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8
Spain: From Tripartite to Bipartite Pacts
Oscar Molina, and Martin Rhodes
8.1. Introduction
The history of social pacts in Spain is one of success in the early 1980s –
dramatic failures ten years later and the consolidation of peak concertation
and bipartite pacts after the late 1990s. This changing and irregular pattern
poses numerous challenges to scholars interested in social pact emergence and
institutionalization.
Among explanations in the literature on Spain, functionalist and neo-
institutionalist arguments have predominated. According to the functionalist
approach, social pacts respond to the time-specific needs of the economy and/
or political context. Hence, the economic and political crisis that accompanied
Spain’s transition to democracy was for many a sufficient explanation for its
negotiated character (Estefanı
´a and Serrano, 1990; Zaragoza and Varela, 1990;
Roca, 1993; Trulle
´n, 1993; Heywood, 1995). But this argument cannot explain
on its own why there was no social pact in the first half of the 1990s, when
unemployment reached record levels and economic imbalances jeopardized
Spain’s membership of Economic and Monetary Union (EMU). Nor does it
fully account for the revival of concertation in the second half of the 1990s.
The second approach – neo-institutionalism – focuses on interest representation
and intermediation, and attributes pacts in the transition years to a neo-corporatist
pattern of policymaking, notwithstanding the weakness of such institutions in
Spain. According to this argument, neo-corporatist innovations – including the
centralization of decision-making and tripartite bargaining – occurred under the
pressure of socio-economic circumstances (Pe
´rez-Diaz, 1984; Espina, 1999).
Others contest this view, claiming that the abandonment of pacts after the
mid-1980s was precisely due to social partner weakness and the absence of
supporting institutions (Foweraker, 1987; Martı
´nez Lucio, 1989; Maravall,
1997; Pe
´rez, 2000; Royo, 2002).
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This chapter presents a different account. In line with the general argument
of this book, we reject the explanatory capacity of single-variable analyses.
While taking political and economic contexts and institutions into account,
we focus on changing perceptions of relative power and interaction between
social actors and governments. Problem loads are important in shaping those
perceptions and clearly affect the dynamics and outcomes of negotiations.
Political and organizational factors are also important, and one of our more
robust conclusions is that government weakness is the best predictor of suc-
cessful pacting, alongside relations between and within the Spanish unions.
The success of unions as social and political actors depends on their ability to
strike a balance between their logics of influence and membership or represen-
tation (Streeck and Schmitter, 1999). Their context-specific perception of how
concertation will affect that balance helps determine whether a pact is signed.
We argue similarly that no single variable can explain the evolution of
Spanish social pacts. Broad or encompassing tripartite social pacts were aban-
doned after the mid-1980s, with the single exception of the 1997 April Agree-
ments. But concertation has remained alive and well, and has become to some
extent institutionalized, via policy-specific bipartite agreements, notably the
annual inter-confederal wage agreements, in place since 2002. Functionalist
arguments contribute much to our understanding at critical junctures, especially
regarding the problem load of high unemployment and the massive expansion
of fixed-term labour contracts. But utilitarian, power-distributional, and nor-
mative theories provide valuable insights into the timing, character, successes,
and failures of Spain’s social pact responses to economic challenges.
8.2. The Emergence of Social Pacts
8.2.1. Political and Organizational Variables
Social pacts in Spain have been signed under very different circumstances.
While providing rich evidence for analysis, this diversity of contexts makes it
difficult to single out sufficient or necessary conditions. Pacts have been signed
in periods of recession and declining competitiveness as well as in periods of
growth and employment creation.
It could be argued that political institutions have been an obstacle to pacting
in Spain. There are no strong, institutionalized mechanisms for social partner
participation in policymaking, except for the Economic and Social Council
(ESC), created in 1990, in which unions and employers have a purely advisory
role. Indeed, the Spanish political system has little tradition of consensual
politics, apart from the years of democratic transition, and relations between
the two main political parties – the PSOE (Partido Socialista Obrero Espan
˜ol)
and the PP (Partido Popular) – are confrontational. Nevertheless, the Moncloa
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Pact of 1978 on economic management and the Toledo Pact of 1995 on pen-
sions between the political parties, both supported by the social partners,
provided the basis for significant consensus-based policymaking in the years
that followed; and the period since 1997 has witnessed a strengthening of the
ESC, as well as the institutionalization of union–employer commissions on
employment and collective bargaining issues.
The colour of government – a precondition of social pacts in neo-corporatist
theory – appears to explain little: the years of majority Socialist rule (1986–92)
saw a high level of social unrest and conflict between the unions and the
government (Astudillo, 2001), while the resurgence of tripartite concertation
after 1996 occurred under the centre-right PP. But although Spain has almost
perfect party-system bipolarism, regionalist (e.g. the Catalan and Basque)
parties play an important role in helping stabilize governments without
ample majorities – a rather frequent occurrence and the first clue as to why
Spanish governments turn to pacts.
Thus, social pacts have most often been signed when governments are weak
and dependent on support from regionalist parties, even if this does not guar-
antee success, as revealed by the failure of pacting under a Socialist-led minority
government in 1993 and 1994. Governments also tend to rely on pacts more so
during their first terms in office. The first mandates of both major parties – the
PSOE (1982–6 and 2004–8) and the PP (1996–2000) – were periods of intense
tripartite bargaining and pacting. Those years – except for the PSOE’s 2004–8
incumbency – were followed by similarly intense periods of social and political
conflict, coinciding with their consolidation or attainment of parliamentary
majorities (the PSOE in 1986–90; the PP in 2000–4). This suggests that typically
social pacts have been used strategically and instrumentally by governments,
rather than as a dependable tool of socio-economic governance, although, as
we discuss below, that may have begun to change in the 2000s.
As for organizational factors, only unity of action between the two major
unions – the UGT (Unio
´n General de Trabajadores) and the CC.OO (Comi-
siones Obreras) – seems to increase the probability that a pact will be signed.
When inter-confederal unity was achieved in the early 1990s, social pacts
re-emerged; and enduring unity of action after the mid-1990s has underpinned
their subsequent stability and gradual institutionalization. Union centraliza-
tion and membership, by contrast, explain little. Both have remained almost
unchanged since the early 1980s, the first at high levels, the second very low.
But the low density levels of Spanish unions have never impeded their partici-
pation in pacts, for they derive their strength and legitimacy primarily from
workplace elections rather than membership. Also important is the power
conferred on unions by the state through official ‘most representative status’
and the erga omnes extension clause of legally regulated collective agreements
that increases their bargaining coverage to high levels (Nonell et al., 2006).
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The unions’ political roles and capacity for mobilization therefore far exceed
their meagre organizational resources.
8.2.2. Negotiation Processes and Actor Preferences
In the following, four episodes of pacting are subject to close scrutiny: the early
1980s pacts, the failed negotiations of the early 1990s, the social pact of 1997,
and pacting in the 2000s (see Appendix A for the full range of social pacts
signed in Spain between 1976 and 2010).
8.2 .2 .1. THE TRANSITION TO DEMOCRACY AND SOCIAL PACTS (1978–85)
The negotiation of social pacts in the early 1980s occurred against a backdrop of
democratic transition, a deep economic crisis, and the consolidation of unions
and employers’ organizations. Balancing the demands of different actors at a
time when political and social institutions were also being reconfigured
required self-restraint and a search for consensus. Fears of democratic reversal,
especially after the failed coup d’e
´tat of February 1981, reinforced incentives for
cooperation. The weakness of the Union de Centre Democra
´tico (UCD) coali-
tion government led by Adolfo Sua
´rez (1978–82) – which combined Christian
Democrats, Liberals, and former Spanish National Movement leaders – helped
bolster the appeal of the political left to voters demanding a stronger departure
from Francoism.
A critical legacy of forty years of dictatorship was the weakness of civil society
and the social partners. The different ideological and associational traditions of
the two main union confederations, the CC.OO and the UGT, produced diver-
gent strategies. The CC.OO enjoyed much stronger roots at the company level,
a more decentralized organization and a relatively strong capacity for mobiliza-
tion. The UGT, by contrast, looked to state support for building organizational
strength, making it more supportive of pacting than its rival, at least until the
late 1980s. Its close links with the Socialist Party also made it more inclined to
cooperate via pacts, whereas the most powerful influence within the CC.OO,
although declining after the late 1980s, was the Spanish Communist Party
(PCE). Inter-union competition for members and votes in workplace elections
prevented strong labour movement unity until the mid-1990s.
