Understanding the positions taken by moderate union confederations and centre-left parties during labour market reforms in Portugal and Spain: Why the configuration of left parties and trade union confederations matters?

Abstract

The insider-outsider politics approach conjectures that moderate unions and centre-left parties safeguard the interests of insiders and neglect outsiders in labour market reforms. This article challenges this hypothesis. By comparing the positions taken by centre-left parties and moderate union confederations during labour market reforms in Portugal and Spain (1975–2019), it shows that while they may indeed protect insiders, they sometimes do the opposite. To explain this, the article argues that more attention must be paid to the configuration of left parties and confederations. In Portugal, where communist and radical left parties were strong, the centre-left was afraid of losing outsiders’ electoral support, and thus it did not follow a pro-insider strategy. This was reinforced by the fact that the centre-left had to face the opposition of a strong class-oriented confederation that was not willing to commit to two-tier reforms. This was not what happened in Spain. The centre-left, supported by a union confederation, undertook a two-tier reform in 1984 because there was a different configuration of left parties and confederations. Notwithstanding, this was not a stable equilibrium because this confederation changed its position over time when it realized the negative consequences of these reforms. Henceforth, their strategy became more pro-outsider.

Keywords

Centre-left parties comparative case studies employment protection legislation insider-outsider politics labour market segmentation union confederations

Introduction

Since the late 1970s, Western labour markets have gradually been liberalized through deregulation of employment protection legislation, of collective bargaining and retrenchment of the welfare state, in the neoliberal pursuit of unhindered wage flexibility (Hayek, 1960; Howell, 2005). The economic insider-outsider literature added to this trend in the 1980s and 1990s by pointing out that regulations were protecting some workers (insiders) and neglecting others (outsiders), leading to increased segmentation (Lindbeck and Snower, 1988).

The economic insider-outsider literature inspired flexibilization in various countries, but reforms during the 1980s and 1990s did not result in full deregulation of employment protection legislation, the end of collective bargaining or the full dismantling of the welfare state. A number of governments implemented two-tier labour market reforms, that is, selective relaxation of employment protection only for fixed-term contracts (Silva et al., 2018). Similarly, in social policy, whereas generous benefits were kept for workers who could make regular contributions to social security, those with atypical employment or unemployed lost access to standard benefits and had to rely on social assistance (Palier, 2010). Collective bargaining followed the same path with negotiations being maintained in some sectors but not in others. Thus, a new divide emerged in Western political economies.

To explain this, a new strand of literature gained momentum in the field of comparative political economy: insider-outsider politics (Emmenegger, 2014; Rueda, 2007). Drawing on the economic insider-outsider literature, scholars argued that this divide results from insiders colluding with unions and centre-left parties to safeguard their position: centre-left parties maintain regulation and welfare generosity for insiders but worsen the position of outsiders because they are afraid of losing insiders’ electoral support. According to these scholars, unions, centre-left parties and insiders in many Western countries followed the same strategy. Insider-outsider politics draws substantially on neoliberal economics to develop this conjecture because the conflict of interests between insiders and outsiders is at the core of their argument; they do not problematize this matter because they rely on rationalist assumptions to address the issue of representation (Keune and Pedaci, 2020: 140–141; Meardi et al., 2019: 2–4).

Contributing to the same literature, other scholars have claimed that arguments focused on the issue of representation have problems (Davidsson and Emmenegger, 2013; Palier and Thelen, 2010: 130–133). This is so because even when there is high union density, unions favour insiders. In their view, there are organizational interests that justify this. First, some institutional features of the existing policies are crucial for unions’ long-term positions of power (for instance, their institutional role on the administration of dismissals), and second, unions have an interest on influencing the direction of labour market reforms, something that requires some degree of compromise. Thus, two-tier labour market reforms work as a second-best solution because they allow safeguarding unions’ organizational interests.

However, looking at Southern Europe which is widely considered as particularly segmented, the positions taken by socialist parties in Portugal and Spain during labour market reforms have varied. While the Spanish conducted one of the most emblematic two-tier labour market reforms in Western Europe, the Portuguese opted for a different strategy: they did not pass two-tier labour market reforms and, contrary to the insider-outsider politics conjecture, they carried out pro-outsider reforms. In the same vein, moderate union confederations adopted different strategies in the two countries: while in Spain they supported two-tier labour market reforms in the mid-1980s, they never did so in Portugal. The guiding question of this article is therefore: why did socialist parties and moderate union confederations adopt different strategies in Portugal and Spain?

To address this question, we argue that these distinct strategies are explained by the different configurations of left parties and union confederations. The existence of strong communist and radical left parties that focus on representing outsiders, on the one hand, and strong class-oriented union confederations that oppose two-tier labour market reforms for ideological reasons, on the other, influenced the positions of socialists in Portugal. These two interlinked conditions meant that Portuguese socialists did not conduct two-tier labour market reforms. By contrast, when this was not the case, socialists passed two-tier labour market reforms, for example, in Spain in 1984. Notwithstanding, this was not a stable equilibrium because the spread of atypical employment had long-term negative consequences for insiders and for Spanish union confederations in general.

