34. Spain

This chapter briefly describes recent developments debates on the older workers’ participation in the labour force, precarious employment, (early) retirement decisions and the pension system in Spain, from a social class, health and gender perspective.

Spain, like other European countries, is faced with an ageing population. Currently, 19% of the total population is 65 years or older, which is expected to rise to 34% in 2050 (Instituto Nacional de Estadistica 2018). At the same time, it has one of the lowest labour force participation rates among people aged 50+ in Europe. Partly to blame is the fact that Spain has historically had a more rigid labour-market structure than other western European countries (Jaumotte 2011). Consequently labour market deregulation occurred later than in other countries. Since the 1990s, Spanish macro-economic policy has increasingly been determined at European level (López and Rodríguez 2011). Educational expansion, the legalisation of divorce (1981) and the economic boom (1995–2007) have contributed to rising female labour force participation rates since the early 1980s, causing gender differences to reduce markedly (Table 34.1).

Spain’s historic specialisation in sectors such as tourism and property development seemed perfectly suited to the age of globalisation. However, the rapid growth of the Spanish economy was matched by rapid decline when the economic crisis hit. The housing bubble was the first cause of the crisis, however the economic crisis also affected consumer goods and services industries. Due to the high proportion of employees on short-term and temporary contracts, big businesses were able to reduce their workforces quickly and at very little cost in response to falling demand. This also contributed to the rising unemployment levels (López and Rodríguez 2011), although the employment rate of women aged 50+ was barely affected. Possible explanations include the proliferation of part-time contracts and being pushed into the labour market by family economic demands during the economic crisis (Murcia-López et al. 2016).

The age at which adults left the labour market also fell markedly during the economic crisis, although this trend already started half-a-century earlier (Gendell 2001). Despite the increase in life expectancy and the delay in labour market entry as a result of educational expansion, the mean exit age dropped from 68 years in 1960 to 60 in 2001 and is about 62 today (OECD 2017), far off the current statutory retirement age (65.5 years in 2018). Behind the decline in the 1980s and 1990s was the increasing use of early retirement schemes for disabled workers or specific dangerous occupations and labour force adjustment plans. The latter were legal procedures initially designed to save companies in a bad short-term economic situation and simultaneously guarantee workers certain rights. However, nowadays this is an instrument used by many companies to maintain or increase profits.

The Spanish social security pension system is a Defined Benefit scheme based on the principle of contributions of employers and workers (de Cos et al. 2017). This discriminates against women as they were less active on the labour market. In 2016, the Social Security system paid 3,605,892 retirement pensions to men compared to 2,125,985 women. Although the average monthly pension for men equalled just over €1,200 and barely €760 for women, gender differences are declining in the new admissions (46.7% in 2006 compared to 22.5% in 2016 (Ministerio de Empleo y Seguridad Social 2017)).

Notwithstanding, the gender gap in Spanish pensions exceeds the European average when calculated on the basis of the total population (+28%). A considerable proportion of Spanish elderly women lack a contributory retirement pension (Burkevica et al. 2015), due to lack of remunerated employment during their working lives or lack of years in employment to access a contributory retirement pension (Ayuso and Chuliá 2018). The relationship between gender and retirement age in Spain is paradoxical, given the average retirement age amongst women is higher than for man as they cannot afford to retire earlier (Radl 2013b).

The pension system itself is financed through a Pay-As-You-Go model. There is no law that imposes a mandatory retirement age, although there are some sector-specific regulations. The state pension age, the age an individual can apply for 100% of a retirement pension, is based on the number of years in employment and contributions made to the pension system. In Spain, the state pension age was 65 for both sexes until 2013 when the pension system was reformed. However, as was explained earlier, the mean exit age has consistently been lower for the last three decades. For instance, workers in dangerous occupations can still leave the labour market and receive a pension from the age of 52.

From 2013 three main measures were introduced in the Spanish pension system: (1) Retirement age gradually increases from 65 to 67 years by 2027 and the early retirement age (possible if certain conditions are met) from 61 to 63 years; (2) The contributory period used for the calculation of the amount increases from 15 to 25 years in 2022; (3) The number of years of income tax required to access to the maximum pension increases from 35 to 37 years. Since the reform, it is also possible for individuals above the normal retirement age to combine retirement benefit receipt and work. However, in these cases the amount of the pension benefit is reduced by 50%. Since 2014, pension benefits are indexed annually to a new Adjustment Index calculated according to the number of contributory pensions, the variation of the average pension amount and balance between revenues and expenses of the Social Security system. From 2027, the initial pension benefit paid to new retirees will be adjusted every five years based on life expectancy gains (Alda García 2016).

Finally, an increase in minimum pensions after policy reforms in 2005 especially benefitted women as they are more likely to receive non-contributory pensions. This includes the widow’s pension that was introduced in Spain in 1955 to protect situations of need for women who had lost their husbands in a family model with strong gender roles.