Organizational weakness was even more pronounced among employers. The
Confederacio
´n Espan
˜ola de Organizaciones Empresariales (CEOE), created in
June 1977, had a highly fragmented membership and lacked disciplinary con-
trol over its constituency. Its organizational structure has always been highly
complex, with 114 sectoral associations and 50 territorial associations in 1985
(firms are usually affiliated to these organizations rather than the peak CEOE),
both growing in number in subsequent years (EIRO, 1999). As a result, the
CEOE has had an ambivalent view of concertation. If organizational weakness
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has obliged it to take a critical position towards pacts, from which employers
expect to obtain less than the unions, participation can also provide it with
influence.
Several months after the failed coup d’e
´tat of February 1981, the UCD
government initiated pact negotiations with the aim of building political
and economic confidence. Even though all actors agreed on the need for a
pact to strengthen democratic stability, and wage moderation as necessary for
relaunching the economy, the communist CC.OO opposed any agreement
that would moderate its industrial militancy. Initial contacts between the
unions, the government, and the CEOE were accordingly difficult. Both
unions feared that participation would legitimize government policies at the
expense of workers.
Because of the political context, the pact signed in June 1981 – the ANE
(Acuerdo Nacional sobre el Empleo) – is popularly known as the ‘Pacto del
miedo’ (‘Pact of Fear’). In order to secure the commitment of a reluctant labour
movement, the government struck a number of ‘parallel pacts’, providing
organizational and financial compensation to break down union resistance.
Thus, the participation of the CC.OO was secured in part by the new roles
given to the social partners in regulatory bodies, the National Social Security
Institute (INSS), the National Employment Institute (INEM), the National
Health Institute (INSALUD), and the National Institute of Social Services
(INSERSO), as well as by a government commitment to create 350,000 public
sector jobs (Estefanı
´a and Serrano, 1990; Encarnacio
´n, 1999). But CC.OO agree-
ment was also a response to competition from the UGT. The AMI – Acuerdo
Marco Interconfederal (National Multi-Industry Framework Agreement) – signed
by the UGT and the CEOE in January 1980, and renewed in 1981 – rapidly
increased the number of workers covered by national bargaining agreements
and drove a wedge between the two unions.
1
Opposed by the CC.OO, these
agreements strengthened the UGT which made important gains in workplace
elections as a reward for its participation, and convinced the CC.OO that it was
better off joining the ANE than opposing it.
Both unions saw their bargaining position as strong vis-a
`-vis the fragile
centre-right government and the fragmented CEOE, whose leaders regarded
any pact as better than no pact at all, or the social conflict that failure might
foment. But as predicted by the bargaining model, gaining union consent to a
moderation of wage demands and militancy required the active involvement of
a third partner – the state.
The second important social pact of the period was the 1984 AES (Acuerdo
1
The AMI established guidelines for collective agreements with the aim of restraining wages,
reducing working hours, and raising productivity. It also created a framework for the new
industrial relations system by regulating collective agreements and the role of trade unions in
the workplace.
Social Pacts in Europe
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Econo
´mico y Social). The context for negotiations was now quite different. The
1982 elections gave the new Socialist government a comfortable majority, and
fears of democratic instability were subsiding. The economy, however, was in
crisis: inflation was at 14 per cent, domestic demand contracted by 1 per cent in
real terms in 1984, and the unemployment rate was rising, reaching 21.7 per cent
by the end of that year (Figure 8.1). This situation, plus the prospect of European
Community membership, and a commitment to join the European Monetary
System (EMS) in June 1989, increased the government’s desire for an agree-
ment. The AES and the wage moderation it secured, combined with a tight
monetary policy, would allow the government to bring inflation down to
8 per cent in 1985 and 6 per cent by 1986.
In this context, the government initiated a new round of talks. The unions
reacted positively, although they imposed some a priori conditions: they would
only accept wage moderation in exchange for an increase in social spending
and an extension of welfare entitlements. But as both CC.OO and UGT officials
Right
PP
Government
-Relative
Majority
(coalition)
Right
PP
Government
-Absolute
Majority
Success:
ANE
Success:
AES Failure:
Solidarity
Pact
Failure:
Social Pact
For
Employment Success:
April Agreements
Centre-Right-
UCD
Government
-Relative-
Majority
Left
PSOE
Government
-Absolute
Majority
Left
PSOE
Government
-Absolute
Majority
Left
PSOE
Government
-Absolute
Majority
Left
PSOE
Government
-Relative
Majority
(coalition)
Left
PSOE
Government
-Relative
Majority
Unemployment Rate
Inflation
Fiscal Deficit
–10
–5
0
5
10
15
20
25
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Figure 8.1. Social Pacts, Governments, and the Macro-Economy in Spain, 1979–2005
Note: The unemployment data in this figure are the national data current at the time, rather than those
in the new OECD historical series which have been revised downwards due to a methodological
discrepancy between national data and OECD/Eurostat data that produced an overestimation of
Spanish unemployment figures hitherto.
Spain: From Tripartite to Bipartite Pacts
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point out, they did not know if the government was willing to accept signifi-
cant changes to its economic policy, or how much compensation they would be
awarded in return for their support (El Pais, 17 July 1984). This uncertainty
made the initial meetings difficult, as the unions struggled to articulate their
bargaining strategies.
The unions’ responses differed significantly. While the weaker UGT kept
negotiations alive by making parallel deals with the government, the CC.OO’s
leaders abandoned the talks when they realized that the government’s commit-
ment to economic austerity might alienate their base. According to a leading
CC.OO official:
( . . . ) contrary to the practice today of signing wage agreements that establish guidelines
for negotiations at lower levels, the early 1980s were real bi-partite or tri-partite incomes
policy pacts. These pacts established bargaining limits for the actors. Accordingly, they
were a permanent source of conflict. But the most worrying aspect of these pacts was that
they limited the possibilities for the participation of the grass-roots in bargaining process-
es. This weakened the links between grass-roots and peak officials, thereby potentially
affecting the representative capacity of the union.
2
The pact was therefore negotiated by the UGT, the government, and the
CEOE. The employers, who feared a strong alliance between the Socialist
government and the UGT, pursued a strategy of desgaste (‘wear and tear’) and
threatened several times to abandon negotiations if their demands were not
met. This strategy was particularly threatening to the UGT whose reliance on
concertation left it vulnerable to an employer-biased pact entailing too many
costs for its constituency.
The outcomes of the pact are in line with the bargaining model’s predictions.
The government perceived itself to be in a strong bargaining position thanks to
its solid electoral mandate and the external constraint of securing EMS mem-
bership. By contrast, the CC.OO perceived itself as weaker than the Socialist
government and its trade union ally, which explains its exit from the talks. The
UGT had become increasingly critical of some of the government’s policies, but
believed that participation would deliver positive results.
Securing the UGT’s agreement to wage moderation required government
commitment to a new social-democratic demand- and supply-side policy. This
meant considerable policy innovation, including a loosening of the tight mon-
etary policy the previous government had introduced to bring down inflation
in 1982, and an agreement to increase spending on public investment, public
employment, education and training, and unemployment benefits, as well as
making the tax system more progressive. The support of the employers was
secured by allowing for an easier use of temporary contracts (a concession that
would lead to a profound segmentation of the Spanish labour market), part-
2
Interview with Ignacio Fernandez Toxo, Madrid, 16 April 2005.
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time and seasonal employment, and by a modification of minimum wage
standards for workers under 18.
The 1984 pact would be the last for over a decade. The demise of tripartite
concertation and pacting can be attributed to several factors: the disappoint-
ment of the unions with the results of the ANE and AES, the neo-liberal turn of
the Socialist government, and its embrace of economic austerity, and the view
of the employers that wage moderation could now be secured by high unem-
ployment and the expansion of low-paid temporary work contracts.
Internal dissent and contestation within each union was weak in the early
1980s, but increased after the 1984 pact, especially in the UGT whose members
began to link their union to Socialist government policies and blamed their
leaders for the strong moderation of wage increases, the continuing job crisis
(unemployment reached 21 per cent in 1985–6), as well as for the weaker
regulation of temporary contracts due to the AES and a revision of the Workers’
Statute in 1984. Some CC.OO workers also criticized their officials for not
cooperating. Eventually, these developments would lead to a convergence of
the UGT and CC.OO on a common model of trade union action, based on a
revitalization of collective bargaining (Molina, 2006). Initially, however, the
unions converged on a joint rejection of concertation as such. The UGT joined
the CC.OO in a new phase of industrial militancy to recoup some of the
concessions made in the 1980s pacts and to re-establish its reputation with
workers, having lost some 40 per cent of its members between 1978 and 1985.