The article, after presenting the argument and the main labour market reforms implemented in Spain and Portugal between 1974 and 2019, assesses the positions taken by union confederations and political parties in each, leading to a comparative explanation of the different national paths.

Under which circumstances do centre-left parties and union confederations adopt a pro-outsider approach?

Two bodies of literature shed light on the circumstances in which centre-left parties and union confederations adopt a pro-outsider approach. Research on political parties points out that centre-left parties may develop inclusive policies if certain conditions prevail: (1) proportional electoral systems, especially if with a strong right-wing adversary party, because governments are often party coalitions including the left (Iversen and Soskice, 2015); (2) weak governments, which have a political incentive to negotiate their policies with trade unions (Rathgeb, 2018); and (3) fast-growing number of outsiders, therefore, with more electoral importance (Schwander, 2018).

In relation to unions, important factors include union ideology, competition between core and peripheral workers, the inclusiveness of interest associations and the unions’ (lack of) links with the centre-left. The industrial relations literature makes frequent reference to the fact that unions have different strategic orientations (Hyman, 2001). Union confederations linked to communist parties, which in some countries are the most representative unions, had a strategic goal to advance the class struggle rather than to negotiate with employers or governments in order to safeguard the positions of insiders (Marques and Salavisa, 2017; Rojot, 2014). Several authors have recently shown that class-oriented unions tend to adopt a pro-outsider approach due to their ideological commitment (Benassi and Vlandas, 2016; Dorigatti, 2017). The literature also notes that allowing the spread of atypical employment through two-tier labour market reforms triggers its expansion, which in turn puts pressure on insiders. Some scholars have argued that even when unions initially agreed on two-tier labour market reforms, they tend to gradually change their position as they realize the negative consequences of these reforms for insiders (Baccaro and Benassi, 2017; Dorigatti, 2017; Eichhorst and Marx, 2020). Moreover, union confederations are more concerned about the position of outsiders when marginal workers are also part of the union constituencies; this tends to happen in countries with high union density (Lindvall and Rueda, 2014; Mosimann and Pontusson, 2017; Thelen, 2014). Finally, unions have more incentives to be pro-outsider if their link with centre-left parties is weak: their membership base becomes more important in this situation, pushing them to trying to unionize outsiders (Baccaro et al., 2003; Dorigatti, 2017).

This article draws on the above literature to explain why centre–left parties and moderate union confederations adopted different strategies in Portugal and Spain. Our argument is simultaneously on cross-country difference and cross-time change. First, we argue that the existence of strong communist and radical left parties that focus on representing outsiders, on the one hand, and strong class-oriented union confederations that oppose two-tier labour market reforms for ideological reasons, on the other, influenced the socialists’ positions in Portugal. These two interlinked conditions meant that Portuguese socialists did not conduct two-tier labour market reforms. Second, when this was not the case, as in Spain, the socialists passed two-tier labour market reforms, but this was not a stable equilibrium because the spread of atypical employment negatively affected insiders and the unions.

Centre-left parties may be more pro-outsider if they are afraid of losing electoral support from left voters due to strong communist and radical left competition (Schwander, 2018: 11). While Rathgeb (2018) and Iversen and Soskice (2015) have pointed out that minority governments and coalition governments are more prone to conduct pro-outsider reforms, we take this argument further by highlighting the importance of parties that focus their action on representing the interests of outsiders. Our case studies show that the existence of a minority government or a coalition government is neither a sufficient nor a necessary condition for a pro-outsider strategy to emerge. Centre-left parties only act in this way when there is a strong political competitor that aims to represent this marginal workforce.

According to the insider-outsider politics approach, the existence of a trade union confederation that agrees with centre-left parties on the need to carry out this type of reform is a key condition for two-tier labour market reforms (Rueda, 2007). Their argument is problematic because it assumes that strong moderate union confederations prevail. However, the Portuguese case illustrates that this is not always the case. As mentioned above, class-oriented union confederations play a vital role in the trade union movement in Portugal. They are not interested in cooperating with governments as they follow a class struggle approach, opposing deregulation policies even when they only target outsiders. Thus, the Portuguese socialists, and the moderate union confederation aligned to them, would have to face their opposition if they wanted to conduct a two-tier labour market reform.

