Households spend up to 2,462 euros more when moving to a permanent contract
Households in which the head of the family went from having a temporary contract to an indefinite one last year they were able to increase their spending between 1,846 and 2,462 euros, thanks to the greater perception of security provided by the new employment situation. The calculation was published this Monday by the Bank of Spain in an article where it analyzes the effect that greater stability in employment can have on the pattern of household spending. According to data from the latest Active Population Survey, between the fourth quarter of 2021 and the same period of 2022, the number of permanent workers increased by 1.6 million in Spain. At the same time, the number of employees with a temporary contract fell from almost 4.31 to 3.11.
The article emphasizes that permanent workers dedicate a greater part of their income to spending and less to “savings for precautionary reasons.” In the years prior to the labor reform, households whose head of family has a temporary contract or is unemployed spent 72.1% of their income on spending, nine points less than those with a permanent contract. When your contract becomes permanent, your expense automatically increases by 24.5%.
The article extrapolates these assumptions to the evolution of employment in 2022, to calculate that an increase of 2.9 percentage points in the proportion of households whose heads of households have permanent contracts would rise from 72.15% to 72.39% (0. 24 points) the part of the income dedicated to spending by all Spanish households. Using another methodology, the Bank points out that the aggregate household expenditure ratio would have also increased by 0.24 percentage points in 2022 as a consequence of the greater number of households whose head of the family now has an indefinite contract.
An important dimension of this analysis is that it establishes that a relatively high fraction (approximately 25%) of the increase in permanent contracts in 2022 would have materialized in contracts called “discontinuous permanent”, which differ from conventional permanent contracts in that they show greater probability of going out of unemployment —with even more intensity after the last labor reform— and, therefore, of greater instability in wage income.
The article makes some alternative calculations in which it equates the spending behavior of workers with discontinuous permanent contracts to that of temporary ones, in which case the spending ratio would increase 0.2 points with the first methodology and 0.18 points with the second. . This means that, as a result of the greater number of permanent contracts, Spanish households dedicated a greater part of their income to spendingor -between 0.18 and 0.24 additional percentage points, depending on the assumptions-, which translates into between 1,189 and 1,586 million euros or between 1,846 and 2,462 euros per additional household whose head of family has a permanent contract.