Although employment protection legislation is stricter in Southern European countries than in liberal economies, there has recently been a tendency in Spain towards higher deregulation of the labour market, for instance by using temporary contracts (OECD 2013). The aim of the 2012 labour market reforms was therefore to develop a framework which would allow efficient management of labour relations, employment creation, employment stability and to achieve a better balance in the use of open ended and temporary contracts, although until now the impacts of the reform are mixed (Corral 2015).

Following recommendations from social partners, the Global Strategy for the Employment of Older Workers 2012–2014 (Strategy 55+) highlighted ‘the maintenance of older workers’ employment as a way to contribute to the extension of working lives’ and promote reintegration into the labour market (Ysàs 2016). Vocational training was recommended, with a particular focus on unemployed women aged 55+ with lower levels of education employed in catering, personnel, security or sales sectors (Programa Acredítate) as well as victims of gender-based violence. Unfortunatley this initiative was not effectively implemented. In 2011 a Royal Decree on workers regulations (Estatuto de los Trabajadores) was enacted to allow flexible retirement through a replacement contract under collective agreements when the worker has not yet reached legal retirement age. According to the National Service of Employment, there were 15,537 replacement contracts in Spain in 2016. This labour reform also facilitated the return of older workers to the labour market through: (1) a reduction of 40% in the social security contribution for one year for workers aged 59+ with four or more years of service in the same company; (2) permitting part-time work while receiving a pension; (3) promoting open-ended employment contracts for workers aged 45+; (4) enabling workers aged 52+ to juggle between unemployment benefit and a salary under certain circumstances and entitling companies to grants. Spain still has no specific anti-age discrimination policies.

Ill-health and unemployment remain obstacles to prolonging working life (Radl 2013a). Regardless of age, employees who experience physical and psychosocial risks, high demands and low levels of autonomy are more likely to experience poor health. Employers should consider the potential discrepancy between a worker’s physical work capacity and the demands and barriers they face. This would decrease the risk of dropping out of the labour market via alternative exit routes to retirement, such as disability or long-term unemployment benefits as well as social exclusion and poverty.

Policies surrounding working conditions are important in promoting work-life extension while minimising health risks and supporting active and healthy ageing in the workplace. Standard strategies have focused on the ageing workforce by considering older workers as a sensitive group that need special protection, permitting older workers with health conditions or employed in jobs which are considered dangerous for health to exit the labour force. The Strategy 55+ contains measures oriented to: (1) promote new skills at work, (2) offer more flexible work schedules, breaks, paces, shifts… adapted to physical condition, (3) develop prevention programmes according to job risks, age, and physical condition, (4) provide information and courses about health prevention and labour risk prevention, (5) promote healthy habits at work and daily life. It also considers the specific risks for older women.

Over the last two decades, Spain has had six labour reforms which proved ineffective in reverting a strongly established precarious and temporary labour market. The 2012 labour reform did not improve employment security; a problem affecting both workers aged 50+ and those with a precarious job or who had recently lost their job. Older female workers are more likely to have temporary employment contracts, and consequently greater job insecurity and more exposure to emotional pressure, the prevalence of physical and mental health conditions is higher among women than among men (Eurofound 2012). If women also combine employment with care for relatives, extending working life may actually further exacerbate their already worse mental and physical health states. While significant gender differences in retirement behaviour exist, these appear to be largely driven by women’s lower-class positions, as social class influences retirement timing in a similar way for women and for men (Radl 2013a).

The political support for generous early retirement pensions in Spain relies on the existence of a significant group of older people with incomplete working history, and therefore not entitled to an old age pension (Conde-Ruiz and Galasso 2003). Although the Spanish system does not pay a particularly generous average pension relative to GDP per capita, its ‘generosity’ lies in providing relatively large minimum pensions to individuals with below-average working histories and/or low wages. This generates very strong incentives for people to retire as early as possible (Jiménez-Martín and Sánchez-Martín 2007).

While the ageing Spanish workforce is still less of an issue than in other European countries due to a later baby boom and a large influx of working-age migrants during the 2000s, the recent economic crisis has cultivated uncertainty among politicians, media and academics, questioning the sustainability and purchasing power of the current pension. Popular mobilisations by retirees during the previous government provoked by the non-revaluation of pensions and subsequent loss of purchasing power were highly instrumental in positioning pensions in the public debate. There is a permanent parliamentary committee (Toledo Pact) since 1995 that addresses the retirement and pension system and issues recommendations for changes to the public pension system. However, in 2017 and 2018 significant attention was afforded towards the pension system. All the committee’s political parties agreed that more money was needed for pensions, however the parties did not agree on how pensions would be financed. While the political left advocated raising more money by increasing the maximum contribution bases, this proposal was not shared by the rest of the political spectrum, especially if maximum pensions would not be raised in parallel. There was greater consensus on increasing the contribution from taxes, although not regarding the origin of this (raising taxes by introducing a new tax or through debt issuance).