These two interlinked conditions – strength of communist and radical left parties, on the one hand, and strength of class-oriented union confederations, on the other – influenced the positions of centre-left parties and moderate union confederations in the two case studies under analysis. However, this does not explain why the Spanish moderate union confederation stopped supporting two-tier labour market reforms from the late 1980s onwards (which we will address below). This is where the dynamic side of our argument comes in. They changed their position because they realized that persistent high levels of atypical employment, even after unemployment decline, have negative long-term consequences, including for insiders (Baccaro and Benassi, 2017; Dorigatti, 2017; Eichhorst and Marx, 2020). Furthermore, organizational power became more important (Baccaro et al., 2003) at a time when the link between centre-left parties and unions was weakened (Howell, 2001; Piazza, 2001), which was the case in Spain in the late 1980s to mid-1990s. The sheer size of atypical employment made those employees a necessary organizing target. This contradicts the argument that allowing the spread of atypical employment and simultaneously keeping regulations for permanent workers preserves unions’ organizational interests (Davidsson and Emmenegger, 2013; Palier and Thelen, 2010: 130–133). The Spanish case shows the opposite.

Comparing the positions taken by moderate union confederations and centre-left parties during labour market reforms in Portugal and Spain

The article compares two case studies, Portugal and Spain, chosen as most-similar cases where the variation of the dependent variable (centre-left and union policies towards the outsiders) can be observed most clearly. It analyses the labour market reform stances of union confederations and political parties between 1975 and 2019.¹ Both countries experienced a long fascist dictatorship from the 1930s until the mid-1970s; joined the EU in 1986; have two main rival union confederations, linked, respectively, to the communist and socialist parties; have similar party constellations; have a similar economic structure, characterized by late industrialization; and, finally, repeatedly passed labour market reforms.

They diverge, however, as regards the balance of power between union confederations, on one hand (Figure 1), and the strength of communist and radical left parties, on the other (Figure 2). In Portugal, communist and radical left parties are historically stronger than in Spain. As in other Southern European countries, historically union confederations are ideologically divided (Gumbrell-McCormick and Hyman, 2013: 21). Whereas the communist-linked trade union confederation in Portugal represents the vast majority of the unionized labour force, no confederation is clearly dominant in Spain. Moreover, the union confederations’ links with political parties have weakened since the late 1980s in Spain (Hamann and Lucio, 2003: 65; Molina and Rhodes, 2011: 183), and their collaboration has increased.

Figure 1.

Membership share of each union confederation in Portugal and Spain (1976–2016).

Figure 2.

Share of votes in parliamentary elections, socialist versus communist and radical left parties (1975–2019).

Throughout this article, the terms class-oriented unions and moderate unions are used as ideal types to characterize the prevailing strategy in each confederation, drawing on Hyman’s (2001: 2–4) framework. Class-oriented unions tend to adopt a class-wide anti-capitalist strategy, while moderate unions take a social-partnership, evolutionary reform approach. The Portuguese Confederação Geral dos Trabalhadores Portugueses (CGTP) comes into the former category. Comisiones Obreras (CCOO) also was in this category until the early 1990s, but changed when the Partido Comunista de España (PCE) lost control over the confederation. União Geral de Trabalhadores (UGT-P) in Portugal and Unión General de Trabajadores (UGT) in Spain have been closer to the principles of evolutionary reform.

As for the methodology, the article conducts a comparative historical analysis of two case studies (Mahoney and Rueschemeyer, 2003; Mahoney and Thelen, 2015). The historical analysis adopts an actor-centred and power-relations-centred approach. Our case studies draw on press reports, documentary analysis of legislative documents, quantitative datasets and secondary literature. This latter source plays a key role in the analysis due to the large time span covered by the empirical analysis.

Key labour market reforms in Portugal (1974–2019)

The first attempt to reform labour legislation was made during the coalition government (1981–1983) formed by the centre-right Partido Social Democrata (PSD) and the conservative Centro Democrático e Social (CDS). The coalition’s main goal was to liberalize individual dismissal. In 1981, the unemployment rate had risen to 8.8 percent, the highest level since 1974, and employers blamed this on the rigidity of labour legislation. The announcement of the reform triggered a fierce response from both trade union confederations. The UGT-P, linked to Partido Socialista (PS), announced a general strike, but the CGTP, which has connections with Partido Comunista Português (Portuguese Communist Party (PCP)), organized two national demonstrations. As the PS opposed this legislation, it was very difficult for UGT-P to accept this reform or to exchange it for the flexibilization of fixed-term contracts. Faced with union opposition, the coalition government put the reform on hold (Barreto, 1991: 436). CGTP organized two general strikes in 1982, thus showing its strength.

