Working 37.5 hours per week: Who Truly Gains from Spain's new Workweek reform?

In December 2024, Spain's government reached an agreement with the country's major trade unions to reduce the standard workweek to 37.5 hours without wage cuts by the end of 2025. This paper provides an ex-ante assessment of the proposed reform using EUROLAB, a discrete choice labour supply model based on EU-SILC 2022 data for Spain. Simulations reveal modest increases in total hours worked, mainly via higher labour market participation, with notable gains among low-income women, non-parents, older, and younger workers. Fiscal simulations show a 1.3% increase in tax revenues and a 0.19% reduction in social expenditures, resulting in a budget surplus of 4.63%. The reform also slightly improves income distribution, including a reduction in in-work poverty and a slight narrowing of income inequality. However, the analysis does not account for fixed costs (e.g. childcare and commuting), equilibrium labour demand responses, and broader effects of increased leisure time on consumption and indirect taxation - elements to be addressed in future research.