A Sucking Sound; The old job-for-life is on the way out across Europe. The new trend is temp-time. Now for the backlash.

Byline: William Underhill (With Tracy McNicoll in Paris and Mike Elkin in Madrid)

For several million Spaniards, work began in earnest during the mid-1990s. That's when increasingly business-friendly governments took an ax to the country's traditional (and highly restrictive) labor laws. Out went the old job-for-life. In came new short-term contracts that encouraged employers to hire new staff. One in three Spanish workers now appears on the nation's corporate payrolls as an easy-to-dump temp--the highest proportion in Europe.

Economists say that helps explain Spain's enduring economic boom. The onetime laggard is now a European pace-setter. These days Spain accounts for a third of all the jobs created in the European Union. Unemployment has plunged--down from a peak of 25 percent to barely 8 percent today--while growth is running substantially above average. So what's bothering Madrid? To businesses elsewhere--think France or Germany--Spain looks like a model for the job-creating flexibility they crave at a time when EU unemployment stubbornly hovers around 9 percent. Yet earlier this month the socialist government of Jose Luis Rodriguez Zapatero signed a deal with unions and employers that could reverse the trend. The package includes sweeteners for companies that switch staff from temporary to permanent contracts. And new rules provide that workers who spend more than 24 out of 30 months in a single job must be given full employment. A step backward? Not according to Zapatero, who speaks of a "good agreement for creating work."

Time will tell. Yet clearly, growing numbers of Europeans share the prime minister's worries over the steady drift away from permanent employment. Across the continent, a gradual relaxation of national laws has encouraged more and more companies to take on temporary staff as a way to sidestep the heavy social costs that go with long-term recruitment. In France, Germany and Italy, short-termers now make up more than 12 percent of the work force. Manpower, the world's largest multinational temp agency, has roughly 1,000 offices in France alone, more than in the entire United States, generating more than a quarter of the company's $16.2 billion annual revenues. "Business is exploding" all over Europe, says corporate spokesperson Tracy Shilobrit. But so is the accompanying controversy. Europeans raised on the promise of job security remain leery of any working arrangements that depart from the traditional--that is, open-ended contracts with guaranteed notice periods and generous payoffs for laid-off workers. Politicians tinker with such provisions at their peril. "Trying to take out some pieces of the package creates the impression that the whole package will be wiped out entirely," says Martin Werding of the IFO Institute for Economic Research in Munich.

Ironically, the loudest protests against the temp-work trend come from those most likely to benefit--the legions of Europe's jobless youngsters. Witness this spring's protests in France, which forced Prime Minister Dominique de Villepin to drop plans that would have cajoled firms into taking on first-time job seekers by easing the rules on firing them in the future. A new terminology has emerged among the disgruntled to express their discontent. French workers say they dread joining the ranks of the "precarious." Italians struggle to avoid "CoCoCos," or consecutive continuous contracts. The Spanish disparage contratos basura , or "garbage contracts."

To be sure, opposition weakens as the prospect of permanent jobs recedes. Ask Ben Noteboom, CEO of Randstad, the largest temporary-employment agency in Germany. "Two years ago the unions were out to kill us," he recalls. "Then unemployment hit 4.3 million, and common sense kicked in." A collective agreement and a change in the law opened up the temp market with dramatic effect. Business has never been so good for the Dutch-based business. In the first quarter of 2006 alone, revenues jumped by more than 40 percent. The company now reckons it could fill 5,000 places overnight, a small but useful cut in the country's unemployment tally. "To be honest," says Noteboom, "I don't see any losers."

The critics do, however. They concede the ...