JOBS ACT THE LABOR MARKET TWO YEARS LATER Edited by: Francesco Beraldi Ivan Lagrosa
With interventions of: Tito Boeri Daniela Del Boca Maurizio Ferrera Elsa Fornero Pietro Garibaldi Andrea Ichino Piero Martello Alessandro Rosina
A project by:
with the support of:
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JOBS ACT THE LABOR MARKET TWO YEARS LATER
A project by:
with the support of:
in collaboration with:
Jobs Act The labor market two years later A publication Neos • News Economics Opinions Solutions edited by Francesco Beraldi & Ivan Lagrosa With the support of Centro di Ricerca e Documentazione Luigi Einaudi and the collaboration of CEST • Centro per l’Eccellenza e gli Studi Transdisciplinari Translations Dr. Janet Rutherford Graphic design Riccardo Agosto, Daniele De Luca, Martina Spalla This work is under the Creative Commons Attribution NonCommercial 4.0 International License. To read a copy of the license it is possible to visit the website http://creativecommons. org/licenses/by-nc/4.0/ or to send a letter to Creative Commons, PO Box, Mountain Viewm CA 94042, USA. Neos thanks Collegio Carlo Alberto for its economic contribution for the realization of the report. The opinions expressed in the present report are those of the authors and do not pledge in any way Neos Magazine and the organizations that in different ways contributed to its realization. Moreover, every error or omission is to be attributed exclusively to the authors. For any comment write us to: firstname.lastname@example.org
NEOS Magazine Founded in 2015 by a group of students united by a background in economics, Neos – an acronym for Notizie Economia Opinioni Soluzioni [News, Economics, Opinions, Solutions] – came into being with the aim of creating a magazine for university students that deals with themes of political and economic topicality through analyses of an academic nature, but with an informative profile. Our objective is to give students the opportunity to evaluate and immediately improve skills acquired during their term of study, exploring themes of their own interest and thus becoming an intermediary type of publication between that for a young public and specialised journals. On the one hand, Neos therefore enriches the experience of those who participate in the programme, and on the other, it undertakes to restore a value to collectivity by its own work: articles, dossiers and interviews with numerous leading personalities are indeed constantly published through our online channels. The real asset that makes Neos special is our team: editing is undertaken by a lively group of over thirty students, always seeking out things that are stimulating and opportunities to enhance their own abilities, contributing to disseminate a clear and informative analysis. On our team are representatives of over ten universities and graduate colleges from all over Italy: from the Bocconi University in Milan to Luiss, to the Sapienza in Rome; from the Carlo Alberto College to the University of Turin, to Sant’Anna in Pisa, without forgetting the European Business School, École Supérieure de Commerce de Paris. Some of our editors contribute to the development of the Magazine abroad, thus making for a greater plurality in the team and the themes looked at. This diversity appears also from the point of view of the breadth of study of the editors: around a nucleus from a background in economics, it has developed a framework that covers all the major university disciplines, thus enabling it to further enrich the panorama of the disciplines addressed.
Index Introduction • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 6 1 • A dual labor market • • • • • • • • • • • • • • • • • • • • • • • • • • 10 Interview to Tito Boeri • • • • • • • • • • • • • • • • • • • • • • • • • • • • 22 2 • NEETs and the European labor market • • • • • • • • • • • • • • 28 Interview to Alessandro Rosina • • • • • • • • • • • • • • • • • • • • • • • 38 3 • The South: crisis and development perspectives • • • • • • • • 48 4 • The reforms of the labor market in Italy, from 2000 to the Jobs Act • • • • • • • • • • • • • • • • • • • • • • • • • • • • 58 Interview to Elsa Fornero • • • • • • • • • • • • • • • • • • • • • • • • • • • • 70 5 • The trend of contracts and the market after the introduction of the Jobs Act • • • • • • • • • • • • • • • • • • 82 Interview to Pietro Garibaldi • • • • • • • • • • • • • • • • • • • • • • • • • 96 6 • The evolution of dismissal legislation • • • • • • • • • • • • • • • • 102
Interview to Andrea Ichino • • • • • • • • • • • • • • • • • • • • • • • • • 114 Interview to Piero Martello • • • • • • • • • • • • • • • • • • • • • • 122 7 • Labor policy after the Jobs Act • • • • • • • • • • • • • • • • • 132 Interview to Maurizio Ferrera • • • • • • • • • • • • • • • • • • • • • • • • 142 8 • Reconciling social care, life and work in the Jobs Act • • • • • 148 Interview to Daniela Del Boca • • • • • • • • • • • • • • • • • • • • • • • • 162 9 • Occasional work and the experience of vouchers • • • • • • • 166 10 • Germany: from the ‘Hartz Plan’ to the present day • • • • • 186 11 • Loi Travail: the French way to the Jobs Act • • • • • • • • • • • 200 12 • Flexibility and instruments for employment. The Spanish formula for the crisis • • • • • • • • • • • • • • • • • • • 212 13 • Labor legislation in a European perspective • • • • • • • • • 224 Authors • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 236
