The 2012 labour reform: an initial analysis of some of its effects on the labour market

In February 2012 a reform of the Spanish labour market was approved, which modified some of the most important aspects of the institutional framework, affecting key elements, such as the degree of centralisation of the collective bargaining system and dismissal costs and procedures. Although some of these changes are structural and will require a long period to produce their full effect, it is already worth attempting to identify labour market developments that may be related to this labour reform. This article analyses recent developments in the main labour market variables (employment, unemployment and wages) to isolate the possible impact of the reform from other factors that may have driven these developments, including notably the adverse cyclical and employment situation in which it is being applied. The results are subject to a high degree of uncertainty, as a consequence of the brevity of the period elapsed since the reform was approved. Continued monitoring will be needed to confirm the evidence found and to detect any new patterns of behaviour. The rest of the article is organised as follows. The next section briefly describes the content of the 2012 reform, while the third section analyses recent wage developments and the changes detected in collective bargaining. The fourth section analyses developments in employment and unemployment, along with job creation and destruction flows. The fifth section summarises the main conclusions.