The Organization for Economic Cooperation and Development (OECD) has visited Madrid to verify that the Temporary Employment Regulation Files (ERTE) were a key tool to preserve jobs during the crisis caused by the pandemic. More than 3.5 million people simultaneously received this assistance benefit designed by the Ministry of Social Security directed by José Luis Escrivá during strict confinement. The club of developed economies assures that the rapid deployment of subsidies to companies and workers by the State was key to retaining employment.
Unlike in other crises, Escrivá and his work team changed the way they faced the economic impact. “Goodbye, 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 one time, practically 25% of the workforce-but which had a positive result in favoring job retention, explained Stefano Scarpetta, the director of Employment, Labor and Social Affairs of the OECD.
ERTE “played a fundamental role in preventing job loss and supporting employment during the COVID-19 crisis. Thanks to the widespread and unprecedented use of support for maintaining employment, the increase in unemployment in response to the decline in economic activity was several times less during the pandemic than during the global financial crisis, when unemployment skyrocketed and the use of ERTE was insignificant”, they emphasize from the so-called club of developed economies.
The reading defended by José Fernández Albertos, then in Escrivá’s team and now in the Presidency cabinet, is that the ERTE have boosted economic activity because have minimized the cost associated with hiring after job destruction (job reassignment) and the loss of human capital that would have caused mass layoffs.
A tool to avoid a historic strike
The use of ERTE decreased while activity recovered without the subsidized workers being absorbed by the enormous unemployment pool that exists in our country (where there is the most unemployment in all of Europe). As a result, the use of the ERTE decreased to insignificant levels at the beginning of 2022, coinciding with the boost in employment in the recovery phase, avoiding an increase in unemployment that would have been historic during the worst months.
According to the document, 25% of the spending was allocated to the ‘dead weight effect’, that is, to positions that were going to be destroyed as well and to jobs that were going to be maintained no matter what. In any case, the result of increasing employment support items was offset by lower spending on unemployment benefits and higher income derived from maintaining the activity. “The fiscal balance of support for maintaining employment was positive”they assure.
“It suggests that the ERTE did not significantly slow down the reallocation of jobs from low-productivity companies with structural difficulties to high-productivity companies with good growth prospects,” explains the OECD, indicating that The greatest use of this figure was in public service companies..
“The use of the ERTE was greater in the regions, industries and professions most affected by the crisis, demonstrating once again that support was effectively directed to the companies and workers who needed it most. The use was especially important among small service businesses and occupations that involve face-to-face contact or where teleworking possibilities were limited,” the report states.
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