Two years have passed from the introduction of the Jobs Act, a period of time that is sufficient to reflect on and analyse what has happened in Italy following the introduction of the reform. Among the objectives of this report is not only an evaluation of the dynamics of the last two year period, but also a retrospective of decade transformations it triggered, and constructing a perspective of European comparison. The Neos Magazine, comprised for the most part of students and recent graduates from various Italian universities, has worked on this publication over the past months, with the aim of providing an organic and complete overview of the Italian labor market and more, and to explain the Reform of the Renzi government and its economic and social implications through a variety of voices and perspectives, a distinctive feature of the working team. For this reason the chapters are interspersed with interviews with some of the most important Italian scholars of the labor market, among whom are Tito Boeri, Daniela Del Boca and Elsa Fornero. The publication opens with an analysis of the duality that characterises the Italian labor market, which represents perhaps the best key for reading to understand the labor reforms that have been introduced in recent years. Two focuses â€“ on youth and the South â€“ explore the theme from generational and territorial points of view. The approach becomes more legal in passing in review the principal labor reforms of recent years: from the Biagi Law to the Reform of the Monti government, to the Jobs Act, to then analyse the trends that have characterised the market following the introduction of this last reform. The four following chapters explore the themes of dismissal, labor policy, maternity and the voucher system from a point of more strictly of economics. The last section is dedicated to placing Italian idiosyncrasies in a European and international context, thanks to a series of focuses on other European countries, France, Germany and Spain. The overview concludes with a broad chapter on labor legislation in a European perspective, which enables us to understand the rĂ´le of the EU in labor regulation and place the Jobs Act once again in the widest international context.
This publication was made possible thanks to the support and contribution of various entities which gave of themselves in a truly generous way to the realisation, communication and circulation of this report: the Carlo Alberto College, the Luigi Einaudi Centre for Research and Documentation and CEST â€“ Center of Excellence and Transdisciplinary Studies. Finally thanks are due to all those interviewed and to the authors who undertook this work.
A dual labor market by Ivan Lagrosa
UniversitĂ Bocconi & IGIER
ABSTRACT The Italian labor market had been characterized for many years by a profound segmentation: on the one hand there is a percentage of workers protected by permanent contracts, with high levels of security and good working conditions; on the other hand there is a group of people employed with fixed-term contracts (or individual contracts), characterized by lower levels of protection and with conditions that are, on average, worse.
Introduction Duality arises primarily from reforms that over the years have liberalized the labor market in a distorted way (Boeri 2010); to a strong, and reasonable, demand for flexibility arising from the market, legislators replied by introducing new contractual forms, compared to that which remains one of the principal means of entrance to the market: the permanent contract. The greater flexibility envisaged by such contractual typologies was however accompanied by the introduction of additional, and in some cases compensatory, protection for workers. These interventions at the margins have thus left legislation for permanent employment largely unchanged, which serves to create important and significant disparities of treatment between groups of workers. The low economic growth of recent years, set in this sort of context, has done nothing except increase the scope of these inequalities. Figure 1.1 clearly shows the effect of the interventions of liberalization on temporary contractual forms, used for the most part by young workers: while the protection of permanent workers remained unaltered up to 2012, with the intervention of Minister Fornero, the forms of insecure work has gradually seen their protection index decrease.
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Unemployment: an analysis by groups The level of unemployment is certainly one of the main indicators of trends in the labor market; it takes into account individuals who are: i) without a job, (ii) immediately available for work, (iii) actively engaged in looking for work, and the relationship to the total work force (employed and unemployed). As is evident from this definition, the datum leaves us with an incomplete picture (and in the case of youth unemployment, even a misleading one) of the employment situation in the market. The data of 2015 show, for example, how the percentage of people who presently do not work and who are classified as unemployed, is relatively small compared to the total number of people without work. Among the groups under consideration, of particular interest is the category of discouraged workers â€“ those who have stopped looking for a job once they think that their chances of finding one are extremely low. The percentage of this typology of people remains practically constant among the various age ranges. In the graph, moreover, involuntary part-time employees are also included. These are people who would be willing to accept a full-time job if they found one; and to widen our overview, we can therefore include them in the category of partially unemployed workers. This category will be the subject of closer examination below. Looking at the level of unemployment, one of the most important dualities that characterize our market has to do with its segmentation by age groups: youth on the one hand; older age ranges on the other; in the middle a job market that offers employment opportunities that differ decidedly on the basis of the group one belongs to. If, for example, young people between 15 and 24 years old constitute around 6% of the labor force of the country, they make up around 20% of the unemployment datum. In contrast, while workers between 45 and 54 years old represent 30% of the labor force, they make up only 20% of the number of people unemployed. In relative terms, it therefore transpires that young people between 15 and 24 years old are decidedly over-represented in the total of those unemployed. In the absence of inequalities between the groups considered, there would in fact be a substantial parity among the weight that the groups exercise in terms of labor force and unemployment (Adda, Trigari, 2016).
