Labor Productivity

Since I have described in two previous entrances, the reform has brought changes in the regulation of the dismissal costs and in the labor relations, that would have to help to reduce the main imbalances of the Spanish economy, and in particular most important, than it is our highest rate of structural unemployment. Nevertheless, he is clear at least that remains short, in a pair of areas. The elephant in the room: duality. The reform does not approach duality between temporary and indefinite contracts directly. When shortening the breach of costs of dismissal between both, will stimulate to the companies to reduce the temporality.

Nevertheless, the incentive could be modest then in the margin, at the end of the second year, the breach between the 18 days of the weather and the 40 (objective originating) or the 66 (inadmissible) continue being relatively high (safe for the SMEs up to 25 employees, that will acquire 8 days per year of FOGASA in the originating objective). In addition, the new indefinite contract for entrepreneurs could generate a false reduction of temporality, when not having no cost of dismissal the first year. For this reason, it is probable that it is not either managed sufficiently to reduce the volatileness of the use throughout the cycle, that creates frictional unemployment . Indeed, the possible fall of the temporality would have to reduce volatileness, but with the smaller present costs of dismissal, the indefinite use will be more volatile, and so the net effect is a priori doubtful. Certainly, the greater internal flexibility will cause that the real wages fall more and faster in the recessions, which will reduce the magnitude of the cyclical increases of unemployment. (Also they will grow plus the real wages in the expansions, but I believe that to a lesser extent.) However, the fall of unemployment will be smaller than the one than it could be obtained reducing the temporality significantly, because the indefinite ones still will count on a mattress of weathers that it will initially protect to them of the adjustments in the use.

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