3
The unions were not alone in rejecting concertation. The Socialist govern-
ment had taken a firm neo-liberal turn under Miguel Boyer and Carlos Solchaga,
the ministers of finance and industry respectively, who oversaw the introduc-
tion of fiscal austerity and a new commitment to labour market flexibility
(Recio and Roca, 1998). The government continued to solicit pacts in the late
1980s (especially after the anti-government UGT–CC.OO-led strike of 1988) but
without much conviction: it walked away from negotiations with the UGT in
1987 after the union requested an upper wage band two points above the
government’s inflation forecast (Pe
´rez, 1999: 673), and a growing budget deficit
(at 7 per cent of GDP in 1985) ruled out further compensation for wage
moderation through public spending. In any case, the government now
believed it had an alternative to incomes policy: the rapid spread of temporary
contracts moderated wage costs (in 1988 temporary workers’ wages were barely
more than half those of permanent contract workers), while from 1987 the
exchange rate of the peseta in the EMS began, for a while at least, to work as an
anchor for the government’s anti-inflation policy (Ferreiro and Gomez, 2005).
3
The outcomes of those pacts had been well below union expectations. Although in 1980–5
both public spending and social spending increased (the latter from 21.6 to 25.2 per cent of
GDP), real wages fell by 9 percentage points between 1977 and 1986, and inflation targets were
only met in one year out of seven (Ferreiro and Gomez, 2005).
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Spain’s employers, who had never been keen on concertation, also believed
they could now avoid commitments and concessions to labour given the role of
high unemployment and the expansion of fixed-term contracts, not just in
moderating wage demands (real wages would rise by a marginal 0.9 per cent
between 1984 and 1989) but also in weakening the influence of the unions
(Rhodes, 1997; Encarnacio
´n, 1999; Ferreiro and Serrano, 2001).
8.2 . 2.2 . FAILED NEGOTIATIONS UNDER THE THREAT
OF MAASTRICHT (1990–6)
After six years of sustained growth, the 1990s began with a deep economic
recession. The Socialist government’s strategy of substituting a restrictive mon-
etary policy and an overvalued currency for bargained wage moderation had
failed to control wage growth and inflation (Pe
´rez, 1999; Royo, 2001). In 1992, a
large and increasing budget deficit, together with high inflation and external
disequilibria, led to speculative attacks against the Peseta, and its devaluation
within the ERM. The real costs of the crisis were skyrocketing unemployment
(which rose to 23 per cent in 1993) and a further increase in the budget deficit.
The political situation also deteriorated significantly for the Socialists.
Although the 1989 elections allowed them to stay in government, their perfor-
mance was far from the substantial victory achieved in 1986: the PSOE govern-
ment won half the seats and only the absence from parliament of the
Herri Batasuna deputies (the political arm of ETA) gave it a working majority
(Lancaster, 1994). The severe recession, and a series of corruption scandals,
further weakened the government over the next few years. In the 1993 elec-
tions, the PSOE remained Spain’s largest party, but was forced to form a minori-
ty government when coalition talks with regionalist parties broke down. The
economic and political circumstances should have been conducive to a pact,
especially given the problem load of high unemployment and government
infirmity. But perceptions of mutual weakness – on the part of the unions,
employers, and the government – worked against it.
After a decade of organizational development and consolidation, the UGT,
CC.OO, and CEOE were ostensibly in a stronger position. In December 1988,
the UGT and CC.OO led a successful 24-hour general strike against government
plans for new weakly regulated contracts to boost youth employment, which
led to the withdrawal of the proposals and government agreement to boost
spending on social services. But union representation remained weak at the
firm level and was mostly limited to large companies. Concertation, and its
associated benefits, had strengthened them as political actors, but not in terms
of membership or bargaining power. As CEOE President Jose
´Marı
´a Cuevas
put it: ‘notwithstanding the enormous influence the unions have on public
opinion and political decisions, the presence of unions at firm level has been
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weakening in recent years. Why? Because their strategy has been focused on
lobbying governments’.
4
The unions had become increasingly aware of this problem. Consequently,
they shifted away from building sociopolitical strength towards improving
their own internal channels of communication and extending their presence
in the business system. When unity of action became stronger in the early
1990s – assisted by the collapse of support for the PCE, and the diminution of its
influence over the CC.OO – inter-confederal competition was replaced by intra-
organizational concerns. But the unions still perceived themselves to be weaker
vis-a
`-vis employers and the government than a decade earlier, the success of the
1988 general strike notwithstanding. As both the government and employers were
aware, the deterioration of the economy, rising unemployment (at 21 per cent
in 1997), and an increasingly large proportion of employees under fixed-term
contracts had all reduced their capacity to attract and mobilize members.
Economic and political conditions in 1993 favoured new attempts at pact
negotiation: GDP fell by 1 per cent that year, caused by falling public invest-
ment, an adverse reaction of private investment to higher interest rates, and a
substantial decline in private consumption as unemployment rose. This created
something of an emergency and bolstered the perceived need for social partner
cooperation. Employment conditions not only reduced the unions’ bargaining
power but also made the abandonment of negotiations more costly for them.
Given the prospect of worsening electoral performance, the government
proposed a ‘Solidarity Pact’ consisting of wage moderation and labour market
reform.
The unions declared – for the first time in eight years – that ‘the inclusion of
wage moderation in the agenda for negotiations would not in itself constitute
an obstacle in the path towards a social pact’.
5
The UGT’s willingness to
negotiate stemmed in part from a financial scandal, and it sought the support
and financial assistance of the government to hold off bankruptcy. Unity of
action with the UGT made the CC.OO more inclined to negotiate certain
policies. And both unions reacted pragmatically to the government’s call for a
catch-all pact, although they called for a revision of its economic policy and for
key issues to be negotiated at separate tables. But the government strongly
defended its Plan de convergencia for economic adjustment to EMU, involving
a tight fiscal policy, a reduction in inflation and interest rates, a control of
nominal wage increases, and the deregulation and flexibilization of capital
and labour markets. This stance, and the employer’s refusal to help the troubled
Socialist party, sunk the negotiations.
4
Diario de Sesiones del Senado, Comisio
´n de Trabajo y Seguridad Social, no. 95, 19 April 1994,
p. 152.
5
European Industrial Relations Review and Report, 1993, 235: 14.
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This episode reveals how under perceptions of mutual weakness the success-
ful negotiation of a social pact becomes more difficult, as predicted by our
bargaining model. In 1993, the unions and the government were both nego-
tiating from weak positions that made a pact more costly for all involved. The
government was in a minority in parliament and under pressure from other
parties to stick with austerity. The unions were dealing with internal problems
and disagreements, and the employers had no intention of boosting the ailing
Socialist government. All parties had negative expectations as to what they
could obtain. Politics and perceptions overrode the problem load. The same
occurred in 1994 when the government initiated further talks on a ‘Social Pact
for Employment’.
Asked about the government’s strategy, Prime Minister Felipe Gonza
´lez
replied that it had the greatest interest in a pact but little scope for providing
an acceptable quid pro quo. The fact that the Socialists could only govern with
the tacit support of the centre-right Catalan CiU (Converge
`ncia i Unio
´) dimin-
ished the unions’ expectations as to adequate compensation. This perception,
together with the stronger bargaining position of the employers, made failure
even more likely. For the general secretary of the UGT, ‘the government was
more interested in reaching a political pact with other parties than in signing
one with the unions and employers’.
6
For the CC.OO, however, other factors
were important, ‘in particular, the bad relationship between the leaders of the
PSOE and UGT’
7
(Royo, 2001). The CEOE blamed the government’s ‘take-it or
leave-it’ strategy
8
and the instability in union–government relations created
by an excessive use of strike tactics.
9
As the bargaining model suggests, had the
government been in a position to compensate union involvement, these
impediments might have been overcome.
Some months after their exit from the talks, the unions agreed to return to
negotiations on two issues: employment regulation and incomes policy. The
unions rejected the government’s plans for mandatory wage moderation, and
both they and the employers rejected the proposed labour market reform. In
response, the government implemented the changes (which allowed for a more
flexible use of working hours and greater flexibility in company pay scales)
unilaterally, provoking a general strike in January 1994. Looking back at their
1988 success, the unions expected to improve their bargaining position and
force the government to reconsider. But the new strike had nothing like the
same impact – either on government policies, which sought to foster a greater
use of part-time contracts, allow for private employment agencies, and decen-
6
Comisio
´n de Economı
´a y Hacienda, testimony of Nicola
´s Redondo (UGT), no. 57, 29
October 1993, p. 1615.
7
Interview with Salvador Bangueses, Madrid, 14 April 2005.
