The Bank of Spain calls in its latest annual report for an ambitious agenda of reforms to the Government for the coming years and, in this sense, marks one of its usual requests in red: the ‘Austrian backpack’. This mechanism consists of the contribution by the company of a fund for each worker that can later be recovered upon retirement, due to dismissal or, partially, if the company changes. The body commanded by Pablo Hernández de Cos proposes a system in which a 50% reduction in current dismissal costs for companies that, in return, would have to pay for their employees’ backpacks, at the rate of six days per year worked.
To help companies in the beginning, the Bank of Spain proposes that the State contribute 8,031 million in these four years –at a rate of five days per year worked in the first year, four in the next, then three and finally two– . Part of this financing, proposes, can come from European funds. In this way, it calculates that the cost for companies would be very similar to that of the current system, taking as a reference what happened in the labor market in the 2013-2016 period and simulating that this transitional mixed regime had been adopted then.
The supervisor gives an example of a worker with a monthly salary of 1,500 euros per month, with the start of the contract on January 1, 2011, who suffered an objective dismissal for economic reasons on December 31, 2014, would receive 60 days of salary (20 for each year prior to the reform and 10 for each one after), is that is, 3,000 euros of compensation. In addition, it would have another 600 euros in its individual fund (6 days per year after the reform) for a total of 3,600 euros. That same worker, in the current scheme without reform, would receive 80 days (20 for each of the 4 years of seniority), that is, 4,000 euros. On the contrary, if the worker voluntarily moved to another company, in the current scheme he would not receive anything, but would have a fund of 600 euros under the proposed reform.
A controversial proposal
The intention of the system, in the words of the Bank of Spain, would be mitigate the costs of severance pay throughout the employee’s working life, in addition to partially decoupling layoffs from the cost of each worker. The proposal of the Bank of Spain comes at a key moment for the reform of pensions and labor requested by the European Union in exchange for receiving the 140,000 million euros in funds. The ‘Austrian backpack’ is an instrument repeatedly claimed from Spain by the European Commission and the IMF. The economic vice president herself, Nadia Calviño, included in the Agenda for Change in 2019 the measure, which Podemos strongly opposes, which she understands that it makes dismissal cheaper.
The proposal of the Bank of Spain tries to save this argument by maintaining the days per year worked that the worker ‘generates’ – they add compensation and ‘backpack’, yes -, although it admits that there are cases in which there will be employees who lose and win , as well as companies. In order to discourage the measure from increasing the number of companies that make intensive use of layoffs, the Bank of Spain proposes to approve a ‘bonus’ and ‘malus’ system that will weigh down the companies that expire the most contracts.
Spain, leader in ERTE within the EU
Along with this, in its annual report the Bank of Spain also draws attention to the cost that the crisis has had on public finances. Spain, in fact, is the country with the most ERTE employees in Europe as a percentage of total employment, with more than 6% of workers on average affected by a suspension ERTE in 2020, compared to environments greater than 4% of France, Portugal O Italy, Y well above 3% on average in the European Union. Precisely, the cost of the crisis in public finances stands at 4.5 points of GDP according to the supervisor.
In any case, the institution believes that the recovery faces “considerable uncertainty”, derived from the recovery of tourism, vaccination and reforms, in addition to the speed with which consumption returns, channeling what has been saved in these months by households.
Given this, he claims to review the tax benefits and highlights that VAT Y Societies they are the taxes in which there is a greater gap with Europe in fiscal pressure. “According to Eurostat data, in 2019 tax collection in Spain reached 34.8% of GDP, 2 pp less than in the simple average of the EMU countries. Most of this lower collection (1.8 pp) was due to the lower fiscal pressure exerted by indirect taxation in our country “, says the Bank of Spain, adding that” Airef recommends, among other measures, the revision of reduced VAT rates, the reformulation of the reduction for housing rental in the personal income tax and the reconsideration of the reduced rates in the special taxes on diesel ».
Depopulation as an economic risk
Along with these economic problems, the Bank of Spain addresses a major social and territorial issue such as depopulation. The supervisor alerts that There are 3,403 municipalities at risk of depopulation (42% of the municipalities in Spain), a percentage much higher than in Europe. In Germany only 1% of the municipalities are in this situation, compared to 7% in France or 4% in Italy. Only Latvia, Finland and Estonia surpass Spain in the EU.
The supervisor admits that there are reasons that drive economic efficiency in the urban concentration of the population, although some recent studies also detect phenomena that suggest otherwise. This occurs in the existence of friction, which can hinder the free movement of companies and workers due to the existence of factors that prevent them from settling in certain territoriess, for infrastructure and service reasons. Also due to externalities: the impact of workers with high salaries in the creation of low-skilled employment is greater in some areas than in others.
George is Digismak’s reported cum editor with 13 years of experience in Journalism