The Government insists on its desire to reduce the working day to 37.5 hours by the end of next year, 2025, and is prepared to do so without an agreement with employers. This is a huge mistake: the working day cannot be reduced, because there is no increased productivitybut quite the contrary. With a drop in productivity, a reduction in working hours will lead to a drop in production, as companies will not be able to hire more workersbecause its cost is unaffordable.
It attacks the workers themselves, because if production decreases, jobs will be lost. Indeed, if different studies estimate that the elasticity of employment in relation to labor costs is 0.3 in absolute value, with a reduction in the working day equivalent to 2.5 hours per week – of 40 hours at 37.5 hours – the reduction in the working day is 6.3% which, applied to elasticity, can lead to a employment drop of 1.8%.
In 2024, by remaining at 38.5 hours, the effect on employment would be a reduction of 1.1%. This measure virtually cancels out in its entirety the estimate of employment growth for 2026 provided by the government in the macroeconomic table, where it estimates that the jobs will increase by 2.2% this year, so that the simple measure of reducing the working day will, in practice, cancel out virtually all employment growth in 2026, also reducing it by 1.1 points – due to the intermediate effect of 38.5 hours applicable that year – than planned for 2025, or half.
It is therefore economic barbarity to want to apply this measure, which only leads to weakening of its economy and the labor market, to an impoverishment of society. The Spanish economy has a large structural problem within it, which worsens with the increase in the minimum wage and the reduction in working hours: a significant absence of total factor productivity and, therefore, competitiveness, since we are less efficient, costs are higher and we obtain a lower production value compared to the cost of the factors used. The same thing happens if we talk about the productivity of the labor factor, where the produced per hour of work It is not as high as in most other countries.
This makes our economy more sensitive to variations in the economic cycleso that it leads in job creation during periods of growth and is the economy that destroys the most jobs during periods of economic decline. What are the reasons? Strong duality in the labor market, growing legal insecurity, rigidities in the labor market or disincentives to achieve better work organization are some of them. These elements could have been improved if the government, instead of approving the labor counter-reform, had improved the 2012 reform by making the labor market more flexible and eliminating the aforementioned rigidities. However, he did not do so.
Improvements in productivity and competitiveness are essential. If the Spanish economy wants to achieve a significant increase in its potential growthmust be able to sustainably increase its productivity. There was a first advance between 2012 and 2016, unrelated to productivity gains due to simple job destruction, since during this period there was a structural increase productivity, but then it was lost again.
This is why, at present, it is more essential than ever to increase the productivity and competitiveness of the Spanish economy, which allows us to respond to the adequacy of the economic system Spanish to new circumstances, strengthening existing ones, such as tourism, commerce or hospitality, and strengthening technological and innovative sectors, while extending efficiency and, therefore, productivity and competitiveness to the the entire productive fabric.
This increase in productivity and competitiveness cannot be achieved with more rigidity in the labor market, nor with inflationary wage increases, nor by working less at current low productivity levels. This objective will be achieved through the application of profound reforms which boost the labor market, contain wages and link their evolution to that of productivity, so that they do not contribute to the price rise.
This is why the government should take note of this and not intervene negatively in the labor market with measures such as reducing working hours – nor with that of minimum wage increase-, which will only worsen productivity and competitiveness. So they would do well to forget about reducing the working day and continue to increase the minimum wage as they are doing, because the only thing they will achieve with this is to impoverish the economy and employment in the medium and long term.