The graph 1.3 in this case, however, considers total unemployment, and therefore also takes into consideration unemployment of short duration, less than a year. As a result, it is possible to see some buffering frictions that might excuse a higher youth unemployment rate, although it would be difficult to trace the observed difference to this source alone. An initial explanation resides in the fact that among the youngest age groups it takes time and several attempts before one finds a job that fits oneâ€™s expectations. And sudden changes of activity between periods of unemployment only worsen the negative datum of this group; moreover, above all in the 15-24 age range, those who enter the
A DUAL LABOR MARKET
labor market are on average less trained and therefore generate a phenomenon of adverse selection, which increases their difficulty in finding a job. This same typology of comparison used for age classes ends up being distorted also to the disadvantage of the southern regions, of women and of less skilled workers. Staying with the subdivision of age groups, if a percentage of the high level of youth unemployment can be explained in part by frictional dynamics, this possibility lessens if we look at the level of long-term unemployment, defined by Istat as more than
one year. Graphs 1.4 and 1.5 show how these data remain severely distorted to the disadvantage both of the young and of the southern regions; and in both cases the economic crisis has only increased the gap between the groups under consideration.
A datum for younger workers that remains in line with (and even better than) the other age groups has to do instead with how long it takes before finding a job, which for nearly half of those unemployed under the age of 24 remains less than a year. The same percentages considered for the whole of the population can for the most part be superimposed, with the datum of those unemployed for a period of less than a year slightly lower.
A DUAL LABOR MARKET
Lastly the employment situation for women. If Italy, taken as a whole, is characterized by employment aggregates lower than the EU mean – and still far from the pre-established objectives – the trend in women’s employment in our country is even worse, with a gap between European countries which has for years remained constant at around 15 percentage points. With regard to this unsatisfactory trend, if compared with our European partners, it is interesting to note how, within our country, in recent years the level of women’s employment has grown compared to that of men, with results that were clearly positive and satisfactory in northern and central Italy, above all if compared with the collapse of men’s employment levels in the south.
Duality in contractual dynamics As foreseen in the beginning of the chapter, the duality of the Italian labor market takes place also, in addition to the dynamics of unemployment levels, in the contractual typologies by which people belonging to different groups end up employed. And contract typology is very far from being a merely formal question since, beyond reflecting a segmentation of the market primarily by age group, as we will see at the end of the chapter this type of duality can also have important consequences. Coming to the data, figures 1.9 and 1.10 show the subdivision of the total of the employed by contractual typology, before (2007) and after the great crisis (2015), by age groups 15-24 and 55-64. The trends of the two groups are quite interesting. On the one hand, indeed, the economic crisis has had a negative impact in a profound way on the percentage of young people with permanent contracts, which has gone from 49.3% to 36.3%; the effect of the crisis on the same contractual typology for the over 55s has on the contrary been positive: while in 2007 those employed permanently were 60.3%, in 2015 this rose to 68.9%. Moreover, while the percentage of those in this group who are employed on fixed term contracts only grew by 0.2%, the increment of the same datum for the under 25s was decidedly higher, the equivalent of 12.7%. Lastly, if the percentage of self-employed workers remained nearly constant for the youngest, it reduced to around a third for the oldest workers.
The trend of fixed-term contracts diversified by age group therefore presents a clear picture of how the duality present in terms of different contractual typologies, as anticipated, often reflects and follows a segmentation by age range. And figure 1.11 represents this phenomenon in an even more plastic way. Leaving the age-range analysis aside for a moment, and considering the aggregate datum, it is moreover interesting to note how the percentage of people employed in Italy with fixedterm contracts is, overall, perfectly (and rather surprisingly) in line with the European mean and with other countries like France or Germany, and even decidedly lower compared to others like Spain. This positive datum does not however take account a high number of self-employed workers, decidedly over the European mean; and, frequently, this contractual typology is used by peo-
A DUAL LABOR MARKET
ple who are de facto actually employed as fixed-term dependents, with even less security. But how long, on average, does a fixed-term contract last? Graph 1.14 gives a very clear picture of how in the majority of cases temporary contracts are used for very short periods, less than a year in around 80% of cases. Such a use of fixed-term contracts is surely consistent with their aim and sheds light once more on
the real demand for flexibility coming from the market. Despite this, as is apparent also from the decidedly high number of businesses that decide to use this instrument of employment, the fixed-term contract is still, and frequently, used to reduce the costs of production rather than to confront the transitory needs of adjustment of the labor force â€“ above all in times of high uncertainty â€“ or to evaluate the suitability of the worker with respect to the position for which s/he was hired. As we will see, the single contract with increasing protection responds to both these needs in a way that is more efficient than the fixed-term contract.
