Can Italy Repeat Spain’s Employment Success Story?

What can be learned (and copied) from the Spanish labor reform.

Spain Labor Minister Yolanda Diaz
Spain's Labor Minister, Yolanda Díaz Pérez. Photo: La Moncloa - Gobierno de España, CC BY-NC-ND 2.0, via Flickr.

“Unemployment in Spain is now below 3 million for the first time in fourteen years,” marvels Italy’s newspaper La Repubblica. As we here in Italy read headlines to that effect, we wonder what’s behind these figures and what, if anything can be learned and even adapted from them to help the beleaguered Italian economy.

But the story behind this news also prompts one to ask if a politician can succeed in appealing to an electorate across party lines. If we’re to judge by the success of Yolanda Díaz Pérez, the ex-Communist Party member and leader of Spain’s left-wing Podemos Party, who, as Labor Minister, is slashing that country’s unemployment rate by creating 2.5 million permanent jobs since January of this year, it would seem the answer is yes.

Díaz’s national popularity has soared as she has cultivated a personal brand away from existing political parties, with recent polling showing her overtake the Socialist Prime Minister Pedro Sánchez to become Spain’s most popular political leader. Some observers say she may be a hotly tipped contender to become the country’s first female prime minister. Already nearly one-fifth of Partido Socialista Obrero Español — the Spanish Socialist Workers’ Party — voters now prefer her to lead the next government.

A former labor lawyer from the northwestern Galicia region, Díaz gained prominence in Spain not primarily as an anti-establishment outsider vowing to break with the existing political system, but as a government minister working from within and seeking to guarantee the rights and incomes of working people in the face of the unprecedented COVID crisis. She negotiated a series of agreements between employers and unions over the social response to the pandemic. The most notable was guaranteeing the wages of over 3.5 million workers as well as managing things like public health, re-industrialization, a tax on energy giants and labor law reform that guarantees worker protection.

Díaz declared in November 2021 that the Left, and particularly left-leaning women, is showing that “it can govern better.” She is vehemently against ‘precarious work’, a blanket term associated with part-time jobs, self-employment, fixed-term work, temporary work, remote and on-call work. She believes that when precarious work becomes long-term, thus permanent but without the perks of a pension fund, holiday and sick leave and insurance, workers are deprived of their basic rights to provide for themselves, their families and their future.

Her policy for permanent employment is paying off. Yet the growing momentum behind Díaz still has to be tested by any major political crisis. Now, in 2022, Spain, like most countries, must face the difficult tasks of reorganizing the country so that pandemic management, soaring inflation across Europe, the specter of war looming, issues like global warming and water scarcity that will impact Spain on a par with other Mediterranean basin countries. All this suggests that the current Sánchez government will face an uphill struggle to maintain its majority in next year’s general election.

Pre-COVID Spain saw that new versus old politics and the rupture from the post-Francisco Franco past had already lost much of their mobilizing power but the onset of the pandemic saw a more definitive shift. Concrete solutions to urgent needs rather than great idealogical debates are now being sought by weary voters as a defense against the Right’s culture wars. Organized labor was largely peripheral to the last decade of mobilizations, but Díaz’s alliance with the country’s major unions has been key to her momentum in office. She has not only sought to reposition the parliamentary left as a credible governing force, but also to contest PSOE’s self-representation as the party of labor.

Diaz is bringing workers back to center stage. Literally. Flanked by the leaders of the country’s two major unions at the Communist Party’s Centenary Celebrations in September, she insisted: “I’m here to change things, like in the labor market where young people are excluded. We can have dignified lives, with dignified employment.” In Barcelona in November: “The alternative to poverty and precariousness is decent work. We are all workers. And that is why this is the major reform that we need to undertake in our country. Because the young people earning €400 a month lack all freedom. They have no freedom to negotiate with business owners.” And again: “Trade unionism is the most effective vaccine against authoritarianism. A strong and organized labor movement that reaches more people and workplaces is a solid guarantee of democracy.”

Negotiating the Labor Reform

Díaz also had to deliver meaningful reform within the constraints of the existing balance of forces in the cabinet starting with the repeal of the Partido Popular’s regressive 2012 labor reform, designed at the height of the European debt crisis to impose a form of internal devaluation by slashing wages. Over the past decade, this legislation has exacerbated the worst aspects of Spain’s labor relations, leading to increased levels of precarious work, stagnant wages, and the scaling back of trade union rights.

Yet from the beginning of the coalition, she and Sánchez were often on different pages in the political ‘hymn-sheet’. He was circumspect about what this commitment to repealing the 2012 reform really meant. Brussels was also applying pressure to leave untouched the greater flexibility that the 2012 law had afforded to management over questions like lay-offs and outsourcing. He sought to intervene in the social partnership talks by attempting to replace Díaz, the lead negotiator, with PSOE’s right-wing economics chief Nadia Calviño. The anger at the attempted U-turn even among the PSOE’s own base, and union talks of industrial action, soon saw Sánchez reaffirm Díaz’s authority as liaison with the unions.

