Preparing ERTE for the Future

This report provides a detailed assessment of job retention support (ERTE) in Spain during the COVID-19 crisis. It provides three major insights. First job retention support in Spain has been transformed from a little used and difficult to access scheme before the COVID-19 crisis to a scheme that can be scaled up quickly in response to a major economic downturn and be phased out easily as economic conditions recover. Second the use of ERTE was stronger in regions industries and occupations most affected by the COVID-19 crisis suggesting support was effectively targeted to firms and workers that needed it most. Third job retention was highly effective in supporting employment during the COVID-19 crisis. It not only prevented a major surge in unemployment but also avoided that the labour market became congested with too many job seekers competing for too few job vacancies. The labour market reform of December 2021 consolidated many of the important changes that made job retention support so successful during the COVID-19 crisis and in addition introduced a specific mechanism that allows scaling up support in the case of large adverse shocks.