The involuntary part-time worker Often taken little into account, the datum on those who work part-time not by their own choice can be considered a good indicator of the health of the labor market, and of the inequalities around the possibilities of entering it. Even in this case, in fact, the differences between the groups of workers considered above are relevant: if four out of five part-time workers between the ages of 15 and 24 are involuntary part-time workers, this proportion falls to one worker in two in the oldest age range of workers. This percentage difference between the two categories increased by 5 percentage points from the beginning of the crisis to 2015. And still, with regard to a markedly contained rise in the difference between involuntary part-time workers of both sexes, the gap increased significantly, tripling itself, between people with a high school diploma, or lower, and those with a degree, or a higher qualification. If in 2007 this difference was around 7%, last year it reached a level of 19%: while around one part-time worker in two with a university degree was in this working situation not by choice, this percentage rises to a level of 72% among less-qualified workers. If the datum considered by age range sheds light once more on the lack of uniformity of working opportunities that the market offers to younger and older individuals, we ought however to take into account how with the increase of age it is certainly understandable that the need (possibly for domestic reasons) to obtain part-time work increases and therefore the datum considered (involuntary part-time) decreases. It is however equally evident that such a high discrepancy between the age groups cannot
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be explained solely by the varying needs of workers during the course of their working life, but rather it represents a means of access to the labor market increasingly necessary for the younger groups, even though it is not the one preferred.
Some consequences This brief overview of our labor market has shed light on its significant duality and the different angles from which it can be analyzed. But what are its consequences? Apart from negative effects on workersâ€™ confidence and morale (which could lead to an increase in the number of discouraged people, for example), the first consequence of a type of temporary employment lies in the fact that such a contract type offers on average fewer possibilities of formation in the workplace. And this lack of continual formation, added to periods of unemployment, only increases the gap between the skills required by the business and those possessed by the worker, who thus sees the possibilities of being re-employed reduced further, once the term of the contract ends. Moreover, a temporary job, perhaps frequently punctuated by periods of inactivity, leads to workers having the prospect of lower pensions, because of the lower contributions made during their working life. Finally, taking an outlook more markedly macroeconomic, the fact that a consistent number of young workers are employed with temporary contracts of work brings a higher volatility to the level of youth unemployment, with a more marked decrease during periods of recession and a more rapid recovery, compared
to the other age categories, during an expansive phase (Boeri & Bentolila, 2010).
This type of segmentation that penalizes the youngest age groups risks in the long run having a consistently negative impact on the one hand on productivity (and therefore on the level of competitiveness of our businesses), and on the other, going hand in hand with it, a market that is not able to modernize its labor force and a market that, on average, will be less able to take advantage of the possibilities of development that the new technologies offer.
A DUAL LABOR MARKET
original photo by Niccolò Caranti
interview TITO BOERI Ph.D. in Economics at the New York University, Tito Boeri has been senior economist at OECD, consultant at IMF, World Bank, European Commission and at the International Labor Office. Today, is full Professor at Bocconi University and Scientific Director of the Trento Economic Festival. From December 2014 he is President of the INPS.
by Francesco Beraldi
Università degli Studi di Torino & Collegio Carlo Alberto
and Ivan Lagrosa
Università Bocconi & IGIER
Professor, the Italian labor market has been characterized for many years by a strong duality, with a large section of workers protected by permanent contracts, and others, contract and self-employed workers, left without protection, with lower salaries on average and worse overall working conditions. You have previously carried out studies on this subject, and illustrated the illusory (‘honeymoon’) effect of the reforms that created this duality, known in the literature as ‘two tier reforms’. Would you explain to us how, and based on what needs, a dual labor market comes into being? What is the ‘honeymoon effect’ that this sort of reform generates? In the past, before the interventions to liberalize the market, when a business realized that a mistake had been made in hiring a worker, once a permanent contract was given, that business was confronted with very high costs for a possible dismissal procedure. For primarily political reasons, there was therefore the need to intervene without weakening the position of workers who already had full time contracts. In this way many kinds of temporary work were introduced, and all the flexibility needs that businesses had were concentrated on them. The result was the creation of two parallel labor markets: an ultra-flexible market and a market that remained as rigid as it had been before. And as we recorded in the study you cited, this dualism of the labor market caused a range of effects, one of which saw all the risk of dismissal concentrated on the category of flexible workers. In some respects the presence of a flexible element in the labor force in fact isolates other employees from this risk. In the short term, during the transition to this new regime and in a period of improvement in the economic situation, duality has triggered an increase in the number of jobs, because businesses were able to hire new workers knowing that it would be easy to dismiss them subsequently whenever the situation deteriorated.
