From “temp‐to‐perm” : Promoting permanent employment in Spain

Following the notable growth of temporary employment, a series of incentives were approved by the Spanish Government to promote both the hiring of workers on a permanent basis and the conversion of contracts from temporary to permanent employment. Nonetheless, hiring and dismissal cost reductions have had a small impact. This paper examines the determinants of Spanish employers’ reliance on temporary workers and their “temp‐to‐perm” conversions. Approved wage and dismissal cost reductions for permanent workers promote the hiring of permanent workers but have virtually no impact on contract conversions, which primarily respond to employers’ flexibility needs and unions’ pressures for increased employment stability.