Economists say that helps explain Spain’s enduring economic boom. The onetime laggard is now a European pace-setter. These days Spain accounts for a third of all the jobs created in the European Union. Unemployment has plunged–down from a peak of 25 percent to barely 8 percent today–while growth is running substantially above average. So what’s bothering Madrid? To businesses elsewhere–think France or Germany–Spain looks like a model for the job-creating flexibility they crave at a time when EU unemployment stubbornly hovers around 9 percent. Yet earlier this month the socialist government of José Luis Rodríguez Zapatero signed a deal with unions and employers that could reverse the trend. The package includes sweeteners for companies that switch staff from temporary to permanent contracts. And new rules provide that workers who spend more than 24 out of 30 months in a single job must be given full employment. A step backward? Not according to Zapatero, who speaks of a “good agreement for creating work.”
Time will tell. Yet clearly, growing numbers of Europeans share the prime minister’s worries over the steady drift away from permanent employment. Across the continent, a gradual relaxation of national laws has encouraged more and more companies to take on temporary staff as a way to sidestep the heavy social costs that go with long-term recruitment. In France, Germany and Italy, short-termers now make up more than 12 percent of the work force. Manpower, the world’s largest multinational temp agency, has roughly 1,000 offices in France alone, more than in the entire United States, generating more than a quarter of the company’s $16.2 billion annual revenues. “Business is exploding” all over Europe, says corporate spokesperson Tracy Shilobrit. But so is the accompanying controversy. Europeans raised on the promise of job security remain leery of any working arrangements that depart from the traditional–that is, open-ended contracts with guaranteed notice periods and generous payoffs for laid-off workers. Politicians tinker with such provisions at their peril. “Trying to take out some pieces of the package creates the impression that the whole package will be wiped out entirely,” says Martin Werding of the IFO Institute for Economic Research in Munich.
Ironically, the loudest protests against the temp-work trend come from those most likely to benefit–the legions of Europe’s jobless youngsters. Witness this spring’s protests in France, which forced Prime Minister Dominique de Villepin to drop plans that would have cajoled firms into taking on first-time job seekers by easing the rules on firing them in the future. A new terminology has emerged among the disgruntled to express their discontent. French workers say they dread joining the ranks of the “precarious.” Italians struggle to avoid “CoCoCos,” or consecutive continuous contracts. The Spanish disparage contratos basura , or “garbage contracts.”
To be sure, opposition weakens as the prospect of permanent jobs recedes. Ask Ben Noteboom, CEO of Randstad, the largest temporary-employment agency in Germany. “Two years ago the unions were out to kill us,” he recalls. “Then unemployment hit 4.3 million, and common sense kicked in.” A collective agreement and a change in the law opened up the temp market with dramatic effect. Business has never been so good for the Dutch-based business. In the first quarter of 2006 alone, revenues jumped by more than 40 percent. The company now reckons it could fill 5,000 places overnight, a small but useful cut in the country’s unemployment tally. “To be honest,” says Noteboom, “I don’t see any losers.”
The critics do, however. They concede the principle: who’d argue against flexibility and more jobs? But in practice, they say, reality falls far short of perfection. Employers in Spain and elsewhere, for example, were quick to abuse their freedoms. So you want a risk-free way to keep the services of a bright young university graduate? Just ensure that he or she spends a few months on unpaid “leave” between contracts. Juan is one such typical case. (He won’t give his full name for fear of his bosses’ wrath.) The 30-year-old Spaniard has been working as an airline clerk for four years, interspersing his six-month contracts with other brief jobs. “All the airlines are the same,” he says. “They know the law and comply with the minimum so as not to give you an open-ended contract.” Sympathetic media have been quick to highlight the worst excesses of corporate meanness. In France, journalists have made hay of the case of postal worker Christine Cros–who’s worked a total of 574 short-term contracts over 19 years.
A worrying picture of a divided work force emerges from the mass of individual cases. “What you get is polarization between good, secure jobs for insiders and precarious jobs for outsiders,” says Nigel Meager of the Institute for Employment Studies in Britain. “And labor-market polarization leads to social polarization.” Too often, the unskilled are trapped in low-grade temporary work, fueling the sense of resentment that showed itself in last fall’s rioting in France’s rundown suburbs. The downside is especially steep in countries where job stability is built into the system. French landlords, for example, may be leery of renting to tenants who don’t hold the golden ticket of the job market–the CDI, or contract of undetermined duration. The latest trend is no less unsettling. Once largely confined to lower-level jobs, temp work is creeping up the corporate ladder and into middle-management and professional ranks such as information technology and engineering, according to Shilobrit. Indeed, this is among the fastest-growing segments of Manpower’s business in Europe.
Doubts about the potential social costs of temp work have prompted some economists and government officials to question what has long been accepted as conventional wisdom–that there’s a causal link between prosperity and easy access to temporary staff. If Spain is flourishing, says Ronald Janssen of the European Trade Union Confederation in Brussels, it’s because of historically low interest rates, not because of easier employment rules. Dependence on temps may even prove an economic downer. “Temporary work does not provide stability for the worker or the household, and that has all kinds of negative effects,” says Janssen, reeling off a list of drawbacks. Productivity declines (it’s stagnant in Spain) because workers feel no loyalty to casual employers. Firms see no need to invest in training employees who won’t be in the office next month, and consumer spending falls since workers on temporary contracts lack the confidence to splurge.
Happily, all parties can at least agree that the problem can be fixed. All that matters is finding the right balance between security and flexibility, experts say. Lately, Spanish unions, employers and free-market ideologues have taken to touting the so-called Danish model–a system of “flexicurity,” which turns the regular staffer into a temporary-permanent hybrid. The Danish firm that hits hard times can dump workers with a few days’ notice, but the state will step in (with generous benefits) to retrain the newly redundant and prod them back into employment as soon as possible. “Our philosophy is, if you can’t be sure of a job, you can be sure of employment,” says Jorn Neergaard Larsen, director of the Danish Employers Confederation. Indeed, who needs more? The rest of Europe is watching closely.
With Tracy McNicoll in Paris and Mike Elkin in Madrid
