1In the first six months of 2020 there was a 21.93% reduction in the number of effective hours worked by employees in the private sector. Although a recovery was observed in the second semester of the year, hours worked did not reach the level registered at the end of 2019.
2In June 2020, more than 3.1 million private-sector employees had a reduction in their work schedule or a contract suspension.
3From a demographic perspective, the workers most affected by layoff processes were those aged over 30 and with a low educational level. Although women were affected more than men in these processes, gender was not a decisive variable.
4From an employment perspective, retail and hospitality were the hardest hit sectors, and full-time workers with a permanent contract were the most affected.
5According to available data, layoff processes do not appear to be the gateway to unemployment, although the process of return to usual employment activity slowed down in the fourth quarter of 2020.
6Job recovery occurred mostly in the construction industry, with temporary part-time contracts.
Covid-19 has increased the number of workers laid off
Towards the end of March 2020, Spanish society found itself in the midst of the pandemic caused by the covid-19 virus. The authorities implemented a series of restrictive measures to address the health situation, including the reduction of mobility. The labour market was no exception to the impact of the pandemic, as many companies were forced to announce redundancies or furlough schemes. This context obliged the government to create a legal framework to regulate the new situation. All this caused effective working time in the Spanish labour market to shrink by more than a fifth in only six months. The third and fourth quarters of 2020 brought a recovery of effective working time, but the levels that had existed in the fourth quarter of 2019 were not regained.
The main reason for this reduction in effective working hours was the exponential increase in the number of furloughs and redundancies, through both the suspension of contracts and the reduction of working time. In June 2020, more than 2.4 million private-sector employees were affected by a contract suspension, while in the same month more than 650,000 employees had a reduced work schedule. The two figures together meant that approximately a sixth of the working population was in a situation of either redundancy or furlough in the second quarter of 2020.
1. Workers over 30, with a low educational level and in the services sector were those most affected by furloughs and redundancies
The demographic and career profile of private-sector employees made redundant or placed on furlough during the period analysed is as follows: over 30 years old, with a medium or low level of education, belonging to the services sector within retail and hospitality, in the occupational category of catering worker, with a permanent contract and on a full-time basis.
In the study conducted no clear differentiation was found in terms of whether men or women were more affected, although the trend in 2020 as a whole was unfavourable for women.
Nearly 80% of workers made redundant or put on furlough were private-sector employees aged over 30, while these measures affected younger workers to a lesser extent.
Workers’ educational achievement and their level of protection against situations of redundancy or furlough are directly related. Thus, in the study conducted, the lowest percentages of reduced work schedules or contract suspension are to be found amongst PhD holders, degree holders and diploma holders. At the other extreme, the highest incidence is observed in workers who only completed compulsory schooling.
Eighty percent of redundancies and furloughs were concentrated in the services sector, and within this sector, retail and hospitality were the hardest hit branches of activity. In relation to hospitality, in the fourth quarter of 2020, one out of every two redundancies or furloughs occurred in this subsector.
With regard to occupational category, redundancies and furloughs were concentrated in low-skilled jobs, mainly support staff, administrative staff and catering workers, with a significant percentage increase that was maintained throughout all four quarters of 2020.
As far as type of contract is concerned, between eight and nine out of every ten redundancies or furloughs are linked to permanent contracts. And as regards working time, more than 80% of redundancies or furloughs correspond to full-time schedules.
2. So far, layoffs are not a stepping stone to unemployment
It is important to ask what has happened, as regards employment, to the workers who were made redundant or placed on furlough during 2020: Did they get their job back during the following quarter? Did they continue in the same situation? Did they join the ranks of the unemployed? Did they leave the job market? It is still early days to obtain definitive data in this respect, as it is not known when the extension of the furlough scheme will be finalised. Nevertheless, apart from the article presented here, the Bank of Spain has also put the spotlight on the dynamic that is being generated in the labour market within this pandemic situation (Izquierdo, Puente and Regil, 2021).
Between the first and second quarters of 2020 the figures are largely unrepresentative, as the impact of the health crisis on the labour market was felt most in the second quarter. In any event, in this first transition, more than 60% of workers who were made redundant or put on furlough returned to their usual job in the second quarter, 20% continued in the same situation, and the remaining percentage was distributed equally among those who exited the job market and those who became unemployed.
Between the second and third quarters of 2020 the data is more representative, as by then the health crisis was affecting the Spanish labour market full on. A priori, the trend in people made redundant or put on furlough in the second quarter appears to be very favourable in the third quarter, as more than 70% recovered their usual job, and workers still redundant or on furlough dropped to 15%.
However, with regard to the transition between the third and fourth quarters, only 45% of workers made redundant or placed on furlough returned to their usual job, and more than 30% continued in the same situation. It is also noteworthy that more than 14% of workers left the job market and fewer than 10% transited to unemployment.
