Is the 2021 labour reform reducing temporary employment? A first evaluation

→ Temporary employment is one of the biggest problems in the Spanish labour market. It is high, present in all sectors, generates inefficiencies and economic problems, especially for certain groups, and is usually involuntary.

→ The 2021 Labour Reform has tried to tackle this problem through (i) the abolition of the temporary contract for a specific project or service and (ii) channelling temporary work through the permanent seasonal (fijo-discontinuo) contract.

→ This paper carries out the first evaluation of the reform’s impact on employment and on permanent and temporary jobs using microdata from the Labour Force Survey.

→ The methodology we use consists of segmenting the labour market according to observable worker characteristics such as sector of activity, region and age group. The difference in the percentage of workers with temporary contracts affected by the reform in each segment thus allows us to estimate the effect on employment of greater exposure to it.

→ We find a positive effect of the 2021 Labour Reform on the creation of permanent employment (some 286,000 workers) and a non-significant effect on temporary employment, both affected and unaffected by the reform. In aggregate terms, we find no effect of the reform on total employment.