among Western Europe’s major economies.
Young workers and the persistence problem
The reform delivered broad effects, yet it did not fully eradicate impermanence among a group that has historically faced higher job insecurity: younger workers. Among those under thirty, roughly 47.2 percent still hold temporary contracts. While this marks a 4.6-point improvement from the previous quarter, the level remains well above other age groups and continues to raise questions about the trajectory of youth employment in the coming months.
Public sector dynamics diverge from private sector
The reform rules apply broadly to private sector hiring, yet the public sector shows a different pattern. Temporary employment fell in private companies, but rose to 32.4 percent in the public sphere. The government has been pursuing a stabilization framework designed to reduce temporary staffing across administrations, particularly in services managed by regional authorities. The idea is to merge merit-based competition processes with permanent placement to fill hundreds of thousands of currently temporary roles, using prior performance as credentialing rather than another formal competitive exam. These stabilization pathways are expected to close later in the year.
The government’s plan aims to reduce reliance on temporary labor in administration. A new stabilization law may streamline pathways for permanent coverage of positions that have traditionally relied on temporary assignments. The expectation is to complete these transitions in the latter part of the year.
Reducing prejudice associated with reform
One anticipated side effect of the new hiring formulas was a potential rise in partial contracts. In particular, the reform targeted temporary or intermittent contracts with an indefinite status. The data from the first three months shows the bias rate easing from 14.9 percent in the prior quarter to 14.7 percent in the current quarter. For the same period last year, the rate stood at 15.3 percent, suggesting a stabilization trend rather than a sudden shift.
Future months may reveal fluctuation in this indicator, but current indicators point to a move toward more permanent hires. The recent trend shows permanent employment gaining traction, especially in sectors where seasonal demand drives hiring cycles, such as hospitality and retail. With spring and summer campaigns in full swing, employers appear to be prioritizing full-time positions for the long run.
Lower volatility in agriculture and services
Evaluations identify the areas where the probability of temporary contracts fell the most in the first three months. Both services and agriculture show pronounced reductions, with services experiencing a notable drop as the reform takes hold. In agriculture, the decline is sizable as well, while industry and construction show a similar pattern of gradual improvement. Overall, temporary contracts have fallen across the board as reforms take effect and hiring practices adjust to new norms.
These shifts reflect a broader transition in Spain’s labor market, where the aim is to strengthen job stability while preserving flexibility for businesses. The ongoing reforms are expected to continue shaping hiring strategies through the rest of the year, with the ultimate goal of aligning Spain more closely with European standards while supporting robust growth in the private sector and responsible expansion in the public administration.