The second attempt at reform came in 1987–1988 (Stoleroff, 1992). In 1987, PSD achieved an absolute majority (51.3 percent), while the left-wing PCP fell from 18 to 12 percent and PS from 37 to 23 percent. At the same time, union density had fallen to 38.6 percent from a peak of 60 percent in 1974. Employers saw this as an opportunity and called for the deregulation of labour legislation. Shortly after, the Prime Minister announced new labour legislation expanding the ‘just cause’ permission for individual dismissals. The government tried to reach a tripartite agreement, but this was rejected by the UGT-P, which chose to oppose the liberalization of individual dismissals (Stoleroff, 1992: 131). Both confederations called, for the first time, general strikes on the same day (28 March 1988), which was UGT-P’s first general strike (Barreto, 1991: 443; Campos Lima and Naumann, 2011: 155; Marques and Salavisa, 2017: 150). The strike was successful with an estimated 80–85 percent participation (Barreto, 1991: 443; Stoleroff, 1992: 133). However, the government went ahead with the reform. The Socialist President sent the law to the Constitutional Court (CC) on the grounds that it violated several articles, including Article number 53 on the right to job stability (Stoleroff, 1992: 132–133), and the law was declared unconstitutional in June 1988. A revised version of the law was vehemently opposed by the employers’ confederation – Confederação da Indústria Portuguesa (CIP) – because it failed to liberalize fixed-term contracts (Glatzer, 1999: 104; Silva, 2016: 3) and labour legislation therefore remained very restrictive (Venn, 2009). In short, in the 1980s the unions and left-wing parties were able to oppose the liberalization of permanent contracts and even to increase the regulation of fixed-term contracts. As shown in Figure 3, the share of fixed-term contracts fell substantially after the 1989 reform.

Figure 3.

Share of fixed-term contract employment (1986–2019) in Portugal and Spain.

In 2003, a new reform attempt was made by the right-wing PSD–CDS coalition government. Aware of the 1989 CC ruling, the government did not try to deregulate individual dismissals but passed three different measures: it abolished the most-favourable principle on the relation between collective agreements and the law; it introduced the so-called ‘caducity’ of collective agreements (the possibility to unilaterally withdraw); and it deregulated the use of fixed-term contracts (Campos Lima and Naumann, 2011: 161). Fixed-term contracts could now be renewed three times instead of two, and last up to 6 years instead of 3 (Silva, 2016: 15). Union confederations, PS and PCP opposed this two-tier labour market reform, but without a common front as in 1988. UGT-P adopted a more moderate stance and negotiated with the government, but did not reach an agreement. CGTP called a general strike, which was less successful than the 1988 one but still had strong participation, especially in large firms and in the public sector.

In 2005, PS won the national elections with an absolute majority for the first time and made the first overall reform to labour legislation. While collective agreements’ caducity was retained and the favourability principle was not restored, the maximum duration of fixed-term contracts was reduced to 3 years (Silva, 2016: 4) and the working time flexibility was increased. Portugal’s Prime Minister was then committed to the EU flexicurity agenda (Bekker, 2012). For the first time, labour law reform was subject to a tripartite agreement that included all employers’ associations, the government and UGT-P. This confederation supported the reform for three reasons: (1) the ‘caducity’ of collective agreements was not a major issue for UGT-P’s more flexible approach to collective bargaining, as it was to CGTP’s more adversarial stance; (2) the new labour code increased the regulation of fixed-term contracts; and (3) the reform came from the PS, to which UGT-P was allied. CGTP opposed it fiercely because the PS government had not revoked the whole 2003 reform, and it called a general strike and a 200,000-strong demonstration (Campos Lima and Naumann, 2011: 162). It is also interesting to note that even though the PS government had an absolute majority for the first time, it introduced a pro-outsider reform, which contradicts Rathgeb’s (2018) argument. More important was that despite the socialist majority, the communist and radical left parties had had a strong result (about 15 percent) and CGTP maintained its dominance.

Portugal was severely affected by the EU sovereign debt crisis (2010–2015) and applied for a bailout programme in April 2011 shortly after the resignation of the Socialist government. In June 2011, PSD and CDS won the national elections and formed a new right-wing coalition government. Unions were in a weaker position than in 1988 as union density had declined to 18.4 percent. The PS had negotiated the bailout before the national elections and could not openly oppose the memorandum between government and troika, which contained several measures deregulating labour legislation. The coalition went forward with a major revision of the labour code in early 2012, including the deregulation of individual dismissals and fixed-term contracts (Bulfone and Tassinari, 2020; Clauwaert and Schomann, 2013; Ramalho, 2014; Silva, 2016). As the Socialists had signed the memorandum and abstained on the reforms, UGT-P was ambiguous on austerity policies: it joined a number of general strikes and demonstrations against public sector cuts but signed a tripartite agreement in January 2012. There was instead strong opposition from CGTP, social movements, communist and radical left parties. Between 2010 and 2013, there were five general strikes, of which three were joint by UGT-P and CGTP. CGTP and/or social movements organized several massive demonstrations across the country, including on 15 September 2012, the largest since 1974 (Costa, 2017; Fernandes, 2017). After its approval, the reform was sent to the CC by MPs from the leftist Bloco de Esquerda (BE) and PCP. Several articles were declared unconstitutional, including the liberalization of individual dismissals (Fernandes, 2017; Ramalho, 2014; Távora and González, 2016). The outcome was therefore similar as in 2003: a two-tier labour market reform because the CC blocked the liberalization of individual dismissals. The PS choice to oppose and block the revision of the Portuguese Constitution, despite abstaining on the reforms, was key as the revision would have made individual dismissals liberalization constitutional.

