Labor market duality: The unresolved issue of the 2012 reform

Labor market duality: The unresolved issue of the 2012 reform

Fecha: enero 2013

Autores: Daniel Fernández Kranz

Etiquetas: Mercado de trabajo, Temporalidad laboral, Reforma laboral

Spanish and International Economic & Financial Otlook, SEFO, V. 2 N.º 1

The creation of the temporary contract in 1984 has given rise to one of the most important problems of Spain’s labor market today - duality. Several recent reforms have tried to address this issue, including the latest in February 2012, however unsuccessfully. This reform aimed to shift workers’ and firms’ incentives away from external flexibility and towards internal flexibility. Unfortunately, initial evidence suggests that still high severance costs for unfair dismissal and legal uncertainty have led to firms’ continued preference for the temporary contract. The resulting buffer of temporary employees is reducing willingness of permanent workers to accept internal flexibility and thereby hindering progress of the reform overall.

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