8
Comisio
´n de Economı
´a y Hacienda, testimony of Jose
´Marı
´a Cuevas (CEOE), no. 57, 29
October 1993, p. 1647.
9
Interview with CEOE leader Gabriela Uriarte, Madrid, 13 April 2005.
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tralize collective bargaining, or on public opinion which favoured a negotiated
solution to the crisis.
8.2 . 2.3 . THE REVITALIZATION OF CONCERTATION IN 1997
By 1997, the political context had changed significantly: the centre-right PP led
by Jose
´Marı
´a Aznar won the 1996 elections and formed a coalition with three
right-wing regionalist parties – the Basque Nationalists, the Catalan CiU, and
the Canary Coalition. But the economy was still sick and perilous for the new
minority government: inflation and the fiscal deficit were improving, but
unemployment had peaked at 24 per cent in 1994, and almost all new jobs
created in 1995 and 1996 were on temporary contracts. The government was
also highly apprehensive of the unions’ reaction to its policies – the PSOE, in
opposition for the first time since 1982, warned that social rights were now
under attack – and sought a dialogue with them and the employers to build a
consensus on its proposed agenda.
The unions and employers had shifted to a pro-pact position. Both believed
that the change of government opened up new opportunities for concertation
but at a lower cost than hitherto, and both were moving towards a common
understanding of the country’s growing predicament (if not the solution), as a
low value-added, low-productivity economy, one over-reliant on cheap and
insecure employment contracts and price-based competition.
Pressure on the unions was especially strong. A majority of their members
now supported dialogue and concertation, especially given the failure of the
1994 strike, as did their leaders whose reputation had been damaged by the
rapid increase in unemployment and their experiment with wage militancy
(Royo, 1996; Pe
´rez, 2010). Not only had they been losing the battle for public
opinion, but critically, support had haemorrhaged in workplace elections, their
main source of strength. In the 1994–5 elections, both unions lost votes to
independent candidates and company representatives, especially in large firms.
And for the first time since 1982, the UGT took second place to the CC.OO, now
led by moderates after the defeat of its more militant wing in 1991 (Hamann,
2001; Royo, 2006). The strength of the unions had been sapped by the segmen-
tation of the labour market, and they had failed to recruit temporary workers in
significant numbers: in 1994, the membership rate of permanent workers was
19 per cent against only 8 per cent for temporary workers (Polavieja, 2001;
Llorente Sanchez, 2007). Concertation to restore political influence now
seemed much more attractive than when they rejected it in the mid-1980s,
precisely to prevent a loss of worker support.
A month after his election, Prime Minister Aznar held a meeting with the
unions. As they remained opposed to ‘catch-all’ pacts spanning numerous
policy areas, the social partners and the government agreed to seven separate
negotiating tables. Even though the government respected the social partners’
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bargaining autonomy, it threatened on several occasions to act unilaterally if
they failed to reach an agreement. The first step was the negotiation of social
security reforms, as outlined in the 1996 Toledo Pact among the political
parties,
10
and an agreement on the ‘Consolidation and Rationalization of the
Social Security System’ was signed in October. The government then launched
talks on labour market reform. An agreement was signed in 1997, consisting of
two collective bargaining reforms – the AINC (Acuerdo Interconfederal sobre
Negotiation Colectiva) and the AICV (Acuerdo Interconfederal de Cobertura de
Vacios) – and a reform of the labour market, the AIEE (Acuerdo Interconfederal
para la Estabilidad del Empleo).
11
Aquid pro quo secured the pact. In the labour market reform, the unions –
presenting themselves for the first time as defenders of ‘outsider’ as well as
‘insider’ workers – obtained the introduction of new ‘permanent employment
promotion contracts’ to help counter the expansion of fixed-term work, with
lower dismissal costs than for other such contracts. Employers received a reduc-
tion in social security charges as their part of the deal. In the collective bargain-
ing agreement, the unions achieved a degree of re-centralization in collective
bargaining. The AINC was especially important in this regard, in aiming to
reduce the number of collective agreements and prioritize national industrial-
level agreements.
Although bipartite deals, endorsed by the government, and then passed into
law, the 1997 ‘April Agreements’ have nonetheless had the significance and
effect of a fully fledged social pact.
12
Not only did they create a new paradigm
for peak negotiations and social dialogue going forward, but they also estab-
lished the quality of employment as a priority, and sought to enhance the
articulation of collective bargaining with concertation.
How do we explain the successful return to pacting? The problem load,
combined with critical organizational and political factors, provides the answer.
The economy was beginning to improve, but still very high unemployment (at
21.5 per cent in 1997) and a massive expansion of atypical contracts helped
10
The Toledo Pact involved a commitment by all political parties to maintain and reform the
public pension system on a consensual basis. In 1996, the trade unions gave it their support,
thereby ensuring that in principle pension reform would be subject to social dialogue. The
consensual spirit of the pact was reinforced by the creation of a monitoring commission to
secure the input of social and economic actors.
11
The AINC clarified the roles of different levels of collective bargaining and expanded
the issues to be dealt with through collective bargaining, which enhanced the influence of
the social partners in the policy debate on labour market reforms; the AICV aimed to extend the
coverage of collective bargaining to those sectors lacking collective agreements; and the AIEE
introduced incentives for employers to transform temporary contracts into indefinite ones, as
well as financial incentives to hire on permanent basis. The reform also removed some of the
protections for employees with indefinite contracts.
12
See Diario de Sesiones del Congreso de los Diputados, Comisio
´n de Polı
´tica Social y
Empleo, no. 225–6, 19–20 May 1997, for parliamentary testimony by union and employer
leaders regarding the success of the 1997 Agreements.
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induce all three actors to sign. In terms of the bargaining model, they all saw
themselves as relatively weak, but all were under pressure to reach agreement
quickly. This was especially true for the unions, given declining workplace
support and accusations of defending permanent workers while neglecting
the now very large temporary workforce, comprised mainly of younger people
and women (Richards and Polavieja, 1997).
13
The employers had also come to
acknowledge the problems created by the very high level of fixed-term work: in
the view of manufacturing companies, it had begun to damage productivity
while failing to weaken the bargaining power of permanent employees
14
(Serrano et al., 1998; Royo, 2006). As for the government, its weak parliamentary
position made it the perfect partner in a positive-sum pact.
8.2 . 2.4 . SOCIAL PACTING IN THE 2000S
The Shift to Bipartite Pacting, 2000–4
Developments in the 2000s reveal the vitality and vulnerability of Spanish
concertation as well as the strengths and weaknesses of its institutionalization.
When the PP was re-elected with an absolute majority in 2000, it agreed again
to dialogue with the social partners over the four years of its mandate. At the top
of its agenda for reform were the labour market, collective bargaining, pensions,
and unemployment benefits. The government preferred to respect the autono-
my of unions and employers, and it asked them to follow the pattern of the
1997 agreements and negotiate a pact as the basis for legislation. It also had a
strong interest in securing agreements to legitimize its policies. But given its
new parliamentary majority, the Aznar government could afford to play a
double game – sponsoring agreements when the social partners could achieve
them, but making policy unilaterally, and largely ignoring them, when they
could not.
The unions and employers had quite different objectives, even if their diag-
nosis of the country’s economic ills was similar. The unions’ ‘Common Proposal
for Social Dialogue’ focused on job creation and a reduction in the use of
temporary contracts. The 1997 agreements had delivered some positive results
13
The segmentation of the Spanish labour market, which had commenced in the mid-
1980s, had become fully entrenched by 1997: that year, 34 per cent of the active labour force
were employe d on temporary contracts , which also accounted for 85 per cent of flows into and
out of employment (the annual transition between the two segments was only 1 per cent).
Moreover, the average tenure of a temporary worker was twelve months, compared with twelve
years for workers on permanent contracts, and 34 per cent of temporary workers were
unemployed, compared to only 6 per cent of permanent ones. All evidence suggests that
temporary employment in Spain is predominantly involuntary and non-transitional
(Amuedo-Dorantes, 2000; Polavieja, 2003).
14
Between 1992 and 1995, years of deep recession, temporary workers lost 25 per cent of
their purchasing power, while the earnings of permanent workers increased by 4 per cent in real
terms (Ferreiro and Serrano, 2001; Ferreiro and Gomez, 2005).
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(mainly due to government incentives) in increasing the percentage of perma-
nent contracts. But while unemployment fell to around 13 per cent in 2000
from 21 per cent three years earlier, the proportion of temporary contracts
remained unchanged at around one-third. The employers’ ‘Approaches to the
New Stage of Social Dialogue’ prioritized the reform of collective bargaining, a
reduction in dismissals costs, greater flexibility for part-time contracts, and a
reduction in employers’ social charges. Common to both proposals was a
preference for more flexible forms of social dialogue and concertation over all-
encompassing social pacts.
