Labor Law Change May Offer Relief For Spain's Youth

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For his age group, Spaniard Miguel Viada is one of the lucky ones. The 25-year-old has a temp job, at the help desk of a tech company in Madrid. But three out of his four roommates are unemployed.

They spend hours on the computer, sending out resumes, he says.

"It's impossible. They find jobs, but for one month or something like that, and not in very good places or situations," says Viada, who has a master's degree.

They are all members of the so-called "ni ni," or "nor nor," generation — Spanish slang for neither in school nor working. Spain already has Europe's highest unemployment — almost one in four workers. It tops 50 percent for people in their 20s like Viada and his friends.

The government wants to change that by dismantling Spain's two-tiered labor system, in which people have either temp work or jobs for life. The hope is that overhauling the system will help youths get a leg up on the employment ladder.

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Incentive To Go On The Dole

As a result of Spain's current labor law, one-third of all workers are on temporary contracts. That's usually the way young graduates start out. In the past, these temporary employees were supposed to bump up to permanent status, with better pay and benefits, at the three-year mark. That's not the case anymore during a recession, when companies can't or don't want to pay more.



"Almost everybody loses their job at two years and 364 days," says Javier Diaz-Gimenez, a professor of economics at Spain's IESE Business School.

The economist says it makes sense that Spaniards live with their parents into their 30s. They have no job security to make long-term financial plans.

On top of that, unemployment checks amount to up to 70 percent of a person's pay, much higher than it would be in the U.S. So for some, there's incentive to go on the dole, Diaz-Gimenez says — especially for young people.

"You have this very low-paid and bad-incentive labor contract that is not really teaching you anything, and then you spend as much as two years getting unemployment compensation," Diaz-Gimenez says. "Because, after all, why should you not do that? Three years [in a] junk job and two years [of] unemployment compensation paid by the taxpayers."

On the other hand, Spanish law requires employers to think very carefully about laying off workers on permanent contracts. Severance pay is typically 45 days' salary for every year on the job. That's three times as much as in Germany.

For instance, for someone who has worked 20 years and makes $100,000 a year, an employer would be liable to pay as much as $250,000 in severance.

"That clearly is a lot of money for any employer, especially if it's a small or medium-sized firm," Diaz-Gimenez says.

Are Proposed Changes Enough?

These contracts go back to the 1960s under Francisco Franco, the military dictator. Spaniards didn't have much political freedom, but they had secure jobs in return.

Led by Prime Minister Mariano Rajoy, the business-friendly conservatives in power now want to overhaul Spain's labor system and say it's long overdue. Rajoy wants to strip away some job protections that have been in place all these years. And he knows full well the trade unions won't like that.

Mingling in Brussels last week, he was caught on an open microphone complaining to the Finnish prime minister, saying he was expecting a strike back home, once Spaniards get word of his labor reforms.

In fact, it has already begun. Furloughed iron workers marched down Madrid's Gran Via last week. Teachers have been on intermittent strike for months.

On a recent day, Viada, the young tech worker, lugs groceries home for his out-of-work roommates. He has an advanced degree and is frustrated that he has only temp work. But in this economy, he doesn't dare say it.

"You can't complain; you must be happy to have a job. Maybe it's not a good job, but you must smile and say, 'Hey, I'm a lucky guy,' " he says.

Cabinet ministers are expected to announce plans for labor this week.

Among the possible measures are changes to make it easier to hire young workers and fire older workers, and to revamp contract terms to prevent temp workers from losing their jobs after three years. The changes may also allow companies to negotiate salaries independent of national mandates and lower the amount of severance pay for permanent workers.

Though they may be able to change Viada's contract for the better, it could be more difficult to change his generation's outlook about Spain's future.