After the conclusion of the bailout programme, in the 2015 elections the PSD–CDS coalition won the most votes but lost the absolute majority. The PS was then able to form a minority government with the support of BE and the PCP. In September 2019, under pressure from the left-wing parties that supported it, the socialist government undertook a reform that extended the probation period of permanent contracts for first-time employees and long-term unemployed, restricted the allowed use of fixed-term contracts and reduced their maximum duration from 3 to 2 years. Overall, this reform increased the regulation of fixed-term contracts but slightly worsened the situation for permanent contracts. It was a pro-outsider reform as in 2009. It was supported by the UGT-P that again aligned with the socialist party, but not by the CGTP, which, as expected, fiercely opposed the extension of trial periods. BE and the communists, who expected more substantial reforms, opposed it and the reform was approved with abstentions from the PSD and CDS (Afonso and Bulfone, 2019). In contrast with a recent strand of literature that points out that the reversal of austerity measures in Southern Europe has been mainly driven by an attempt to protect core groups of voters (Afonso and Bulfone, 2019; Bulfone and Tassinari, 2020), the Portuguese case demonstrates that regarding reforms to employment protection legislation the socialists prioritized outsiders. This shows how the balance of power within the left is important to understand the socialist’s strategy.

The Portuguese case shows that the socialist party and UGT-P never agreed on the implementation of two-tier labour market reforms. The farthest the PS went was to abstain on a reform that was passed in 2012 by a right-wing coalition government. This was in a very specific context, characterized by external intervention due to the EU sovereign debt crisis. In 2019, the socialists again implemented a pro-outsider reform. The Portuguese case thus corroborates our argument. Moreover, it was right-wing governments who conducted two-tier labour market reforms; they used these reforms to further flexibilize the labour market as they were unsuccessful in their initial goal to deregulate labour law generally. Thus, it was the attempt to liberalize that brought about segmentation and not the collusion between the centre-left and union confederations (Piore, 1980; Prosser, 2016). This shows that it was the centre-right, not unions, which went for second-tier reforms as second best, contradicting, therefore, key contributions to the dualization literature (Davidsson and Emmenegger, 2013; Palier and Thelen, 2010: 130–133). In addition, not only did PS oppose two-tier labour market reforms, they also passed two pro-outsider reforms which reverted the legislative changes implemented by the right-wing coalition government. Interestingly, legislative changes implemented by right-wing parties in the two situations that had a detrimental effect for insiders were not reverted. In other words, the Portuguese socialists prioritized outsiders over time in a coherent and stable strategy. Finally, it is interesting to note that the strategy of UGT-P has been strongly aligned with that of the socialist party, with whom they still have strong links. UGT-P opposed all reforms implemented by centre-right parties that faced the opposition of the socialist party (1982, 1988 and 2003). They supported the two reforms passed by the socialists (2009 and 2019). They agreed with one reform passed by the centre-right, the only one that the socialist party did not vote against in the parliament (2012) (Table 1).

Table 1.

Key labour reforms in Portugal, 1974–2019.

Labour reform	Content	Tripartite agreement?	General strikes	Government composition
1982	Deregulation of permanent contracts	No	Yes, by CGTP	PSD–CDS, majority
1988	Deregulation of permanent contracts	No	Yes, by UGT-P and CGTP	PSD, majority
2003	Dualization reform. Caducity of collective agreements. More favourable treatment principle abolished	No	Yes, by CGTP	PSD–CDS, majority
2009	De-dualization reform. Increased working time flexibility	Yes, signed by UGT-P	Yes, by CGTP	PS, majority.
2012	Deregulation of labour legislation in general	Yes, signed by UGT-P	Yes, by CGTP	PSD–CDS, majority
2019	De-dualization reform. Minor deregulation of permanent contracts	Yes, signed by UGT-P	No, protest actions by CGTP	PS, minority, with support of BE and PCP

Key labour market reforms in Spain (1975–2019)

In the 1982 elections, the Partido Socialista Obrero de España (PSOE) obtained an absolute majority while the PCE fell from 10.8 percent (1979) to 4.1 percent (1982) (Burgess, 1999; Lucio, 1990). In the same period, union density declined from 45 percent in 1978 to 12 percent in 1984 (Visser, 2019). Unemployment had risen rapidly from 5.1 percent in 1977 to 21 percent in 1984, pressuring the government into revising labour legislation, seen as very restrictive and unable to address the job crisis (Richards and Polavieja, 1997). The PSOE introduced a two-tier labour market reform (Bentolila et al., 2012; Ferreiro and Serrano, 2001; Llorente, 2005; Lucio and Blyton, 1995; Rhodes, 1997; Richards and Polavieja, 1997; Rueda, 2007; Toharia and Malo, 2000), keeping high protection for permanent workers intact but deregulating fixed-term contracts. Union confederations did not converge on this: while the UGT, linked to PSOE, signed a tripartite agreement with the government, CCOO, linked to PCE, opposed the reform (Burgess, 1999). This was an archetype two-tier reform and central to the dualization literature (Emmenegger, 2014; Rueda, 2007). The reform was possible because of UGT support and PCE/CCOO weakness.