In fact, talks at separate tables had already been institutionalized, and con-
sisted of three ‘negotiating commissions’: on the social protection of the unem-
ployed, on increasing secure employment, and on part-time employment. In
the late 1990s, negotiations in the first two were deadlocked, with employers
and the government seeking more resources for active employment policy
against union calls for higher unemployment benefit and job promotion via
working-hours reduction. This discord did not prevent success, however, in the
third commission where an agreement on improving the social security entitle-
ments of part-time workers was reached (the employers abstained) in November
1998 (EIRO, 1998a, 1998b).
This more flexible strategy produced further results, regardless of a surge in
industrial conflict in 2000–4, and the government’s predilection for breaking
with concertation on many critical reforms. In March 2001, following union–
employer failure to reach agreement on replacing the expiring 1997 agreements,
the government unilaterally reformed the labour market, extending the cate-
gories of worker who could be hired on open-ended contracts with employer
social security reductions, and providing limited compensation for the dismissal
of temporary workers. In May 2002, the government also unilaterally reformed
unemployment benefits, removing certain categories of workers – for example,
those on seasonal work contracts – from entitlement, and abolishing the ‘interim
wages’ employers had to pay workers waiting for rulings on unfair dismissals
claims. The breakdown in social dialogue and union opposition to these
changes led to a general strike in June 2002, which, alongside a precipitous
decline in government opinion poll support, forced the resignation of the
labour minister and a repeal of most of the benefit reform package.
Surprisingly, none of this prevented a pensions’ agreement in April 2001,
which was supported by the CC.OO but not the UGT,
15
or government–union
agreement in November 2002 on the ‘modernization and improvement’ of the
15
The reform allowed workers to take early retirement if they had not paid contributions
before 1967, created a reserve fund, improved widows’ pensions, allowed flexible work and
retirement beyond 65, and ensured the ongoing participation of unions in the management of
the social security system.
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public administration.
16
Indeed, the UGT claimed that the 2002 strike had
strengthened the unions and forced the government to concede more than it
wanted to secure their support.
What we see, then, across this period is a process in which both unions and
employers engaged in concertation to preserve an influence over social and
labour market policy (using this strategy, as in the past, to compensate for
associational weaknesses), while the government used the social dialogue
instrumentally, exerting a strong ‘shadow of hierarchy’ via the threat (and
reality) of unilateral policymaking. A government with a strong majority
could afford to embrace a ‘take-it or leave-it’ strategy, more often than not to
the disadvantage of the unions, for whom an abandonment of social dialogue
promised marginalization from the policy process, with no guarantee that
militancy and social movement opposition would deliver better results.
Perhaps the most important innovation in this period was the return in late
2001 to an incomes policy agreement (the first since 1984) on a union–employer
bipartite basis, but once again under the shadow of state hierarchy. It would be
renewed every year until 2009, when it broke down amidst the financial and
economic crisis, but was reprieved in early 2010 – a development made all the
more remarkable by open conflict at the time between the unions and the
government over its anti-crisis measures.
17
The pattern for the rest of the decade was set in December 2001, when the
unions and employers concluded an ‘Acuerdo para la Negociacio
´n Colectiva’,
or ANC, for 2002. The ANC established guidelines and set out criteria for lower
level bargaining, linked pay rises to inflation and productivity gains, and also
included a general commitment to employment stability and quality. It even
recommended the creation of national sectoral ‘observatories’ to analyse eco-
nomic and employment trends (EIRO, 2002), and a monitoring commission
was created in 2003 to promote their implementation.
Subsequent ANCs have often been beset by stormy negotiations, as well as by
opposition from critics in both employer and union camps. But the system has
now endured for nearly a decade, making it the most persistent of reiterated
wages pacts in the EU, apart from Ireland’s incomes policy (see Chapter 5).
It is worth considering briefly the reasons for the institutional success of this
implicit incomes policy pact in terms of the bargaining model, prior to an
extended discussion of its institutionalization in the next section.
16
This reform sought to rationalize the public workforce and increase its efficiency in return
for above-inflation pay increases, a 35-hour week, and measures to improve employment
stability.
17
Pe
´rez (2000) presents evidence that the unions began unilaterally to restrain their wage
demands from the mid-1990s onwards, once they had prioritized lowering unemployment and
reducing the number of non-standard contracts. According to Ferreiro and Gomez (2005), the
UGT and the CC.OO signed joint documents laying out joint wage-setting criteria every year
between 1997 and 2001.
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A review of almost a decade of ANC agreements reveals the following features.
The central concern has been wage moderation on the part of both employers
and unions, driven in part by their shared view that containing real unit labour
costs will promote employment (and a diminution of temporary employment)
and enhance the competitiveness of Spanish firms. The results have been
decidedly mixed. Job creation proceeded apace in the 2000s on the back of a
booming economy (only to collapse precipitously in the recent crisis) and while
the expansion of temporary contract workers in the private sector fell signifi-
cantly, they began to grow in the public sector. Nominal wage growth has been
contained and real unit labour costs have fallen – although wage moderation
only accounts for part of this trend; immigration and an ongoing expansion of
low-cost labour have also contributed – as has declining purchasing power
(wage drift has been negative for most of the period) in a tighter labour market.
But productivity growth has been low and relative unit labour costs have risen
well above the Euro average: wage moderation alone cannot cure Spain’s multi-
factor productivity problem.
If we think of the ANCs as an implicit incomes policy pact instead of a series
of annual ad hoc wage agreements (for they have depoliticized pacting and
created a stable system for trade-offs and exchange between employers and
unions), then we can more readily understand the power balance underpinning
this structure. The unions entered the ANC process from a rather weak position
given the failure of either pacting in the 1980s or militancy in the 1990s to
counter an erosion of workers’ rights and security, or provide them with greater
influence over collective bargaining and the workforce. By the mid-1990s, even
the power derived from workplace elections was under threat. Their political
influence was restored to some extent by the 1997 Agreements, and their
adoption of job promotion as a primary goal led them to ‘internalize’ wage
moderation even before the ANC formally committed them to it. At the same
time, both Socialist and centre-right governments had sought to flexibilize the
labour market in response to the employment crisis and persistent demands
from employers, and experience had proven that the unions’ only real means of
slowing or blocking that process was concertation. Although a second-best
option for the unions – especially after 2000 when a growing economy, much
lower unemployment, and rapid job creation might have backed a more mili-
tant stance – concertation on wages and work-related issues under the ANCs
have allowed for a mutually reinforcing relationship between the exercise of
political influence and a strengthening of the unions’ organizational powers.
The Problems of Pacting under the New Socialist Government
The minority government led by Prime Minister Jose
´Luis Rodriguez Zapatero
elected in March 2004 and supported in parliament by two small left-wing
parties – the Republican Left of Catalonia and United Left – revealed a strong
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determination to engage in social dialogue, and to make its mark across a range
of other policy areas (Kennedy, 2007). In May, the government announced that
it would target four major imbalances in the Spanish employment system: a
model of flexibility based on a high rate of temporary employment, the weak-
ness of employment policies, the low level of human capital, and inflexible
working hours. The protocol for social dialogue signed in July with the trade
unions and employers pinpointed active labour market policy, training, the
minimum wage, employee involvement, and the reform of collective bargain-
ing as major areas for discussion.
But following the pattern established since 1997, neither the new government
nor the social partners revealed any inclination for tripartite pacts. Instead, the
protocol identified a series of issues for parallel rather than overlapping nego-
tiations. Several agreements signed in this period are noteworthy: the 2006
agreement on labour market reform, which represented a new attempt to
limit the incidence of temporary employment but – like previous such initia-
tives – has disappointed the unions with its meagre results;
18
the so-called Ley
de Dependencia (39/2006) designed to provide social assistance to those unable
to care for themselves, and one of the most important pieces of social legislation
since the return to democracy; and law 40/2007 that established new provisions
for retirement after 65 as well as disability and widower’s pensions. Also impor-
tant was the June 2005 Royal Decree which established a new procedure for
extending collective agreements to areas of employment without coverage
due to the absence of one of the parties authorized to bargain. Based on
employer–union agreements in the joint commission that implements the
1997 ‘AICV’, the aim of the new procedure was to counter a decline in collective
bargaining coverage that fell from almost 71 per cent of workers in 2002 to just
over 60 per cent in 2004 (EIRO, 2005).