INTERVIEW TO TITO BOERI
The duality of the market seems to have hit the employment prospects of the younger generations significantly. ‘Scarring effects’, fewer opportunities for in-service training and the prospect of lower pensions due to lower contributions, are some of the features that distinguish the market today, for young people who are facing the world of work. And in the light of the studies you have made into the link between productivity and market duality, can you provide us with an overview of the inefficiency that this allocation of resources generates? The greatest inefficiency resides in the fact that there is a harmful entry into the labor market by people who today have more human capital to offer: the young. They are in fact the workers who remain at the margins of the market and who are hired with temporary contracts, the first ones that a business gets rid of as soon as the situation deteriorates, concentrating all the risk on them, as I said before. Moreover, the fact that there are temporary contracts doesn’t encourage either the business or the worker to make investments in the job, such as formation. All this, in the long term, has negative effects on the labor productivity. In this regard, our market shows a level of employment very far from the objectives set by the EU for 2020, with important territorial, gender and age differences. How is it possible to expand participation in the labor market, also taking into consideration present circumstances, in which new technologies seem to be pushing in the opposite direction? Today’s new technologies can also be an instrument for expanding participation in the labor market, because they make it possible to organize work much more flexibly, for example in terms of a worker’s timetable and the possibility of working at a distance from home. This flexibility can allow a greater involvement, above all for people who have different requirements, for example family responsibilities. Certainly, there is also the risk that some jobs, above all those that are more repetitive, could be substituted by machines or robots. This is certainly a problem when there is a productive structure that is highly specialized in jobs of this kind. Italy is a very vulnerable country from this perspective. If the country doesn’t succeed in restructuring itself quickly, there is the real risk that a range of jobs in small businesses could be substituted in some way because of technological advancement.
Many publications show a clear negative correlation between the rate of participation in the labor market and the rate of unemployment, exploding once again the idea that the number of jobs is fixed. This consideration is tied to two important phenomena that are taking place in our market: the enormous entry of foreign manpower and the raising of the pension age â€“ one of your more recent studies has to do precisely with the effect of the Fornero Reform on younger generations. What prospects do you see in relation to these phenomena? It is undeniably true that in the medium to long term the number of jobs is not fixed, which fits easily with increases in offers of work, and in fact they usually do fit, with increases in the levels of employment. It might however come about that, in a period of recession, when demand exceeds offers of work in determining levels of employment, a sharp restriction on pension eligibility might, in the immediate, short term period, have a negative impact on youth employment. This phenomenon seems to arise in the studies which we have recently conducted at Inps, and seems to be taking place following the introduction of the Fornero reform. The possible presence of these short term consequences is therefore an important datum to reflect upon. But in the long term it is absolutely true that an increase in job offers tends to create even more demand, and therefore does not necessarily push aside those already working. In 2008, in your book, among proposals that would be complementary to the adoption of the single contract, was cited the introduction of a guaranteed minimum wage. The political debate of recent years has often turned on this question, and those who are not really inclined towards its adoption emphasize the need to incentivize the creation of work, rather than give out subsidies of this kind â€“ for example with the proposal of the work of citizenship. The tradeoff between these two aims could be summarized by the comparison between active and passive policies in support of the worker/citizen. Do you think one measure is more effective than the other? The Jobs Act seems to move in both directions.
INTERVIEW TO TITO BOERI
I have always thought that there isnâ€™t any trade-off between active and passive policies; they are two policies that have to proceed hand in hand â€“ so much so that countries that make more active policies also make more passive ones. They are complementary because active policies serve to put pressure on the beneficiaries of passive policies and to ensure that they have the right incentives for re-entering the labor market. I think that in Italy there is the need to have social buffers of last resort for people who find themselves in a state of long term unemployment. In this sense it is right to have instruments like the guaranteed minimum wage, which affects transfers to the economic and capital situation of the family as a whole. But this should certainly be accompanied by a strengthening of the ability to propose active policies for the beneficiaries. The two things go together, they are not in opposition.
2 NEETs and the European labor market by Alessio Mitra Bath University
and Raffaele Tranchitella
Dottore commercialista, ODCEC Bari
ABSTRACT The economic crisis of recent years which involved most European countries placed a severe strain on the labor market, with inevitable repercussions on employment opportunities for the younger generations. The most alarming datum is that the level of youth unemployment in the Eurozone rose by several percentage points during the crisis, reaching a value of 24.6% in 2013. An army of invisible people is wandering around Europe. They roam without a predetermined goal, almost as if they have lost the compass of their identity, without having a clear idea of their rôle in society and, in particular, in the labor market. They are the NEETs (the acronym for Not in Employment, Education or Training), those young people who neither study nor work: a phenomenon that is constantly increasing and which, in recent years, has reached an emergency level that means we can speak of a ‘lost generation’.
