The Spanish labour market has been characterised by high unemployment rates since 1970. In an effort to deal with this problem, in the mid 1980s flexibility measures were adopted, in particular widespread use of temporary contracts. These reforms gave rise to an employment model that was very sensitive to economic fluctuations and highly segmented, in which certain social groups experienced greater labour market uncertainty (Bernardi and Martínez-Pastor, 2010). Specifically, the growing dualisation in terms of stability and social protection between permanent and temporary workers added a supplementary feature of intergenerational inequality to the Spanish labour market. The Portuguese labour market has shown similar patterns in terms of market-oriented policies and the extension of contractual flexibility since the beginning of the 1980s. It is commonly said that these labour reforms in Portugal were partial, insofar as permanent workers were not affected, while flexible work served as an adjustment variable with little or even no social protection. This has led to similar consequences as those found in Spain, with a segmented labour market characterised by increasing labour devaluation and social and economic inequality between permanent and temporary workers (Campos Lima and Caldas, 2023).

Younger workers, together with other social groups (for example, immigrants, women and low-skilled workers), have held a central position in this flexibilisation and growth of temporary employment in both countries. Both Spain and Portugal were seriously hit by the economic recession of 2008, becoming – along with Greece – the European countries that suffered its impact on employment most severely, and young workers who held temporary jobs were the most affected by labour shedding and lack of job opportunities. The circumstances got worse in Spain with the labour reform of 2012, which made layoffs cheaper, while in Portugal these temporary contracts acted as a cushion to help businesses to deal with fluctuations in demand, thus contributing to the increase in youth unemployment.

For many of those who entered the labour market during the Great Recession, the covid-19 crisis rubbed salt into the wounds of the previous economic shock. With the impact of the pandemic, Spain experienced a 5% rise in the unemployment rate and a reduction of around 4-5% in the labour force participation rate, while the temporary employment rate dropped as a result of the economic standstill, which hindered the renewal or creation of temporary contracts (figures 1 and 3). Thus, the economic shock of March 2020 drove a large part of the temporary workforce out of the labour market, and many of the unemployed who were looking for work gave up in the face of lack of opportunities. The situation was similar to that experienced by young people during the Great Recession, although the latter lasted longer. The succession of periods of unemployment followed by protracted stages of temporary work cannot be regarded as just a bad patch in young people's work history, but often has permanent effects on their career. Therefore, the composite effect of the two crises on young people's working lives was huge, not only for young adults who were starting to work, but also for those aged under 30 who had already suffered the Great Recession (Molina and Godino, 2021; Almeida and Santos, 2020).
 

The high temporary employment rate in Spain and Portugal is not due solely to the importance of sectors with a strong seasonal component, such as tourism, but also responds to a structural pattern, as both countries have a higher temporary employment rate than the EU average in all sectors of the economy. The prevalence of small enterprises and the predominance of the services sector, together with a business culture that normalises the use of temporary contracting, may be factors explaining the high turnover and low conversion of temporary contracts into permanent ones in both countries (Silva, Martins and Lopes, 2018). These trends have gone towards shaping strongly unequal labour markets in both countries, with a particularly vulnerable position for the youth population. Some approaches take this instability to be a defining aspect of youth employment histories today, assuming it as a circumstantial phenomenon that gradually tends to improve.

However, the reality is that precarious and intermittent work histories continue beyond youth for certain groups, sometimes with the chronification of unstable employment situations.
This systematic use of temporary contracting was one of the main reasons for the labour reform introduced by the Spanish government in December 2021. The aim of the law was to reduce the temporary employment rate by abolishing "works and services contracts", lowering the maximum duration of temporary contracts to one year, limiting the possible grounds for their use, and extending discontinuous permanent contracts for seasonal work. In April 2023, the Portuguese government also adopted the Decent Work Agenda to reduce – albeit with more timid measures – the use of temporary contracting, by limiting successive contracts, increasing compensation for the termination of contracts of a certain duration, and lowering the maximum duration of temporary contracts from six to four years.

Although a more complete analysis requires observing the long-term trend, in the short term some signs of the possible effect of the adoption of the labour reforms can be seen in both countries. In this respect, the researchers explore the variation in the labour force participation rate, the unemployment rate and the proportion of employees with temporary contracts in relation to the total number of employees in both the youth population and the total population. In this analysis the figures for 2020 and 2021 are omitted in view of the composition effect that occurred in levels of stable and temporary employment due to the pandemic crisis, especially in southern European economies characterised by the predominance of seasonal activities.