In terms of the bargaining model, a reforming government dependent on
smaller left-wing parties for support embraced pacting to legitimize its forays
into social policy reform. The strong growth of the economy may have facili-
tated employer support for these changes, for many of their own demands were
unmet, especially regarding dismissals costs. Nevertheless, like the unions,
relative weakness seems to have spurred engagement with concertation: the
employers apparently believed that it was better to work with the system, and
try to extract concessions from it, rather than oppose it and risk losing political
leverage and legitimacy.
The re-election of the Socialist government (once again without a clear
majority) in 2008 coincided with the first symptoms of economic recession,
18
The total proportion of temporary contracts in the labour force fell from 33.5 per cent
in 1997 to 31.8 per cent a decade later, while the proportion in the private sector fell from 39 to
33 per cent. But that improvement was countered by an increase in public sector temporary
contracts from 16 to 25 per cent over the same period.
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and the intensity and duration of the crisis have severely eroded the process of
social dialogue. Despite a tripartite agreement in July 2008 on a ‘Declaration of
principles for the promotion of the economy, employment, competitiveness,
and social progress’, the trade unions and employers failed to renew the ANC in
2009 (but would succeed in 2010), and negotiations that year on new labour
market reform proposals also broke down. New attempts in late 2009 and early
2010 failed due to the opposition of trade unions to a government pension
reform proposal to increase the pensionable age to 67. The rapid growth in
social spending propitiated by high unemployment as well as an ad hoc exten-
sion in unemployment benefit duration added further elements of financial
stress and uncertainty and significantly reduced the government’s room for
manoeuvre in finding an agreement. The government’s policy package of May
2010 to reduce the deficit included a freeze of some pensions, cuts in public
employees’ salaries, and reductions in some family programmes, and reopened
conflict with the unions. In June 2010, the government passed its labour
market reform unilaterally, leading to calls for a new general strike.
There are striking similarities between the most recent episode of failure to
negotiate a social pact and those of the early 1990s. In both cases, a minority
Socialistgovernment, weakenedby high unemployment andeconomic recession,
tried to negotiate a social pact under heavy pressure to reduce the public deficit.
As predicted by the bargaining model, reaching a pact under these circumstances
becomes more difficult as the perception of mutual weakness deters the actors
from negotiating when the expected pay-offs are low. This situation could only
be reversed by the provision of incentives by the government, ruled out,
however, in 2010 by a high government deficit and the risk of debt default.
8.3. Institutionalization
8.3.1. Institutionalization Paths
The character of Spanish social pacts changed significantly between the early
1980s and the 2000s. The 1980s pacts were one-shot responses to acute social,
political, and economic problems in periods of government weakness, increas-
ing unemployment, and democratic consolidation. As developments thereafter
confirmed, those pacts were weakly institutionalized – a ‘strategy’ rather than a
‘system’ (Martı
´nez Lucio and Blyton, 1995) – and their procedures and sub-
stance strongly criticized. The unions were especially critical of the pacts and
their outcomes, and the industrial relations conflict that followed in the late
1980s and early 1990s made it clear that change was required to the model of
social pacting. This led after the mid-1990s to a new pattern of pacting based on
sporadic and narrower agreements on a range of issue areas that excluded an
explicit incomes policy. Even though initially only weakly institutionalized, the
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apparent effectiveness of those agreements has been conducive to repetition
and a slow process of institutionalization. There was also a trend, beginning in
1997, towards the integration and articulation of concertation with the wider
industrial relations system. As pointed out by a CC.OO official, ‘concertation
today in Spain does not enter into conflict with negotiations at lower levels, nor
with the micro-dynamics of the Spanish economy. Instead, these agreements
serve to channel lower level negotiations upwards rather than simply impose
decisions from the top down’.
19
The practice of permanent bipartite social dialogue after 1997 significantly
improved cooperation among the social partners, and created the conditions
under which further pacts could be signed. Under the new paradigm, social
pacts are limited to providing guidelines for lower levels of bargaining and road
maps for social dialogue in the years ahead. The key example of the former are
the ANC agreements signed each year (with the exception of 2009) by unions
and employers that provide guidelines for collective bargaining on pay. These
peak bipartite agreements have no legal character, but have nonetheless been
quite effective. The road maps include the 2004 ‘Declaration for Social Dia-
logue’ and the 2008 ‘Declaration for Economic Growth, Employment, Compet-
itiveness, and Social Progress’. Overall, the crisis of 2009–10 notwithstanding,
these agreements point towards a qualitative and perhaps irreversible shift
towards pacting on a leaner, more regulatory basis.
How can we explain the overall dynamics of social pact evolution in Spain?
The Spanish experience can be summarized as a three-step process: the aban-
donment of early post-democratization pacting in the second half of the 1980s; a
reduction of the number of issues negotiated as well as bargaining partners in the
early 1990s; and a process of integration (i.e. a greater focus on implementation)
in more recent years (see Figure 8.2). The Spanish case demonstrates that
reduction in scale and complexity does not necessarily imply deinstitutionali-
zation but rather a slow process of institutionalization of mainly bipartite pacts,
alongside a small number of tripartite agreements on labour market policy,
whereby a focus on fewer issues has minimized the scope for conflict and
integrated pacts more closely with policymaking and execution. The distribu-
tive function of earlier social pacts has given way to a series of regulatory and
coordination procedures since 1997 which have strengthened the articulation
of collective bargaining and opened a new era for concertation.
The new peak agreements seem much better suited to the diversity of con-
texts and conditions in the Spanish industrial relations system, given its region-
al and sectoral heterogeneity, than the earlier, more centralized pacts. Since
1997, the unions have stressed the importance of greater articulation in the
collective bargaining system as a precondition for successful social dialogue,
19
Interview with Salvador Bangueses, Madrid, 14 April 2005.
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and more recent narrow agreements contain specific clauses regarding lower
level implementation. Although narrower, Spanish pacts today are much more
integrated vertically than in the past.
8.3.2. Mechanisms of Institutionalization
How can we best account for these changes? Regarding the functionalist
approach, Spanish employers do in fact use a functionalist discourse to explain
the transformation of concertation. As one CEOE official has put it:
( . . . ) the 1980s social pacts were aimed at achieving macroeconomic stability. The
difference with the situation nowadays is not so much the existence of bi-partite nego-
tiations. Nor is the existence of a new bi-partite equilibrium a direct consequence of the
unions’ change of strategy. The main explanation for the change in the pattern of social
dialogue is the change in macroeconomic conditions, as the need to ensure macroeco-
nomic stability forced actors to include numerous issues in pacts. Now that Spain has
achieved a sufficient macroeconomic equilibrium, the agreements can be more focused
and bi-partite.
20
That argument is contested, however, by the unions who argue – in utilitarian
fashion – that concertation has evolved because they altered their strategies
when earlier pacts failed to meet their expectations. Both explanations have a
degree of validity. ‘System needs’ and ‘problem loads’ have clearly been impor-
tant background factors: the political and economic emergency of the demo-
cratic transition years, the ongoing unemployment crisis of the 1980s and
1990s, and the combination of EMU and Spain’s competitive problems from
the late 1990s onwards. But utilitarian, ‘cost–benefit’ considerations and power
politics have been critical in determining the timing and nature of the country’s
social pact response.
The early 1980s pacts were clearly a reaction to the twofold problem of
economic crisis and democratic stabilization. The failed attempts at pacting in
1982 1984 1993 1994 1997
Emergence Abandonment
Success:
ANE
Success:
AES
Failure:
Solidarity
Pact
Failure:
Social Pact
For
Employment
Success:
April
Agreements
Reduction
(Narrow Pacts)
Integration
(Focus on Articulation
and Implementation)
+
Figure 8.2. The Evolution of Concertation and Social Pacts in Spain
20
Interview with CEOE official Gabriela Uriarte, Madrid, 13 April 2005.
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the late 1980s and early 1990s have therefore been explained by some (e.g.
Boix, 1996) by the lack of a political catalyst (i.e. the risk of democratic failure)
coinciding with an expansionary phase of the economic cycle until 1992. But
even when crisis hit the economy again in 1992–4, pushing unemployment up
to 24 per cent, no pact was achieved – in spite of a large problem load and weak
micro-foundations in the collective bargaining system, which ostensibly
demanded a wages pact, as well as the loss, by the Socialists, of their parliamentary
majority. Attempts by the Socialist government to put pacts in place at that
time nevertheless failed: the costs of legitimizing austerity measures and wage
moderation far outweighed the benefits unions could obtain from a govern-
ment determined to pursue its EMU-convergence programme and opposed to
an expensive process of political exchange. For the unions, this looked much
too much like the experience of the early 1980s when the 1984 AES imposed
high costs on labour without sufficient compensating benefits. It was not until
1997 that new political and organizational circumstances allowed a concerted
policy response when the ongoing problem of high unemployment and expan-
sion of insecure jobs pressured the unions in particular to return to pacting.
