“The Spanish public sector has become more effective in recent years, according to international indexes. Nevertheless, there is still plenty of room for improvement compared to the effectiveness of the most advanced European Union countries,” explained Francisco Longo, Associate Director General of ESADE. Prof. Longo insisted on the importance of reports like “Public Employment in Spain: Challenges for a More Effective Democratic State”, written by ESADE researchers, published by the Institute for Economic Studies and presented today at the headquarters of the Spanish Confederation of Business Organisations (CEOE). The new report is intended to serve as a road map, not only to improve the human capital of public employment but also – given the sheer number of people employed by the state (3 million) and the intensive involvement of public employees in the provision of public services – to “improve the performance Spain’s government bodies and public organisations”, according to Prof. Longo.

Public employment after the economic crisis

Public employment in Spain does not present a problem of excessive size. The number of public employees is well within the average range for developed countries and below the OECD average, although any comparison should take into account the fact that, in other countries, a significantly higher percentage of public employees work part-time. Nevertheless, according to the study presented today, the underlying dynamics of Spain’s public-employment sector are quite different from those of other countries. “The number of public employees in Spain has doubled in the last 25 years,” explained Prof. Longo. “Even during the economic crisis, in 2008, when jobs were being destroyed in huge numbers, the number of jobs in the three levels of the administration grew by nearly a quarter of a million.” He added: “Later, the recession forced a two-year hiring slowdown, but this was just a temporary break.” Prof. Longo also noted that the economic recovery has quickly returned public-employment figures to their 2008 levels: “The peculiarity, therefore, is not so much the hypertrophied size of the sector but rather a strong expansive tendency, which is difficult for the authorities to control.”

Public employment in Spain accounts for more than half of the central government’s production costs, a proportion considerably higher than that of the core European Union countries. Consequently, use of the private sector for the provision of public services – i.e. outsourcing – is considerably lower than in those other countries. “This fact suggests that the development of public-private partnerships could, if rigorously designed, make it possible to balance risks and guarantee transparency, accountability and greater efficiency in the use of public resources,” commented Prof. Longo.

Aging workforce, temporary contracts and low skill level

Regarding human-capital characteristics, the ESADE report notes that Spanish public-sector employees have a relatively low rate of qualification for their jobs. This fact is evident, for example, in a comparison of Spain’s professional categories with those of neighbouring countries. In the General State Administration, which essentially performs regulatory and planning functions, no advanced degree is required for around 70% of jobs. Managerial positions, in contrast, account for a considerably lower percentage of jobs than the average for EU countries. “Paradoxically, Spain has one of the highest percentages of public employees with university degrees. This phenomenon of over-qualification – that is, employees having a higher level of formal education than needed for the task – implies, among other problems, a serious waste of talent,” explained Prof. Longo.

“The shortage of skills in Spain’s public-sector human capital is worrying in a context of increasing complexity, and is compounded by two factors: the aging workforce and the number of temporary contracts,” commented Prof. Longo. In 2014, the public sector had more employees over age 60 than under age 30; in the past two years, the differential has increased by three percentage points. Spain has the highest rate of temporary public employment of any EU country except Poland. As explained in the new report, access to temporary public-sector employment in Spain generally requires a lower level of merit and skill than stable government jobs.

Remuneration: inversely proportional to qualification

On the subject of remuneration, the study notes that the salaries of Spanish public employees are, in relation to the country’s GDP, slightly above the OECD average. Between 1999 and 2008, public-sector salaries grew significantly more and remain, on average, 1.5 times higher than public-sector salaries (INE, 2014). According to the ESADE report, this differential is inversely proportional to the skill level required for the job: low-skilled segments are favoured in the public sector, but in contrast, in highly skilled technical categories and executive positions, salaries are considerably lower than for similar positions in the private sector. This imbalance of the wage structure has been accentuated by the distribution of budget cuts during the economic crisis, which penalised higher professional categories to a greater extent. According to the report, “The scarce use of performance evaluation generally makes it impossible to link part of an employee’s wages to performance.”

The management function: deregulated and damaged by the economic crisis

“Uniformity and rigidity are the two main diseases afflicting Spain’s public employment management system,” explained Prof. Longo. The civil service statute, intended for jobs involving authority functions, is not well suited to the management of most of the service-provision activities that make up the vast majority of civil-service jobs (science, R&D&I, education, healthcare, social services, etc.). The ESADE experts who authored the report broadly agree on the need to develop differentiated regulations adapted to each sector and to grant public organisations and their managers greater autonomy in the management of their human resources.

One of the most notable deficits of the Spanish public sector is the fact that there are no public management regulations – at the central, regional or local level – to ensure the professionalism and suitability of senior managers. “The most widespread consequence of this is the politicisation of these jobs and the colonisation of public management by the political parties,” explained Prof. Longo. “We urgently need to create, at the various levels of the administration, a differentiated regime of public managers, as in neighbouring countries, in order to shift the allocation of these jobs away from the electoral cycle, to ensure their professionalism, to link their management to results, and to establish appropriate mechanisms of accountability.”

He added: “Experts agree that public employment policies should, in the coming years, prioritise the renewal and rejuvenation of personnel with a strong emphasis on skills and managerial talent, introduce advanced and flexible practices for hiring and evaluation, open up salary ranges to bring them closer to salaries in reference markets, link compensation to performance, and professionalise labour relations and collective bargaining.”

“Public Employment in Spain: Challenges for a More Effective Democratic State” was written by ESADE faculty members Carlos Losada, Francisco Longo and Manuel Férez, as well as Adrià Albareda of the Institute of Public Administration at Leiden University.

The presentation of the report featured the participation of Rafael Catalá, Spanish Minister of Justice; Ana Plaza, Secretary General of the CEOE; Juan Pablo Lázaro, Director of the Madrid Confederation of Employers and Industries (CEIM); José Luis Feito, President of the Institute for Economic Studies; and Francisco Longo, Associate Director General of ESADE.