Employment, Wage and Price Reactions to the Crisis in Spain: Firm-Level Evidence from the WDN Survey

Abstract

This paper describes the main results from the third wave of the Wage Dynamics Network (WDN) survey. Its main goal is to provide information on demand, finance conditions and other factors determining economic activity, on wage, price and employment adjustments over the period 2010-2013, and on firms’ perceptions of institutional changes in the labour market. In Spain, the survey was conducted at the end of 2014, collecting information from a representative sample of 1,975 Spanish firms covering manufacturing, energy and market services sectors. The main results show that Spanish firms’ adjustment to falling demand and other negative conditions since 2010 relied heavily on the dismissal of employees under temporary contracts, although those firms most affected by the crisis also significantly reduced permanent employment. On the contrary, wage and hours adjustments remained limited even in those firms most severely affected by the negative shocks. Regarding institutional changes, Spanish firms perceive some easing in the conditions for economic layoffs, attributing the main source of this higher flexibility to legal changes since 2010. As to other labour conditions, including wages and hours, the share of firms perceiving higher flexibility is somewhat lower.