Looking beyond the functionalist explanation, evidence from pact negotia-
tions therefore suggests that power politics, specifically tensions within the
unions, and between the latter and governments, have been critical in both
social pact failures and successes, as have the cost–benefit calculations of all
actors. A utilitarian argument is especially useful in explaining the chequered
history of incomes policies.
The pacts of the early 1980s exerted top-down control over wages, compen-
sating for a lack of strong micro-foundations in the bargaining due to the firm-
level weaknesses of both unions and employers (Hancke
´and Rhodes, 2005). As
the unions managed to improve their political and organizational capacities,
due in large part to the rewards of their participation in pacts, they gradually
developed a greater ability to govern the collective bargaining system and took
greater account of the likely economic impact of excessive wage demands
(Nonell et al., 2006). Yet they remained poorly rooted in firms and organiza-
tionally weak compared to most of their European counterparts. Precisely
because of this, Spanish unions have fiercely opposed since the late 1980s any
pact containing mandatory pay bands, lest a loss of control of wage bargaining
weakens them further. The peak negotiation of wage guidelines after 2002,
however, allowed the unions to minimize that problem. For although function-
ally equivalent to an incomes policy pact, the ANCs have not entailed the same
political commitments and costs, and remain formally in the arena of autono-
mous collective bargaining.
In the 2000s, although strictly bipartite, the annual ANC negotiations and
agreements have become the core of the concertation process, even if the
collective bargaining system remains fragmented, and if wage moderation can
only make a small contribution to improving Spain’s overall competitiveness.
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But despite these mixed results, employers and unions have stuck with the
system, creating a system of mutual commitments, and a degree of de facto
institutionalization – even if the unions could have used lower unemployment
and the rapid growth of the economy after the late 1990s to push for higher
wage claims, and the employers might have been more successful without a
wages pact in working for a decentralization of bargaining which, at least
rhetorically, they still support. A series of cost–benefit calculations underpin
their respective strategies.
First, concertation has allowed employers to avoid greater union wage mili-
tancy: in a number of the ANCs, employers have moderated union demands for
higher annual wage targets with concessions such as the preservation of wage
clauses in collective bargains. These allow wages to ‘catch up’ with the Retail
Price Index if it increases faster than the agreed wage norm: such clauses
affected 77 per cent of the workers covered by collective bargaining in 2006.
The CEOE has even backed the resurrection of such clauses where sectoral
employers – as in banking – had already abolished them.
Second, unions have been able to exchange wage moderation for thereluctant
agreement of the employers (and the PP government) to moderate their
demands for still greater external labour market flexibility (i.e. lighter dismissals
regulations; the unions have supported enhanced internal company flexibility
instead, including flexible working time as a ‘soft adjustment variable’) as well as
their calls for a further decentralization of bargaining. The CEOE has been split
on the latter issue between large firms who seek the reduction in transaction
costs that a degree of centralization can bring (Nonell et al., 2006) and smaller
employers who seek greater decentralization. The two main union confedera-
tions, however, have always sought to prioritize national industry-level bargain-
ing, first to prevent decentralization to firms in which their presence is, at best,
very weak, and second to enhance their positions as ‘most representative unions’
while marginalizing the role of small and regional competitor unions.
Finally, both unions and employers have been keen to reduce the fragmenta-
tion of bargaining that in the past allowed the sheltered sector to set pay
increases that wage agreements in the exposed sector would seek to emulate,
thereby reducing the competitiveness of export-oriented firms. In that respect,
the annual ANCs have attempted to complete the process of collective bargain-
ing rationalization that began with the agreements of April 1997, while new
legislation (the Royal Decree of 2005) has bolstered the coverage of collective
agreements
21
(Pe
´rez, 2000; Ferreiro and Gomez, 2005). In recent statements,
21
In 2005, sectoral and provincial collective agreements accounted for 21 per cent of all
agreements but covered 55 per cent of workers; national collective agreements accounted for
only 1.5 per cent of the total but covered 27.4 per cent of workers; while company-level
agreements accounted for 75 per cent of the total but covered only 10 per cent of the
workforce (EIRO, 2007).
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both employers and unions agree that overall results of the social dialogue have
been positive, even if the unions have been more critical about the levels of
execution (Eurofound, 2008). To that effect, the 2010 ANC included the crea-
tion of a new bipartite monitoring commission (to sit alongside the existing
tripartite National Advisory Board on Collective Agreements), with three repre-
sentatives from each of the signatory organizations, to apply and monitor the
implementation of the annual accords.
The power-distributional argument also provides insights into the Spanish
experience. For governments, the 1980s pacts were instruments for the control
of industrial conflict and moderating wage demands, but for workers they had
an uneven distributive impact to the benefit of capital. The unions accepted
these sacrifices in the early 1980s, not only because they wanted to help
consolidate democracy but also because they obtained significant compensa-
tion. But the costs soon began to outweigh the benefits, leading them to reject
any social pact with a wages component after 1984. The shadow of hierarchy of
state intervention has also played a crucial role – both directly, as in the 1980s
when the state solicited union participation with financial rewards, and indi-
rectly, as in the late 1990s and early 2000s, when it threatened to make policy
unilaterally if the unions and employers failed to reach agreement.
After the late 1980s, the Socialist government became reluctant to compen-
sate the unions, partly because of a neo-liberal policy shift under Pedro Solbes,
the minister of economic affairs from 1993 to 1996, but also lest they challenge
its electoral power from the left, especially after the breakdown of relations
between the PSOE and the UGT in 1986 and their subsequent ‘divorce’. It
follows that the abandonment of pacts was not so much a consequence of the
government’s loss of interest – it still sought social partner legitimization of its
policies – but of its inability or unwillingness to provide the resources required
for their reproduction. Along with union opposition to incomes policy agree-
ments, this explains from a power-distributional perspective the abandonment
of pacts between 1984 and 1997.
What of the normative argument? It was precisely the lack of consensus on
the costs and benefits of pacts in Spain that explains the low level of institu-
tionalization before the late 1990s. Conversely, a stronger degree of consensus,
both within the labour movement and between unions and employers, has
contributed to a consolidation of concertation in the 2000s. The 1980s pacts
institutionalized union involvement in managing a number of welfare state
institutions, but there were no significant efforts to create a stable forum for
communication or deliberation. The Social and Economic Council was only
created in 1991 and its role until the 2000s was quite limited. Accordingly,
horizontal actor networks remained weak, and pacts relied on ad hoc exchanges
between actors, making them highly unstable, and a shared perception of the
appropriate role for pacting in the economic system was lacking.
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All actors now agree that the most recent decade or so of social dialogue has
been necessary and valuable, but this shared belief has long been accompanied
by opposition to encompassing pacts. Governments of both left and right have
had a positive view of social pacts, albeit dependent on economic and political
circumstances. Employers’ organizations were initially sceptical of pacts in the
early 1980s, but more openly supportive thereafter. As for the unions, the
CC.OO was initially strongly opposed to social pacts and the UGT in favour,
so the 1980s pacts did not embody equally shared norms and beliefs. As the
CC.OO General Secretary stated in 1993, ‘Given the lack of consensus around
common ideas, an equitable exchange of goods among actors becomes indis-
pensable. This exchange does not become so necessary when there is consensus
on some basic ideas’.
22
A degree of consensus along those lines seems to have
developed since the late 1990s.
The norms underlying the 1980s pacts were so weak, and the outcomes
delivered so criticized by the unions, that when the first signs of economic
downturn appeared in the early 1990s, they preferred to reject cooperation
altogether. But rejection of a specific form of negotiation did not imply a
rejection of social dialogue as such. As the 1993 negotiations made clear, the
unions were not even completely opposed to ‘catch-all’ negotiations, but they
did oppose the inclusion of wage moderation – for power-distributional rea-
sons. Equally important for the failures of the early 1990s, however, was the
lack of a common diagnosis of the problems affecting the economy: in all of
those attempts, the social partners presented quite distinct alternatives to
government plans, the unions demanding re-regulation, the employers dereg-
ulation, of the labour market. By the 2000s, however, not only did unions and
employers share a diagnosis of the economy’s ills (its drift towards a low-
productivity, price competition-based equilibrium), even if they differed on
some of the solutions required, they also believed that a new era of concertation
had begun, one that could deliver desirable outcomes. This helped to institu-
tionalize the new modus operandi, even when governments broke with their
own commitment to social dialogue.