The don’t work, study or train. Who are they? The term NEET comes from the acronym ‘Not in Employment, Education or Training’. The NEET generation therefore signifies that section of young people who are at one and the same time out of work, education and training. The terms was first coined in Great Britain in 1999 by the Social Exclusion Unit (SEU), the equivalent of the Commissione di Indagine sull’Esclusione Sociale in Italy. Among first intentions was the need to develop an ad hoc program that would allow entry into a course of instruction, training or work by young people between the ages of 16 and 18 who are at risk of dropping out of school and social exclusion. In order to respond in the most comprehensive possible way to the question ‘who are they?’, with the aid of the Istat data we have divided Italian NEETs on the basis of three factors of differentiation: geographic area, sex and qualification level. As can be seen in graph 2.1, over half of NEETs present in our country come from the South. This high figure is also probably influenced by the greater rootedness of the phenomenon of undeclared work in the southern regions: young undeclared workers, it appears from statistical discoveries, end up being identified as NEETs. In the North, on the other hand, it had a percentage value of 29%. Central Italy turns out to be the area with the lowest percentage of NEETs, around 15%. Although the distribution per geographic area appears to be fairly stable over time, it can be observed that during the crisis the percentage level of the South, while remaining high, decreased, while the level of the Centre rose slightly, and that of the North even more. (See figure 2.1)
But dividing the population by qualification level, we can see how graduates are less subject to coming into the NEET category: during all the years taken into consideration, their percentage always remains around 10% of the total.
NEETs AND THE EUROPEAN LABOR MARKET
In graph 2.2 it is interesting to observe how, during the entire time range taken into consideration, the weight of NEETs with a diploma increased, while that of NEETs without any qualification decreased. Indeed from 2010 those with degrees became the most representative within this category. Finally, looking at the distribution of NEETs by sex, we can see a slight prevalence of female NEETs, which however reduced slightly over the years.
What is the situation of the young in Europe? From the youth unemployment data we see that the European countries in the most problematical condition are mostly those of southern Europe. Heading the sad list of the highest youth unemployment level is Greece, with 48.6%; Spain and Italy follow closely, with 46% and 37% respectively. A direct consequence of this unequal distribution of youth unemployment within the panorama of the Old Continent is the different opportunities for independence of young Europeans.
NEETs AND THE EUROPEAN LABOR MARKET
According to Eurostat, the countries that exhibit a high level of youth unemployment are also those in which the young have more difficulty in undertaking an adult life independent of their nuclear family. The high values registered in the south and east of Europe are indeed probably due (apart from cultural factors) to the lack of a stable job.
What is the role of social protection? If we accept the idea that the duty of the State is not to create jobs, but rather to create the best conditions for employment to be generated by the economic-productive system, we must ask ourselves whether public expenditure is distributed in a way that favors the creation and sustaining of work. Welfare services designed for professional formation and temporary support in unemployment, with accompaniment/entry into the labor market, are key elements for efficient public spending for fighting unemployment. Entering into the functional reclassification of expenditure (Eurostat data), it turns out that, in Italy, spending on social protection has a significant impact on GDP, well over the European average.
Sweden and Denmark have similar levels of expenditure on social protection than Italy. These countries are typically
indicated as nations that are very attentive to the protection of workers. But actually it hides an illusion, represented by pension expenditure and a very high level of disorganization in assistance spending of Italy and typical of Mediterranean welfare programs. Spending on social protection is in fact constituted both by pension expenditure and welfare. Italy, like Greece, uses most of this spending to sustain the pension system, rather than to finance real activities that assist re-entry into the labor market. This spending is therefore unproductive, bringing about a scarcity of funds for re-entry and training projects, or for tax cuts for businesses that hire.
It is evident that expenditure of this type, which provides an immediate income, is more advantageous from an electoral perspective than investment in active policies, which only show results in the medium to long term. Although pension expenditure turns out to be efficient as income support, it is an instrument that doesnâ€™t have the slightest influence on the training of human capital and its development within the dynamics of work. On the contrary, it turns into an invisible barrier, which to be economically sustainable weighs on the productive system, further reducing the possibilities of job entry for the youngest.
NEETs AND THE EUROPEAN LABOR MARKET
Training citizens or workers? Having analyzed the support and social protection elements that might influence the entry of the young into the world of work, another fundamental element is the education system. Two factors that recent studies put forward as having a positive impact on the professional realization of young students leaving scholastic institutions are connections between school and industry, giving an incentive to the business mentality. In the case of Italy, the scholastic institutions are characterized by a significant disconnection from the world of work, often based on ideological prejudices. The objective of schools is often not that of forming individuals to be suited to the needs of the world of work, but to bring up citizens with a reflective outlook. For all that this is admirable as an ideal, the data contradict the real efficacy of this approach. In the latest ranking compiled by the OCSE about principal adult skills, Italy comes last, among the 24 countries analyzed, for skills in humanities, and next to last in mathematical skills. Connections between Italian schools and the productive world are rare, if not nonexistent. They are two parallel worlds, which have to talk to each other but speak two different languages. One example of this is the attempt the Renzi government made to introduce an alternation between school and work. Having generated public indignation, this scheme turned out to be difficult to apply because of the absence of the fabric of territorial relations it would have had to be based on. This absence of networks that would allow students to get to know and become known to the labor market before their studies finished therefore causes bewilderment among young people at the end of their school years. As a direct consequence, a dependency is generated on the use of ‘strong ties’, meaning those of family, rather than ‘weak ties’, those derived from personal acquaintances and friendships developed in the academic/working environment. The prevalence of the use of family relationships thus distorts the proper functioning of the labor market, particularly for young people, in that it undermines the principle of equal opportunity and makes an inefficient allocation of workers more likely. This mentality can be counted among the determining causes of the high numbers of NEETs in Mediterranean countries.
