Noah denkt™  -
    Project for Philosophical Evaluations of the Economy
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They don’t get it, do they?
Dialogue with the Alter Ego about a Spanish labor law reform proposal, first drafted on Jan. 17,
published on Jan. 18, 2012
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Question by Noah denkt™ (Nd): As you perhaps know, there are negotiations going on right now between the
Spanish unions and employer organizations to reform the national labor law. With respect to that we have learned
on Monday (Jan. 16) that both sides are now discussing a proposal which would stipulate that in case of an
employee dismissal the respective employer would have to pay 20 days of severance for each year that the
sacked employee was previously employed in the company. What does our Alter Ego make of that proposal?
Answer by Alter Ego of Noah denkt™ (AE): Well, it certainly doesn’t reflect
your earlier suggestion to adopt a less
protective labor law which would emulate the American hire-and-fire system.

Nd: Certainly not. But don’t you think it is a disgrace that they still don’t understand what is needed now to remedy
the crisis which the Spanish economy is currently suffering from?
AE: You, obviously, have to realize that it takes time to have people accept that t
he age of the abundant social
market economy is coming to an end.

Nd. But can you give me one feasible argument that would defend the idea of severance pay in today’s
competitive environment?
AE: Well, there are obviously several arguments which worker rights’ advocates would be field here. Among them
perhaps the following:

  1. Employees deserve a certain compensation for the loyalty which they have previously demonstrated
    towards the employing company. After all, it is only due to that loyalty that they are still around to
    experience the present misery of their employer.
  2. The employees have turned the company into what it is today. Should they hence not receive an extra
    premium for that?    
  3. It is a matter of social justice not to let the newly unemployed fall into an abyss of poverty. We are, after all,
    a caring Christian society.
  4. Especially older employees will have a very hard time to find a new employment in an otherwise difficult
    market environment. The concept of solidarity simply demands that we should specifically protect the more
    senior of our colleagues.  
  5. If there is such a thing as a golden handshake for executives, it is hard to see why regular employees
    shouldn’t receive a similar sign of corporate gratitude.
  6. Should it not be in the interest of an employer to end the subject employment contract on good terms?
    After all, it may well be that said employer will have to recruit the now sacked employee again, once the
    company’s prospects improve significantly.

Nd: Okay let’s go down that list, one by one.
  1. To be quite frank, it seems rather dubious to us whether such a thing as loyalty still exists in this hard-
    knuckled world of ours.  We certainly wouldn’t advise anyone to rely too much on that.
  2. We would have thought that the wages are the adequate vehicle to compensate workers for their
    contribution to a prior company success.
  3. But don’t our Christian societies usually cushion the fall into unemployment by something like
    unemployment insurance?
  4. There is some truth in that argument. But the question is whether the latter shouldn’t be better dealt with
    within the framework of the unemployment insurance.
  5. Companies that allow for golden handshake provisions in executive contracts should be avoided anyway,
    since they are stupid enough to become victim of the reputation bubble which we are still living in.
  6. That argument certainly has merit. But it should be up to the individual employer to decide how he wants to
    let his employees go rather than signing it into law.

AE: Well, whatever you say here may all be true and well, but the simple fact is, that unions won’t accept your
point of view on this. So the real question here is how you are planning to make them understand that this is the
way to go?

Nd: Obviously,
you would have to have some backbone here….
AE: … and follow the example of the Iron Lady who was willing to risk civil war (see the UK miners’ strike in the
early 80s) in order to force unions into accepting the new capitalist reality?

Nd: It may well be that governments will have to go down that road,
if they truly want to avoid tanking the EURO-
project and thereby risking a worldwide depression.
AE: But wouldn’t the prospect of prolonged civil unrest in Europe be equally difficult for the international economy?

Nd: In our mind,  this would certainly constitute the lesser of the two evils, which we are discussing here.
AE: Perhaps.  
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Keywords:

labor law reform, golden handshakes, severance pay, saving the EURO, European
debt crisis, debt crisis in the EURO-zone, Spanish labor law, social capitalism, hire and fire, social market
economy, reforming the social market economy, Spanish severance pay regulation, unflexible labor law