8.4. Conclusions
A number of conclusions can be drawn from the above analysis. First, a full
understanding of social pacting in Spain needs to pay attention to a combina-
tion of variables – not just the ‘problem load’, although it is of undeniable
importance, but the institutional and political variables that allow a concerted
response to economic problems at particular junctures. In the above, we have
22
Diario de Sesiones del Congreso de los Diputados, Comisio
´n de Polı
´tica Social y Empleo,
no. 57, 29 October 1993, p. 1626.
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pointed to the importance of government fragility, trade union ‘unity of
action’, and social partners’ perceptions of their respective strengths. Economic
and political conditions are both important explanatory factors, but primarily
because they shape those perceptions. Our analysis reveals that social pact
success was more likely when power perceptions were asymmetrical (in the
early 1980s and 1997), while failure was more likely when actors had similar
perceptions of weakness (as in the early 1990s) and the government was unable
or unwilling to compensate for that weakness with political exchange.
If organizational factors seem to tell us little about the proclivity of actors to
engage in pacting (the associational strengths of unions and employers have
been rather consistent over the entire period), political conditions are impor-
tant, but not in the way suggested by traditional neo-corporatist theory, with its
focus on left-of-centre governments. It is rather the peculiarities of governmen-
tal strength and weakness in Spain’s system of modified bipolarism, and espe-
cially the dependence of minority governments on small regional parties, that
explain a great deal of the variation in pacting, although not all of it: for a
minority Socialist government in the early 1990s was unable to solicit a pact,
and a centre-right majority government in the early 2000s supported pacting
unless unions and employers were unable to agree.
Especially interesting in the Spanish case is the issue of institutionalization.
Although our negotiation episodes indicate that social pacts in Spain have often
been used instrumentally by governments, from the late 1990s onwards, pact-
ing was depoliticized: the social partners began to converge on a common
diagnosis of what was wrong with the Spanish economy and even majority
governments took advantage of concertation as a tool for shaping, legitimizing,
and implementing reforms. Undoubtedly, competitive challenges under the
constraints of EMU membership played a role in inducing the support of actors
for an ongoing process of socio-economic reform, making Spain an exemplary
case of ‘competitive corporatism’ (Rhodes, 1998). However, underpinning con-
certation since 1997, and the new supporting institutions such as the bargain-
ing and monitoring commissions that have sprung up around it, was a
particular balance of power in which unions, employers, and governments all
decided that cooperation delivered higher dividends than conflict. The pattern
of bargaining and pacting that resulted began to acquire the characteristics of a
system once utilitarian concerns, including a reduction of uncertainty for the
actors involved, were accompanied by a sense of normative commitment. It is
difficult to explain the ongoing support of employers and unions for regular
pacting on wages and employment issues in the face of considerable difficulty
and disagreement in any other way.
But this degree of institutionalization does not mean stability and survival
regardless of the circumstances. The return to peak wage bargaining in 2010 was
remarkable given the state of the economy and the almost total breakdown of
relations between the unions and the Socialist government of Jose
´Zapatero
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(Royo, 2009). But there are numerous challenges to the system that are struc-
tural rather than conjunctural and that may defy the capacities of Spain to find
consensus (Molina and Rhodes, 2007). One is the fact that wage moderation
has not been able to reduce inflation to the European average and that relative
unit labour costs continue to disadvantage Spanish firms, as revealed in the
country’s growing current account deficit since the late 1990s. Nor has it made
much impact on the Spanish model of competitiveness more generally. For
although unions seem to be exchanging wage moderation for a pledge on the
part of employers to help build a different kind of economy, one in which an
enhanced quality of work is valued as part of a high-price, high-productivity
competitive strategy, the economic crisis has revealed the extent to which the
country’s recent growth has been built on low-cost labour and employment on
insecure contracts, in highly volatile sectors such as construction and tourism.
And thirdly, wage moderation appears to be benefiting employers rather than
workers and employees, with a considerable redistribution in favour of capital
income and profits alongside negative wage drift and diminished purchasing
power for the unions’ constituency. It may only be a matter of time until the
labour movement begins to view the present system as it once saw the social
pacts of the 1980s: a source of sacrifice and costs rather than redemption and
gains.
Appendix A: Social Pacts and Concertation in Spain: 1976–2010
Year Pact/agreement Actors Character Content
1979 Acuerdo Ba
´sico Interconfederal
(ABI)
Bipartite: CEOE + UGT Narrow Incomes policy;
industrial relations
1980 Acuerdo Marco Interconfederal
(AMI)
Bipartite: CEOE + UGT
+ USO
Narrow Industrial relations;
collective
bargaining
1981 Acuerdo Nacional de Empleo
(ANE)
Tripartite:
Government + CEOE
+ UGT + CC.OO
Broad Incomes policy;
labour market
1983 Acuerdo Interconfederal (AI) Bipartite: CEOE + UGT
+ CC.OO
Narrow Incomes policy;
industrial relations
1984–6 Acuerdo Econo
´mico y Social (AES) Tripartite:
Government + CEOE
+ UGT
Broad Incomes policy;
labour market;
welfare state
1992 Inter-confederal Agreement on
Life-Long Learning
Tripartite:
Government + CEOE
+ CC.OO + UGT
Narrow Labour market;
industrial relations
1994 Inter-confederal Agreement on
Labour Ordinances
Bipartite: CEOE + CC.
OO + UGT
Narrow Industrial relations
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1996 Agreement for Risk Prevention at
the Workplace
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
1996 Agreement for Protection of Rural
Employment
Bipartite: CEOE + UGT
+ CC.OO
Narrow Labour market
1996 Agreement for Extrajudicial
Mechanisms of Conflict Resolution
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
1996 Agreement on the Rationalization
and Consolidation of the Pension
System
Bipartite:
Government + UGT +
CC.OO
Narrow Pensions
1997* Inter-confederal Agreement for
Employment Stability (AIEE)
Bipartite: CEOE + UGT
+ CC.OO
Broad Labour market
1997* Inter-confederal Agreement on
Collective Bargaining
Bipartite: CEOE + UGT
+ CC.OO
Broad Industrial relations;
collective
bargaining
1997* Inter-confederal Agreement on
Coverage of Bargaining Gaps
Bipartite: CEOE + UGT
+ CC.OO
Broad Industrial relations;
collective
bargaining
1997 Agreement on Part-time Work Bipartite:
Government + UGT +
CC.OO
Narrow Labour market
1998 Agreement on the Stabilization of
Temporary and Part-time
Employment
Bipartite:
Government + CC.
OO
Narrow Labour market
1999 Agreement to Increase Minimum
Pensions
Bipartite:
Government + UGT +
CC.OO
Narrow Welfare state;
pensions
1999 Agreement on Tripartite
Foundation for the Prevention of
Labour Risks
Tripartite:
Government + CEOE
+ UGT + CC.OO
Narrow Labour market;
industrial relations
2000 Third Agreement on Life-Long
Learning
Tripartite:
Government + CEOE
+ UGT + CC.OO
Narrow Labour market
2001 Second Agreement on Extrajudicial
Mechanisms of Conflict Resolution
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
2001 Agreement on Pensions and Social
Protection
Tripartite:
Government + CEOE
+ CC.OO
Narrow Social protection;
pensions
2002 Inter-confederal Agreement on
Collective Bargaining
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
2003 Inter-confederal Agreement on
Collective Bargaining
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
2004 Inter-confederal Agreement on
Collective Bargaining
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
2005 Inter-confederal Agreement on
Collective Bargaining
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
2006 Agreement for Enhancing the
Quality of Growth and
Employment
Tripartite:
Government + CEOE
+ UGT + CC.OO
Narrow Labour market
2006 Inter-confederal Agreement on
Collective Bargaining
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
(Continued)
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Year Pact/agreement Actors Character Content
2006 Agreement to Reform the Social
Security System
Tripartite:
Government + CEOE
+ UGT + CC.OO
Narrow Social security
2007 Inter-confederal Agreement on
Collective Bargaining
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
2007 Agreement to Reform the Social
Security Reserve Funds
Tripartite:
Government + CEOE
+ UGT + CC.OO
Narrow Social security
2008 Inter-confederal Agreement on
Collective Bargaining
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
2010 Inter-confederal Agreement on
Collective Bargaining
Bipartite: CEOE + UGT
+ CC.OO
Narrow Industrial relations
Note: *Negotiated simultaneously, these three agreements are considered part of the same broad pact.
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