The Pros and Cons of the Latest Labour Market Reform in Spain

In this paper, I analyze the main novelties of the new labour market reform approved in Spain in 2012 in relation to the changes that were already introduced in the preceding short-lasting reforms of 2010 and 2011. On the positive side, it is argued that the new reform goes in the right direction in achieving higher internal flexibility as a means of adjustment to business cycle fluctuations. However, on the negative side, it fails to be transformational enough in other relevant areas, like suppressing dualism, improving the effectiveness of active labour market policies, enhancing productivity and maintaining the overall level of social protection of Spanish workers. Given these limitations, it is unlikely that this will be the ultimate reform curing once and for all the Spanish labour market “disease”.JEL codes: H29, J23, J38, J41, J6