In 1988, the PSOE government tried to implement a new reform to further deregulate labour legislation (Burgess, 1999; Toharia and Malo, 2000; Yruela, 1997). It proposed a Youth Employment Plan (YEP) with contracts for people under 25 without past job experience, with lower pay rates and social contributions. This was again a typical two-tier labour market reform. Although the reform did not include measures to decrease permanent workers’ protection, CCOO and UGT fiercely opposed it and organized a successful general strike on 14 December 1988, which led to the government’s withdrawal of the proposal (Toharia and Malo, 2000). There are three reasons for the UGT change of strategy. First and foremost, the labour market context was different. Contrarily to 1984, unemployment was declining (Burgess, 1999). Simultaneously, the share of fixed-term contracts was expanding rapidly (Figure 3). In this new context, UGT recognized that the expansion of fixed-term contracts was not a temporary measure to address unemployment but indeed a structural transformation of the Spanish labour market. They were aware that temporary contracts were being expanded at the expense of the decline in permanent employment: ‘between the second third of 1987 and the second third of 1988, when levels of employment in Spain were increasing, only two out of ten temporary contracts were converted into permanent contracts’ (Richards and Polavieja, 1997: 16). Thus, the UGT realized that the concession made in 1984 had had a greater impact than expected (Burgess, 1999). They were weakened by this because it is much more difficult for workers with fixed-term contracts to unionize as they are at greater risk of being fired and the bargaining power of insiders also tends to deteriorate (Miguélez, 1995). This was particularly problematic for UGT because, relative to CCOO, they were stronger in firms with fewer than 50 employees where the share of fixed-term contracts was also higher (Burgess, 1999). Second, the change in the UGT approach reflected the shift towards a more critical stance towards the policies of the PSOE government. UGT also knew that the PSOE was committed to further liberalizing the Spanish economy and opposition to labour law reforms represented a more general warning from the union against an excessive PSOE’s pro-market strategy. As noted by Burgess (1999: 13), throughout this period ‘UGT refused to sign any agreement that ratified the PSOE’s macroeconomic policies’. Third, this conflict with the PSOE meant that organizational power became more important for UGT. Therefore, containing the spread of atypical employment became crucial, given its negative effects on unionization (Oliver and Morelock, 2020). Interestingly, union density increased significantly between 1988 and 1994, from 12.6 to 17.6 percent (Visser, 2019). Unlike UGT, the PSOE did not change substantially its line as they did not face strong competition from other left-wing parties.

As a result of another surge in the unemployment rate (from 16.3 percent in 1991 to 22.7 percent in 1993), the PSOE government proposed a new reform in 1994. The labour legislation again included the YEP (now called apprenticeship contract), the creation of a part-time contract, fewer restrictions on collective dismissals, the legalization of temporary employment agencies, the easing of dismissals and the termination of the labour ordinances in place since the Francoist era (Burgess, 1999; Molina and Rhodes, 2011; Rhodes, 1997; Rueda, 2007; Toharia and Malo, 2000). This reform deregulated employment protection for both workers on permanent contracts and those with atypical work arrangements. As in 1988, CCOO and UGT joined forces and organized a general strike on 27 January 1994. Although the strike was at least as participated as the 1988 one with over half the labour force joining it, this time PSOE went ahead with the reform (Lucio and Blyton, 1995; Royo, 2006) as it did not face opposition from other strong left-wing parties.

The right-wing Partido Popular (PP) won the national elections in 1996 and formed a minority government. Surprisingly, the following year union confederations signed a tripartite agreement with the government, which included a reform that increased flexibility for permanent contracts while decreasing it for fixed-term contracts (Burgess, 1999; Ferreiro and Serrano, 2001; Molina and Rhodes, 2011; Toharia and Malo, 2000). While this contrasted with the insider-outsider politics conjecture and these scholars found it very difficult to explain this reform (Rueda, 2007: 125), there are three possible explanations for it. First, the fall-out of the 1994 strike to block the previous reform. As a result of that reform, the share of fixed-term contracts had reached a historical record (Figure 3). Thus, the adoption of a new and more effective strategy was urgent. Interestingly, the share of fixed-term contracts declined slightly after this agreement. However, PP was looking for social partners’ support to consolidate its minority government (Mosquera, 2017; Royo, 2002). Finally, CCOO made an agreement with the PP government because it was no longer controlled by the PCE. This reform shows that moderate union confederations can be pro-outsider when they appreciate the negative long-term consequences of allowing the expansion of atypical employment.