3. Men and young people were more likely to return to their usual employment status, and recovery occurred mostly in the construction industry
The variables that have major effects on the quarterly transitions in the direction of either employment or the continuation of redundancies or furlough schemes are of a diverse nature. It can be seen from the data analysed in the research on which this article is based that men showed a greater probability than women of redressing layoff situations in any of the quarters considered. Thus, between the third and the fourth quarter of 2020, the probability of recovering their usual job was 29.82% higher for men than for women.
Nationality is also a significant variable, although it does not have the same sign in all the transitions analysed in the research. Specifically, between the first and the second quarter, and between the third and the fourth, foreign workers had higher probabilities of returning to their usual job, whereas between the second and the third quarter this characteristic was more associated with native workers. Between the third and fourth quarters of 2020, the foreign population were 9.79% more likely to recover their usual job than the native population.
As far as age is concerned, younger workers were more likely to move on from a redundancy or furlough situation, and adults over 46 years of age were less likely. For example, between the third and fourth quarters of 2020, young people had a 20.92% higher probability of returning to their usual job than people aged over 46.
With regard to educational level, no uniform pattern can be seen over the quarterly transitions. For example, between the second and third quarters, it was the least qualified workers who had the highest probability of getting their job back. However, between the third and the fourth quarter, this characteristic corresponds to workers who had completed the first stage of secondary schooling and those with higher education. This could be explained by the seasonality of the Spanish economy, and more specifically, the predominant type of activity in each quarter. Between June and August, economic activity in Spain is linked to low-productivity services, unlike in the last quarter of the year. Thus, between the third and the fourth quarter of 2020, workers with a low educational level had a 56.22% lower probability of returning to their usual job than workers with higher education.
Regional distribution was also unequal throughout 2020. Between the first and the second quarter, the northeast (Basque Country, Navarre, La Rioja and Aragon), together with Madrid, showed the largest likelihood of recovering from the layoff situation. Between the second and third quarters the most positive trend was in the centre (Castile and Leon, Castile-La Mancha and Extremadura) and the northwest (Galicia, Asturias and Cantabria). Between the third and fourth quarters it was in the central region and Madrid again. In this last transition, the worst figures were for the northeast, the east (Catalonia and the Valencian Community) and the islands (Canaries and Balearics), independently of the quarter analysed. In the case of the first geographical area, this may have been due to the high incidence of covid-19 there, and in the rest of the areas, to the importance of the hospitality and retail sectors in those regions. In comparison with workers in the southern region (Andalusia and Murcia), those in the northeast and in the east and the islands were respectively 31% and 24.35% less likely to recover their usual job.
In sectoral terms, the services sector shows less potential to recover normal activity, being highly influenced by the predominance of retail and hospitality in redundancies and furlough schemes. On the other hand, the construction industry (a male-dominated sector) shows a greater likelihood of recovery in all quarters: for example, between the third and fourth quarters of 2020 construction workers were 45.79% more likely than services sector workers to return to the job they had before being laid off.
No clear pattern emerges as regards occupational category: between the second and the third quarters those workers in a position of least responsibility were most likely to find their way out of the layoff situation. However, between the third and fourth quarters of the year, the highest probability corresponded to the most highly skilled workers, with a likelihood of recovering their usual job 44.48% higher than less skilled workers with a lower occupational rank.
Concerning types of contract and work schedule, some notable features are found. Specifically, having a temporary contract or a part-time work schedule are characteristics that are conducive to being able to leave a layoff situation behind. For example, between the third and fourth quarters, workers who have these characteristics are found to be respectively 60.98% and 43.73% more likely to leave redundancy or furlough situations than employees who have another type of contract or schedule. This has major implications for economic activity in Spain, as companies seem to keep workers with a permanent contract and a full-time schedule in a situation of redundancy or furlough. To some degree, such workers can be the most productive, although also those who generate most cost for the company. On the other hand, normal employment activity is regained mostly by workers with a temporary contract and a part-time work schedule, who generate least cost for the company and at the same time may be less productive.
The analysis presented here of what could be called the jobs pandemic that is sweeping through the Spanish economy leaves more darkness than light for now. The substantial reduction in the number of effective working hours and the sharp increase in redundancies and furloughs have still not disappeared. The socio-demographic profile of the workers affected shows that the crisis has had a profound impact on one of the economic mainstays of productive activity in Spain: retail and hospitality. Furthermore, damage has been done to the most stable part of the employment fabric: workers on a permanent contract and with a full-time work schedule. Moreover, those workers who manage to recover their usual jobs do not seem to be those with most productivity: they tend to be under the age of 30, with temporary contracts and a part-time schedule or with a low educational level.
BRUN, L. (2020): «Respuestas fiscales asimétricas frente al COVID-19 en Europa», Información Comercial Española, 916, 37-75.
GÓMEZ, A. L. and J. M. MONTERO (2020): «El impacto del confinamiento sobre el mercado de trabajo del área del euro durante la primera mitad de 2020», Boletín Económico del Banco de España, 4/2020.
IZQUIERDO, M., S. PUENTE and A. REGIL (2021): «Los ERTE en la crisis del COVID-19: un primer análisis de la reincorporación al empleo de los trabajadores afectados», Boletín Económico del Banco de España, 2/2021.
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