The Organization for Economic Co-operation and Development (OECD) visited Madrid to verify that the Temporary Employment Regulatory Files (ERTE) were a key tool for preserving jobs during the crisis caused by the pandemic. More than 3.5 million people simultaneously benefited from this assistance service designed by the Ministry of Social Security led by José Luis Escriva during the strict confinement. The club of developed economies assures that the rapid deployment of subsidies to businesses and workers by the State has been key to maintaining employment.
Unlike other crises, Escriva and his team have changed the way they deal with the economic impact. “Goodbye to austerity”, must have thought the current governor of the Bank of Spain, who imposed aid that increases public spending in the short term -covered more than 4 million workers at a time, or practically 25% of the workforce-but which had a positive result in promoting job retention, explained Stefano Scarpetta, Director of Employment, Labor and Social Affairs at the OECD.
ERTE “played a fundamental role in preventing job losses and supporting employment during the COVID-19 crisis. Thanks to the widespread and unprecedented use of job retention support, the increase in unemployment in response to the decline in economic activity has been several times smaller during the pandemic than during the global financial crisis, when unemployment was skyrocketed and the use of ERTE was insignificant”, they point out from the so-called club of developed economies.
The reading defended by José Fernández Albertos, then in Escrivá’s team and now in the presidential cabinet, is that ERTEs stimulated economic activity because minimized costs associated with hiring after job destruction (job reassignment) and the loss of human capital which would have caused massive layoffs.
A tool to avoid a historic strike
The use of ERTE decreased while activity resumed without subsidized workers being absorbed by the enormous pool of unemployment that exists in our country (where there is the most unemployment in all of Europe). As a result, the use of ERTE fell to insignificant levels in early 2022, coinciding with the rise in employment in the recovery phase, avoid a rise in unemployment which would have been historic during the worst months.
According to the document, 25% of expenses were allocated to the “windfall effect”, that is to say to positions which were also going to be destroyed and to jobs which were going to be maintained no matter what. In any case, the result of the increase in employment support elements was offset by a reduction in expenditure on unemployment benefits and an increase in income from maintaining activity. “The budgetary balance in support of maintaining employment was positive”they assure.
“This suggests that ERTE has not significantly slowed the reallocation of jobs from low-productivity firms experiencing structural difficulties to high-productivity firms with good growth prospects,” explains the OECD, indicating that This figure has been most used in public utility companies..
“The use of ERTE was greater in the regions, industries and professions most affected by the crisis, demonstrating once again that support was effectively directed towards those companies and workers who had it the most need was particularly strong among small businesses and service professions that involve face-to-face contact or where teleworking opportunities were limited,” the report said.
