Author: Daniel Fernández Kranz. SEFO - Spanish Economic and Financial Outlook. Vol. 4, N.º 3 (May 2015)
Wednesday 24 June 2015, by Daniel Fernández Kranz.
The majority of Spain´s wage adjustment is still attributable to external flexibility.
Nonetheless, internal flexibility is playing an ever-increasing role in the explanation of income changes in the two years following Spain´s 2012 labour reform, providing some evidence in support of its success. This article examines the evolution of Spanish wages during the height of Spain´s economic crisis with a particular focus on patterns observed prior to and post the introduction of the 2012 labour reform. Official statistics show that salaries in Spain decreased and part-time work increased after 2012. By disaggregating a sample of Spanish workers into “stayers” and “movers,” this article presents empirical evidence of the acceleration in the decrease of “stayers” wages in the wake of the reform, interpreted as an increase in internal flexibility.
The bulk of Spain´s wage correction is still being achieved through external flexibility. However, the rising contribution of internal flexibility indicates that the 2012 reform succeeded in increasing reliance on this type of wage adjustment mechanism. Unfortunately, temporary workers appear to still bear the brunt of the wage adjustment.