The adequacy of pensions is the next item on the agenda. Some political parties would like to see the minimum pension linked to the average salary and pension, reducing control of governments in power to intervene. Centre-right parties are calling for a redefinition of widow’s and orphans’ pensions, proposing these benefits are paid through taxes rather than social security contributions. However, the political left fears that this encourages increaseds reliance on welfare assistance. The current debate on the annual revaluation of pensions has neglected one of the fundamental aspects of the 2012 reform, namely linking the amount of pension received at the time of retirement to life expectancy. Yet, despite the fact that the statutory retirement age now progressively increases to 67, it is a scarcely discussed subject. Moreover, there is still no political consensus as left-wing parties continue to reject its implementation. Finally, in this debate unions mainly strive for pensions to be annually revaluated based on changes in the cost of living and that pensions are financed by the national budget or a final tax. Other organisations, such as the Bank of Spain, insist on the need to stimulate savings during adult life, encouraging investment in financial instruments.

There is some concern about the relationship between health and retirement. Health status plays an important role explaining transitions out of employment as individuals in the worst health quintile are twice as likely to retire compared to individuals in the best health quintile (Prieto et al. 2002). The effects of the incentives from the different social security schemes on employment behaviour are concentrated among individuals in worst health, while other groups seem not to be affected (García-Pérez et al. 2013). Employment rates of healthy and less healthy individuals converge from age 60, the age at which retirement plays a predominant role. Health is an important variable in determining the rate of activity among people younger 60 years old, but it becomes less important as the incentives of the pension system become more evident (Jiménez-Martín 2011). Individuals with deteriorated health move not only towards economic inactivity, but also towards unemployment. This result raises an important question: If we want to design integration policies to keep individuals at work, it is important to understand the role that health plays when individuals are deciding whether to go back to work?

Regarding the relationship between caregiving and retirement, in Spain providing intensive informal care decreases the probability of employment by about 10% (Moya-Martínez et al. 2012). Labour effects appear to be concentrated in intensive carers, co-resident carers and those who provide care for long periods (Casado-Marín et al. 2011).

The debate about age discrimination has only just started. Discrimination against older workers is high and, moreover, may start at a surprisingly young age, perhaps already in the late thirties (Albert et al. 2011). The efficacy of policies which rely only upon economic disincentives to reverse the early exit trend is called into question by widely internalised age norms which are incompatible with later retirement (Radl 2012). Instead of merely being faced with monetary punishment for early retirement, actors need to be persuaded that older workers are more productive than often assumed.

Training policy needs to reach out to the numerous Spanish adults who left education with poor skills. On the job learning opportunities are less frequent in Spain than in other EU countries and a substantial share of workers are poorly skilled (Jin et al. 2017). In a context where the cost gap between permanent and temporary workers is so high, employers have few incentives to invest in training their temporary workers. This underinvestment may have negative consequences on the skills competences that workers acquire at the workplace (Cabrales et al. 2014). Although during the recession the training needs of the population increased, there has not been an increase in participation in training programmes, partly because of cuts in the financing of employment training. Contrary to most EU-15 countries, Spain does not have programmes aimed at providing adults with basic educational competences beyond the return to school in the regulated education system (Felgueroso 2015).

Spanish employers’ views on older workers are less outspoken than in other European countries and limited policy initiatives have been taken. Only 28% of Spanish employers expect the average age at which people leave the workforce to increase during the next ten years; and only 17% expect the same for their own organisation (Van Dalen et al. 2009). Spanish employers expect an ageing workforce to provide an increase in know-how and experience but also in labour costs and resistance to change. For example, just one in ten Spanish employers report offering training programmes for older workers (ibid.).

Health is an important variable in determining the rate of activity among people under 60 years old, but it becomes less important as the incentives of the pension system become more evident. In general women are more likely to have temporary work contracts, greater job insecurity and more exposure to emotional pressure. Regarding reasons for early retirement, pursuing personal interests is more important for women than for men. Men highlighted health problems and pressures from employer as reasons for early retirement to a greater extent than women (Fernández et al. 2008). Gender also plays a role in a forced retirement model, as especially women with a retired partner have a lower probability of remaining in employment or returning to work following a spell of inactivity (Jiménez-Martín et al. 2006). Nevertheless, in Spain women retire on average two years later than men as they often cannot afford to retire earlier (Radl 2013b). This is because women have a lower probability of achieving the requisite minimum contributions that give them the right to receive a pension. Consequently, their retirement is more conditioned by their husband’s retirement or is forced upon them for family reasons, including the need to care for family members in poor health (Alcover et al. 2012).

It would be an error to think that the main reason that the state cannot assume the cost of retirement or that there will be a shortage of workers is because of population ageing (Spijker and MacInnes 2013). Disability pensions and collective redundancies are behind the low labour force participation rates among older adults in Spain. Therefore solely raising the retirement age will not solve the current crisis of state pension funds. Rather, lowering unemployment, particularly among young people, raising the employment rate of women and people aged 50–64 years, as well as combatting the grey or black economy, are important policy factors to consider.

The Spanish social security pension system discriminates against women. Gender differences in the labour lifecourse must be taken into consideration in the design of retirement policies. The implications of precarious employment for pensions, in current and future generations, is an issue that should be urgently addressed by public policy. Moreover, employers should consider the potential discrepancy between a worker’s physical work capacity and the demands and barriers they face. Subsequent research on the implications of the extension of working life in gender and health is necessary to ensure a safe old age for the entire population.