In the case of Spain, although the labour reform was adopted in December 2021 it was not fully binding until April 2022, so the analysis focuses on the second quarter of each year. Thus, the figures show a reduction in the temporary employment rate of 4.5% in 2022 and a more substantial 9.5% in 2023 with respect to the second quarter of 2017 for the wage-earning population as a whole (figure 2). This has occurred together with a parallel reduction in the unemployment rate, while the labour force participation rate has remained relatively stable (figure 1), which dispels early interpretations that pointed to the possibility of people being pushed out of the labour market. These effects seem to be particularly clear in the case of the youth population: temporary contracting was 10.4% down in 2022 and 21.2% down in 2023, while unemployment fell by figures in the region of 9% in both periods (figure 1) and the labour force participation rate remained stable (figure 3). In this way, with respect to 2019, the reduction in the temporary employment rate among Spanish young adults was over 8% shortly after the adoption of the reform and almost 19% more than a year after its implementation, percentages that practically double those found in the population as a whole.

The downward trend in the temporary employment rate is less evident in the case of Portugal, although very few months are available for consultation to assess the impact of the reform. Therefore, any possible effects observed on the basis of these figures should be interpreted with caution. The first point of note is a sizeable drop (although smaller than in Spain) in the temporary employment rate in the post-pandemic period (-6% in the second quarter of 2022 and -4.3% in that of 2023 with respect to the same period of 2017). Nonetheless, it is interesting that this reduction is larger in 2022 than after the adoption of the Decent Work Agenda in April 2023 (figure 2). As in the case of Spain, these reductions are occurring parallel to less abrupt drops in the unemployment rate, while the workforce actually seems to be increasing (figure 1). One possible explanation for this would be a slower economic recovery in Portugal after the covid crisis, due to the burden of the aforementioned composition effect whereby employees with stable jobs would account for a larger proportion of total workers than in other periods, given the expulsion of temporary workers from the labour market. The larger labour force participation rate in 2023 compared to 2022 appears to point in this direction. As regards young people, there seems to be a clear decrease in the proportion of temporary contracts in the period following the adoption of the labour reform in relation to previous periods: practically non-existent with respect to 2022 and more evident with respect to the pre-pandemic period, occurring in conjunction with decreases in the unemployment rate and increases in the labour force participation rate (figure 3). However, this reduction in temporary jobs falls short of 1% for the youth population in the quarter when the reform was adopted (April-June 2023) in relation to the previous year.

On the basis of the descriptive data observed, it can be stated that only in Spain has the adoption of these reforms resulted in a drop in the temporary employment rate of the youth population, without any apparent job destruction. The Spanish labour reform actually contains more structural measures directed towards changing business practices with regard to temporary contracting. Portugal, on the other hand, having implemented a softer reform aimed at discouraging the use of temporary contracts, shows practically no results in the direction of reducing the temporary employment rate among young people. The measures are similar to those adopted at earlier stages in Spain with equally meagre results, which suggests that only those institutional initiatives that seek to change the rules of the game in the labour market will succeed in making a substantial improvement to the material conditions of young workers.

The question arises as to whether the reduction in temporary contracting in Spain is affecting younger workers in general or, on the contrary, there is a differential effect. In other words, whether in fact these reforms have less impact precisely on those profiles that structurally lie around the bottom of the labour market, and are systematically affected by a higher rate of temporary employment. It is necessary, therefore, to remain alert to any possible risks that might distort the benefits achieved through the reform, such as an increase in involuntary part-time employment among young workers.

ALMEIDA, F., and J.D. SANTOS (2020): «The effects of COVID-19 on job security and unemployment in Portugal», International Journal of Sociology and Social Policy, 40(9/10).  

BERNARDI, F., and J.I. MARTÍNEZ-PASTOR (2010): «Falling at the bottom: Unskilled jobs at entry in the labor market in Spain over time and in a comparative perspective», International Journal of Comparative Sociology, 51(4).

CAMPOS LIMA, M.P., and J.M.C. CALDAS (2023): «A desvalorização interna, a austeridade neoliberal e os efeitos cumulativos na desvalorização do trabalho», en M.P. Campos Lima y J.M.C. Caldas (coords.), A persistência da desvalorização do trabalho e a urgência da sua revalorização, Lisboa: Almedina.

MOLINA, O., and A. GODINO (2021): «Scars that never heal: dualisation and youth employment policies in Spain from the Great Recession to the Corona Crisis», Sociologia del lavoro, 159.

SILVA, M., L.F. MARTINS and H. LOPES (2018): «Asymmetric labor market reforms: effects on wage growth and conversion probability of fixed-term contracts», Industrial and Labor Relations Review, 71(3)