Another key element, as previously cited, is the typology of mentality with which human capital approaches the world of work. In the modern context it is ever more crucial, in order to gain and keep a competitive advantage, that an environment is created that is favorable to business activity that makes connectivity, creativity and innovativeness its fundamental basis. In order to pursue this objective the index of red tape (formal and taxation procedures needed to start a business activity) is crucial, as is the awareness of the social role played by the business world. According to a recent study produced by the World Economic Forum, Italy is among the least innovative and business-friendly countries of Europe. In this study business culture (defined as EEA) was measured not only on the ability to create new ideas and self-employed business opportunities, but also on the basis of workers being able to formulate and implement new ideas within the organization where they are already working. This more generalized context is dramatically reflected onto the business opportunities of the youngest. An investigation conducted by Gallup in 2011 in fact gave evidence that within Europe, Italian youth encounter the greatest obstacles and a superfluity of difficulties in realizing their own business idea (22%, as opposed to a European average of 13%).
Active policies and the young The condition of the young just described has distant roots and resides in a combination of cultural, demographic and institutional factors. The reforms of the labor market begun with the Treu Law in 1997 and pursued with a decision by the Biagi Law in 2003 significantly increased the level of youth employment. This employment increase was however characterized by insecure conditions in the different aspects of underemployment and involuntary part-time work and by the absence of a serious welfare policy capable of sustaining the newly created system. With the exacerbation of the crisis in 2008 and the inextricable dualism of insiders-outsiders that has characterized the Italian labor market for decades, the employment indicators for the younger groups deteriorated very rapidly. With the advent of the technical governments in 2011, the measures of ALMP were directed mainly
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towards employment, with the rest towards education and training. Despite these measures, a concrete policy of investment in young human capital never took off effectively. In recent years, the Decree Law no. 150 of 2015 on the subject of ‘Reorganizations provisions of the regulation of employment services and active policies’ addressed the last action of the reform envisaged by the Jobs Act. In this context, the execution of active and passive policies and their coordination took place, on the one hand through the reinforcement of the principles personalizing employment services and cross-compliance in the granting of benefits, and on the other with the introduction of the new instrument of relocation allowance. For the young targets, who are not particularly interested in active policies ad hoc, it was envisaged that particular emphasis should be placed on the project Garanzia Giovani (Youth Guarantee). This is a program of the European Union that is intended to insure that young people between the ages of 15 and 29 who neither study nor work have opportunities to acquire new skills in order to enter the labor market.
Guideline for the future ‘The future perspective of Europe depends on her youth.’ This is what the European Commission wrote in its report ‘Youth on the Move’, the initiative that primarily deals with relaunching youth employment in support of the ‘European Strategy 2020’. The International Monetary Fund estimates that, in the absence of concrete stimuli for relaunching the economy, a period of 25 years will be needed to reabsorb the devastating effects the economic crisis has had on employment.
The preconditions for realizing this recovery in the shortest possible time can be addressed by three fundamental strategies:
1. To incentivize the completion of courses of study and make sure that they address not only to competence skills, but also to social and life skills.
2. To improve and efficiently institutionalize the school-work transition mechanism, through a broadening of basic professional courses in secondary school. It is moreover necessary to make a thorough and rigorous selection of teacher training, together with substantial investments in the apprenticeship instrument, which needs to be relaunched powerfully, learning from the wealth of past errors and from the experience of countries which adopted them many years ago.
3. To incentivize active research in the labor market, through the implementation of serious and well-monitored policies, both ex ante and ex post, in a way that doesnâ€™t suddenly make such a precious asset as the human capital of the young obsolete. Towards this, it is necessary to invest a consistent amount of public spending in employment services and training. The Jobs Act envisaged the institution ANPAL (Agenzia Nazionale per le Politiche Attive del Lavoro â€“ the National Agency for Active Employment Policies): a positive, if hesitant, step towards the implementation of a system of policies that revolve around the efficiency and quality of employment services.
