Employment stability improves in Spain
The 2021 labour reform has managed to significantly reduce the temporary employment rate in Spain: from an average of 29.7% in the period 2014-2019, it has fallen to 12.7% in 2024. This reduction has occurred across the various sectors, age groups and regions, and it has led to greater employment stability, although job turnover has increased and the number of contracts registered has decreased.
In view of the significant reduction in the temporary employment rate in recent years, which has occurred across the various sectors, age groups and regions, it could be said that the labour reform adopted in December 2021 has achieved one of its main objectives. In this regard, of the total number of social security affiliates registered under the General Regime at the 2024 year end, 12.7% were temporary workers, a figure which contrasts with the average rate of 29.7% in the period 2014-2019.1 Has this resulted in greater employment stability? As we shall see in the following lines, we have witnessed an improvement in this regard too, albeit a less pronounced improvement than the fall in the temporary employment rate would suggest.2
As the labour reform has discouraged temporary hiring and the proportion of permanent contracts has grown, there has been a significant drop in the number of contracts signed. Specifically, the number of contracts registered has increased from around 20.3 million on average per year before the pandemic (2014-2019) to 15.4 million in 2024 (see first chart); as a result, there has been a drop in the turnover rate (ratio between the number of contracts signed and the number of people hired in the period), going from a monthly average of 1.37 in 2014-2019 to 1.22 in 2024 (see second chart).
The fact that fewer contracts are being signed to replace temporary ones coming to an end automatically translates into a lower volume of registrations and de-registrations with the Social Security Institute. The evolution of registrations and de-registrations provides an approximation of the stability of employment. In this regard, in order to see the evolution of rotation in the labour market, we can look at the ratio of the sum of registrations and de-registrations each month over the total volume of affiliates (wage earners registered in the General Regime): this ratio shows us the intensity of the inflows and outflows of the labour market relative to the volume of employment.
As shown in the third chart, this turnover rate has declined in recent years, going from 1.30% on average in the period 2014-2019 (i.e. out of ever 100 workers, 1.30 registered or de-registered each month) to 1.10% in 2024. However, this good result is accompanied by a higher turnover, both among temporary workers (from 3.84% to 4.32%) and especially among permanent workers, whose rate, although still low, has risen from 0.25% to 0.67%; the only reduction in turnover, from 0.47% to 0.40%, has occurred among other workers, which includes non-professional caregivers, civil servants and those with a training or internship contract.
Another indicator which attests to the greater stability in the labour market is the survival rate of contracts one year after their signing. Using data from the Continuous Work History Sample (MCVL),3 we can see that 16% of the contracts signed in March 2022 were still in force one year later, compared to 11% in the case of contracts signed in the same month of 2017 and 2018. On the other hand, the survival rate among permanent contracts, excluding fixed discontinuous contracts, has reduced from 52.5% to 48%, which would appear to confirm that part of the instability inherent in temporary contracts has been transferred to permanent contracts.
Along the same lines, flows according to the Labour Force Survey show a notable drop in the number of people in employment who become unemployed in the following quarter. From a quarterly average of 3.9% in the period 2014-2019, this figure has fallen to 2.9% in 2024, although this is still above the European average (1.3%).
In short, the stability of employment, in aggregate terms, has improved in recent years, despite the fact that turnover has increased within each type of contract. What has dominated is the composition effect, since permanent contracts, which have a lower turnover, have gained prominence in the overall mix.
- 3.
The Continuous Work History Sample (known by the acronym MCVL in Spanish) gathers anonymised individual information from the Social Security databases and other data from the Municipal Continuous Register (National Statistics Institute) and from the annual summary of personal income tax withholdings and payments (Spanish Tax Agency), on relations with the Social Security system of an extensive sample of registered workers and pensioners (1.32 million in the last edition of 2023); information is available on the date of registration and de-registration of each affiliation between January 2017 and March 2023. For more information, see Bank of Spain (2024), «The recent behaviour of the temporary employment ratio and other indicators proxying job stability», Box 3.1, Annual Report 2023.
- 1. For further details, see the Focus «Where has the fall in the temporary employment rate been concentrated?» in the MR06/2024.
- 2. See FEDEA (2023). «Reforming dual labor markets: “empirical” or “contractual” temporary rates?». Estudios sobre la Economía Española, issue 2023-36.
- 3.
The Continuous Work History Sample (known by the acronym MCVL in Spanish) gathers anonymised individual information from the Social Security databases and other data from the Municipal Continuous Register (National Statistics Institute) and from the annual summary of personal income tax withholdings and payments (Spanish Tax Agency), on relations with the Social Security system of an extensive sample of registered workers and pensioners (1.32 million in the last edition of 2023); information is available on the date of registration and de-registration of each affiliation between January 2017 and March 2023. For more information, see Bank of Spain (2024), «The recent behaviour of the temporary employment ratio and other indicators proxying job stability», Box 3.1, Annual Report 2023.
