Abstract

The Great Recession had a profound impact on the Spanish labour market. On the one hand, unemployment skyrocketed reaching 27% of the workforce at its highest. On the other hand, three different labour reforms were approved, aimed at deregulating and flexibilising the labour market. This paper explores the potential impact of one of such changes, the alteration of the hierarchy of collective agreements in favour of firm-level collective agreements, on wage inequality and temporality rates within the firm. According to our analysis of firm-level data of a large sample of Spanish firms, having a firm-level collective agreement correlates positively with higher wage inequality and higher temporality rate at the level of the firm. Thus, should one of the intended implications of the reform (the growth of firm-level collective bargaining) materialise, one of the consequences could be the growth of wage inequality and employment instability.