In the 2000 elections, the PP won with an absolute majority, which allowed the government to pass reforms in March 2001 without the agreement of social partners (Bentolila et al., 2012; Dolado et al., 2002; Molina and Rhodes, 2011; Rueda, 2007). Permanent contracts were further deregulated. CCOO and UGT opposed it because no substantial changes were introduced to improve precarious contracts. Opposition to the PP government escalated in 2001 and 2002 as other reforms were implemented unilaterally and in June 2002 the union confederations organized a general strike (Molina and Rhodes, 2011; Mosquera, 2017).

The PSOE won the 2004 national elections and reached an agreement in 2006 with the union confederations to reform labour legislation. This was quite different from the previous agreement between UGT and PSOE, which had been in 1984. The 2006 labour reform was a continuation of that of 1997 in that regulation of permanent contracts decreased but that of fixed-term contracts increased. This was achieved by providing subsidies to convert fixed-term contracts into permanent ones, by increasing self-employment regulation and improving unemployment benefits for precarious workers (Campos Lima and Artiles, 2011; Molina and Rhodes, 2011; Mosquera, 2017). The change in the PSOE position compared to its previous reforms is difficult to explain because neither the communists nor the radical left had gained a substantial number of votes in the 2004 elections. However, the tensions with the unions during the late 1980s and 1990s had been bad for the socialists, arguably contributing to the party’s electoral decline between 1986 and 2000 (Figure 2). Also, after the PP government had come to an agreement with CCOO and UGT in 1997, it was difficult for PSOE to be seen as less committed to social dialogue than the conservatives. Like the PP government in 1996–2000, the socialist one did not have an absolute majority and social partners’ support was important for its legitimacy and stability. It can be added that the PSOE was under new leadership, removing the personal obstacle of Felipe González’s figure in the dialogue with trade unions. However, this shift in strategy did not last long.

When unemployment rose during the global economic crisis, the situation changed again and conflict between union confederations and the government escalated in a situation of fast rising unemployment. In the aftermath of the economic crisis, Spain was hit by the EU sovereign debt crisis (2010–2015) which further aggravated the situation. In 2013, unemployment reached 26.1 percent, a record high. Two reforms took place in this period, one implemented by PSOE in 2010 and the second by PP in 2012. To address the rise in unemployment, PSOE unilaterally implemented a reform in June 2010, further deregulating permanent contracts and facilitating individual and collective redundancies (Bentolila et al., 2012; Campos Lima and Artiles, 2011; Clauwaert et al., 2016; Kohler and Jiménez, 2013; Molina and Rhodes, 2011). Although various measures were implemented to limit fixed-term contracts, in 2011, the socialist government suspended the provision of the Workers Act that restricts the use of consecutive fixed-term contracts (Clauwaert et al., 2016). UGT and CCOO opposed this reform and called a general strike on 29 September 2010 (Romanos, 2017). The re-regulation attempt of 2006 remained therefore short-lived, and still without a strong competition on the left, the PSOE rapidly returned to a deregulation agenda. The consequences of this crisis were dramatic for the socialist as they lost about 20 percentage points in the 2011 national elections.

After winning the national elections with an absolute majority in November 2011, PP implemented a new reform the following February without consulting union confederations (Bentolila et al., 2012; Clauwaert et al., 2016; Kohler and Jiménez, 2013). The reform further deregulated permanent contracts and reformed collective bargaining regulations (Bulfone and Tassinari, 2020). As for fixed-term contracts, although the Government prohibited the unlimited successive fixed-term contracts introduced by PSOE in 2011, the regulation of precarious jobs was further reduced by new measures such as the extension of the scope of apprenticeship contracts that were less regulated than fixed-term contracts. Thus, PP further deregulated the Spanish labour law, very much in line with the strategy that the party had followed in 2001 when it had an absolute majority. Not surprisingly, UGT and CCOO called two general strikes in 2012 (Kohler and Jiménez, 2013).

To conclude, the Spanish socialists saw two-tier labour market reforms as a viable strategy to fight unemployment in the early 1980s. This was feasible because other left parties were weak and the reform was supported by UGT in 1984. In 1988, the PSOE tried to do the same, but by then UGT had realized the damage labour market dualization entailed for trade unions, and the unions managed to block the reform. Later, in the 2000s and 2010s PSOE oscillated between a pro-outsider strategy (once) and a pro-deregulation strategy (twice), depending on the economic and political circumstances. While having an absolute majority seems to play an important role in the Spanish case, it is not enough to explain the positions taken by the PSOE. For instance, in 2010–2011 they had a government without an absolute majority but opted to deregulate the labour law further, including for outsiders. What is crucial in our view is that, unlike their Portuguese counterparts, they did not adopt a coherent pro-outsider approach, at least up until the late 2010s. From 2015, the radical left has gained a substantial presence in the Spanish parliament (Figure 2), which seems to be having an impact on the political strategy of PSOE. The 2019 government agreement between PSOE and Podemos (2019) mentions the objective of tackling the spread of atypical employment by restricting the use of fixed-term contracts for seasonal work. The agreement does not mention changes to the provisions regulating permanent contracts. Very recently, when the recovery and resilience plan was released (a compulsory document to be sent to the EU under the Recovery and Resilience Facility), the coalition government announced a set of measures to tackle labour market segmentation, including reducing the scope of atypical contracts in labour law and a reform of active labour market policies that intends to promote hiring through permanent contracts (El País, 2021). When these measures were announced, union confederations demanded a complete reversal of the 2012 labour law reform, that is, besides agreeing with the need to reduce the use of atypical contracts they demanded the reversal of reforms to permanent contracts and collective bargaining (Table 2) (El Economista, 2021).

