Drawing Lessons from the Boom of Temporary Jobs in Spain

We review some lessons from the Spanish experience of using temporary employment contracts for regular jobs since 1984. The focus is on the role of fixed-term contracts with low severance pay, which have substituted for reform of employment protection legislation for permanent contracts. We consider the main findings about this reform on the Spanish labour market in the light of the main theoretical implications derived from models dealing with dual labour markets, and address why the incidence of temporary work has remained highly persistent, around 33% of salaried employment, in the 1990s, despite several reforms aimed at reducing it.