While doing away with many of its most damaging aspects, the final ‘social partnership’ agreement announced on December 23 ultimately fell short of a complete repeal of the 2012 reform. But it was agreed that it improved workers’ rights. Critics were cutting. “We are expected to celebrate as a victory what is only not a major defeat,” wrote Antonio Maestre, journalist and author.

Weighing up the reform

The new legislation’s limits and the major concessions relative to the promise to fully repeal the 2012 reform are obvious. The 2012 reform that gave greater freedom to employers to impose lay-offs were left unchanged, both in terms of the reduced compensation owed to redundant workers and companies’ legal right to declare lay-offs unilaterally without needing authorities’ or unions’ consent. Companies also maintained their right to break certain terms of collective agreements when justified by financial, technical or production issues, while the demand to scale back outsourcing in businesses’ core activities was also dropped.

What the deal did was to refocus on unions’ collective bargaining rights. It also agreed the primacy of sectoral wage agreements over company-level ones and, fundamental for workers, it established that the terms of expired collective agreements would remain in effect indefinitely until a new deal is negotiated. Seasonal work was better regulated and eliminated the widespread use of consecutive fixed-term contracts for what are in reality permanent jobs — a practice that has left hundreds of thousands of workers with little or no job security. Sanctions against companies using fraudulent temporary contracts have been strengthened, with fines now applicable for each worker involved rather than a single company-level penalty. Díaz had already instituted a much more aggressive workplace inspection regime, with her ministry converting 267,000 temporary contracts into permanent ones in the first ten months of 2021 (a 58% increase on 2020), while unions are promising a more robust strategy of collective negotiation in 2022 as inflation eats into workers’ purchasing power. Díaz is seeking another increase in the minimum wage, building on an existing 22% rise since 2019 by bringing it above €1,000 a month.

Specific to the Spanish situation, agreement has been reached with Left leaning Catalan and Basque Nationalist Parties — essential to the government’s majority — to guarantee that regional sectoral agreements will take precedence over national ones.

Díaz, who was never a member of Podemos and holds no leadership position within the Communist PCE, has distanced herself from existing Unidas Podemos structures in recent months, as she seeks to open channels with Más País and other left-wing forces. Managing such intra-left tensions will not be easy. But having broken PSOE’s monopoly on office on the progressive side of politics, the wager is that in a second term the Left could secure a more balanced coalition, with greater weight in the cabinet. This, in turn, should enable a stronger legislative agenda.

In various key areas, from housing to tax reform and regulating energy prices, the coalition has yet to deliver the change it promised. But ultimately, a hypothetical left surge around her brand of laborism will not count for much if the Right ends up winning a majority on the back of a weakened PSOE. To repel such an authoritarian nationalist alternative, Díaz’s reinvigorated social democracy is urgently required across regions, age, gender and productivity, as well as high levels of public debt — all of which have been compounded by the COVID-19 crisis, and Diaz knows better than most that uncertainty leads to voter volatility. So the key priority for recovery and stability is to enhance the public administration’s effectiveness.

Italy and Spain: close, but distant

Yet, a second term is far from certain. Most polls give the right-wing bloc (including the Franco-nostalgist Vox Party) a slight edge over the current government parties, though neither bloc would likely have an absolute majority. Vox styles itself as defending the unity of the Spanish state, with a promise to deport illegal immigrants and repeal laws against gender violence. It has made major gains by calling for a suspension of autonomy for the north-eastern Catalonia region, after separatists failed in their push for independence in October 2017. Many believed that Spaniards would never endorse a far-right party due to its history under the Franco dictatorshop. But, almost fifty years on, memory is being tinted with nostalgia and hatred is raising its head. Diaz seems to be addressing the challenge head-on. She has decided to play a new hand in this complicated political poker game. She recently announced that she is launching a new left-wing political platform in July. The platform will be called Sumar, meaning ‘to add’ in Spanish. She says all of Spain’s divergent left-wing parties such as Podemos, the United Left and Mas Pais will be invited to join. A big gamble.

Without going too deep into developments in twentieth century Spain and Italy, we can conclude by saying that both these Mediterranean countries can learn a little from the other’s management of the historical, cultural and economic paths they chose to follow and, more so, from their collaboration in the management of a very uncertain present and future. They cannot replicate the other’s success or otherwise in structural reform because the narratives are too different. Having said that, Italy’s Labor Minister Andrea Orlando, inspired by the Spanish success, wants to study it in order to reduce so-called mini-jobs that are now endemic in the country. Observing and applying what is relevant to their own policies while avoiding the mistakes and useless meanderings that waste time and energy and lead nowhere may give energy to what will be an up-hill battle in a country where the story of a young worker who was offered €280 per month for ten hours daily employment in a clothes shop has been making the rounds on social media.