Table 2.

Key labour reforms in Spain, 1975–2019.

Labour reform	Content	Tripartite agreement?	General strike	Government composition
1984	Dualization reform	Yes, signed by UGT	No	PSOE, majority
1988	Dualization reform	No	Yes, by UGT and CCOO	PSOE, majority
1994	Labour legislation deregulation in general	No	Yes, by UGT and CCOO	PSOE, minority
1997	De-dualization reform. Less regulation for permanent contracts	Yes, signed by UGT and CCOO	No	PP, minority
2001	Deregulation of permanent contracts	No	Yes, by UGT and CCOO	PP, majority
2006	De-dualization reform. Less regulation for permanent contracts	Yes, signed by UGT and CCOO	No	PSOE, minority
2010	Labour legislation deregulation in general	No	Yes, by UGT and CCOO	PSOE, minority
2012	Labour legislation deregulation in general	No	Yes, by UGT and CCOO	PP, majority

Conclusion

By comparing Portugal and Spain since democratic transition, this article has shown that while moderate union confederations and centre-left parties may behave against the interests of outsiders, this is not always the case and, indeed, is not the most common strategy. We have shown that political events that strengthen or weaken both class-oriented union confederations and the communist and radical left parties are of relevance to the understanding of this process. When these two actors were strong – as the Portuguese case illustrates – centre-left parties did not conduct two-tier labour market reforms and moderate union confederations opposed them. When the opposite occurred, two-tier labour market reforms emerged – as illustrated by the 1984 reform in Spain. Notwithstanding, in the latter situation, this was not a stable equilibrium because UGT changed its position over time when it realized the negative long-term consequences of the expansion of atypical employment, something that contradicts key contributions to the dualization literature, namely those that argue that dualization reforms safeguard union’s organizational interests ( Davidsson and Emmenegger, 2013; Palier and Thelen, 2010: 130–133). On the contrary, the Spanish case shows that these reforms weakened unions and for this reason they changed their strategy. Furthermore, the Portuguese case also contradicts this argument because it was the centre-right that saw two-tier reforms as a second-best solution, not unions.

This article has analysed two countries in which the strength of the communist and radical left parties, on the one hand, and of class-oriented union confederations, on the other, remained stable over time (high in Portugal and low in Spain). But this may not always be the case because changes can occur in the political and industrial relations systems; it would therefore be interesting to study countries in which, for instance, new strong political parties are trying to speak up for outsiders, like the Five Star Movement in Italy (Eichhorst and Marx, 2020). Will centre-left parties alter their positions in order to address this challenge? We expect our contribution to open new avenues of research in this area. Moreover, future research can also apply our framework to study other policy fields such as collective bargaining and welfare state policies.

Footnotes

Acknowledgements

The authors gratefully acknowledge two anonymous reviewers for valuable comments on an earlier version of the manuscript. They also thank Editor Guglielmo Meardi for very helpful comments. The usual disclaimer applies.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was financed by Portuguese funds through FCT – Foundation for Science and Technology in the framework of the projects: REVAL – From internal devaluation to the revaluation of work: the case of Portugal [project no. 028811; Reference: PTDC/SOC-SOC/28811/2017]; and SOLID-JOB - Rebuilding solidarity in an age of job dualisation [project no. 06230; Reference: PTDC/CPO-CPO/6230/2020].

ORCID iD

Paulo Marques

Notes

Author biographies

Paulo Marques is Assistant Professor in the Department of Political Economy at Instituto Universitário de Lisboa (ISCTE-IUL). His research focuses on labour market segmentation and contributes to the field of comparative political economy. His work has been published, among others, in the Socio-Economic Review and Comparative European Politics.

Dora Fonseca has a PhD in Sociology, with the thesis ‘Social movements and trade unionism in times of crisis. The Portuguese case: alliances or latent tensions?’ by the Faculty of Economy of the University of Coimbra. She is Researcher at the Center for Social Studies, currently working in the research project ‘REVAL – From internal devaluation to the revaluation of work: the case of Portugal’.

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