Internship contracts in Spain: a stepping stone or a hurdle towards job stability?

Spain is one of the European countries with the highest unemployment and temporary employment rates. In response to the labour market precariousness that young individuals in Spain have faced for the last 35 years, one initiative that aimed to alleviate this issue was the introduction of internship contracts (IC), aimed at educated young workers. Internship contracts (first implemented in 1998) were designed to provide young workers—who have already completed their university or vocational training education—with the opportunity to develop their professional skills at the start of their career. This professional experience must be related to the level and field of studies, and firms must complement this experience by investing in young workers’ training. In particular, the spirit of the law underpinning IC is that it entails investment in human capital by offering practical training and, in return, benefits by paying lower wages and taxes. The specific question we seek to address in this study is whether this instrument has been an effective active policy to achieve more stable and better employment trajectories for its beneficiaries.

The most noteworthy results of the study are as follows: In the short term, the internship contract leads to greater subsequent job instability than an unsubsidised temporary contract, unless the person who benefits from it leaves for another company. In that case, it does appear that IC beneficiaries are ahead of their counterparts in terms of employment stability, understood as the holding of permanent contracts. With respect to wages, the IC seems to have a negative impact, either for those who stay in the company (stayers) or for those who move to another company (leavers). To measure the medium- and long-term effects, we choose the employment situation of the two groups, in particular their contractual situation and their wages, after 2 and after 5 years. When comparing the situation of the two groups, the main disadvantages found in the short term are mitigated. In particular, the negative impact found earlier on wages disappears, while the employment stability of the beneficiaries of the internship contract is greater in terms of having achieved permanent contracts. Although in the short term, the internship contract does not have particularly advantageous effects in terms of labour market outcomes for their beneficiaries who enter the labour market, its impact becomes more positive 2 and 5 years ahead, especially in terms of job stability. One possible interpretation of this result is that although companies that hire young people through internship contracts do so to reduce costs, this group nevertheless sends a signal of high productivity to the market that allows them to subsequently achieve greater job stability.

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By Sara De la Rica and Lucía Gorjón


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