Sources Istat Eurostat European Commission Gallup.com
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interview ALESSANDRO ROSINA Alessandro Rosina is Professor of Demographics and Statistics at the Catholic University of Milan, where he is also Director of the Centre for Applied Statistics in Business and Economics. He has participated as an expert in various ISTAT and Ministerial Commissions, and he is a member of the ISTAT Scientific Committee on the Continuous Census. He has contributed to the ‘Mutual Learning Programme’ promoted by the European Commission on the theme ‘Targetting NEETs’ as the Italian expert. His analysis deals with themes like the transition to adult life, ‘degiovinamento’ (the decreasing proportion of young people in society), human capital and the international mobility of talents, domestic policies, welfare and social innovation, longevity and the new stages of life.
by Mariachiara Bo and Adele Ravagnani
Università degli Studi di Torino & Collegio Carlo Alberto
We would like to ask you first of all to introduce us to the phenomenon of the NEETs: who and how many there are and, above all, why they represent a concern for our country. The acronym NEET (Not in Education, Employment or Training) was coined in the United Kingdom towards the end of the last century, but its general use began in 2010 when the European Union adopted the percentage of NEETs as a point of reference on the condition of younger generations. Compared with the ordinary percentage of youth unemployment, this reference comprises all inactive young people, not only those who are unemployed in the strict sense. One of the merits of the NEET category is the inclusion not only of those who actively seek work (technically ‘unemployed’, part of the ‘labor force’ together with the employed) but also of the ‘inactive’. This latter group includes both the ‘discouraged’ (or those who no longer seek work, but would like to work) and those who don’t want to work. The fact that these last sub-categories (those who are neither part of the labor market in the strict sense, nor of the potential labor market) are also included in the percentage of NEETs is the most open to criticism. It is however important to be aware that in the category of those who are not presently interested in a job, there is also the factor of undeclared work and those, above all women, employed in informal activities of care that could be included in the labor market with adequate means of balancing family and work. With respect to the scale of the phenomenon the Eurostat data show that: Italy had higher levels than the European average before the recession (18.8% in 2007 as opposed to the 13.2% of the EU 28); the phenomenon was largely exacerbated for us during the crisis (a rise to 26.2% in 2014 as opposed to 15.4% of the EU 28); our decline was slower in the exit from the crisis (around 22% in the first half of 2016, while many countries of the Union had already returned to pre-crisis levels). At present in relative terms we are second only to Greece, while in absolute terms we are the biggest producers of NEETs in Europe with over 2.2 million under-30s who neither study nor work (but this rises to 3.3 million in the 15-34 age range, an ISTAT datum of 2016).
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What are the economic, social and cultural contexts of NEETs? Do they constitute a diverse group from this perspective? The high number of NEETs in Italy relative to other advanced countries is partly due to lack of skills and social disadvantage, with the risk of sliding toward a state of marginalisation both of new school leavers and new graduates who have good abilities but take a long time to find a place in the labor market, because of the difficulty in evaluating human capital in the Italian productive system. But those most at risk of remaining trapped in this state are those who come from families lacking cultural resources and from contexts that are socially and economically deprived. Even the overprotection of parents towards their children heightens the risk of entrenchment in the situation of NEETs. During your presentation at the Talks Slidingdoors 2016 at Verona, You made reference also to another category of youth, the ‘expat’: under-35s who seek opportunities to study and work abroad. Is there a correlation between this phenomenon and that of the NEETs? In your opinion, would it be simplistic to draw the conclusion that, considering the high level of Italian youth unemployment, the 30-35s have no other choice than being either NEETs or ‘expats’? More than in other developed countries, young Italians find themselves having to choose whether to remain in their own country and adapt themselves to the downturn and what goes with it (low employment levels and the risk of becoming a NEET) or choose to go abroad, to become an ‘expat’ in order to realise their ability to the full. This is even more true in the southern regions. If on the one hand in Italy investment in the young leaves much to be desired, on the other hand families have been transformed by social buffers. Is the problem behind this purely economic/legislative, or can it be framed in a broader and more cultural context? The fact that the phenomenon of the NEETs has been able to grow so disproportionately without already exploding like a social bomb, is also due to the presence of a cultural model that makes the prolonged dependence of adult children on their parents acceptable. In other countries it is unthinkable to remain living
with one’s parents up to the age of 30, but in Italy it is considered to be normal. At root there is a network of reasons both cultural (strong family ties of mutual solidarity) and structural (the deficiency of the welfare system for the young, in particular for housing and active income assistance in times of unemployment). But it is true that the long passive dependency on parents by 30 year olds is becoming increasingly unsustainable. NEETs is not however solely an Italian phenomenon, but a European one. What policies have the other member states of the Union implemented to incentivise the young to enter the world of work and training? The factors that explain the high number of NEETs in Italy compared to other countries in terms of policy are essentially three: A) Many young people find themselves, when they leave school, lacking adequate skills and without the experience required by businesses. B) Many other young people, although they have a higher level of training and high potential, don’t find positions at the level of their ability and expectations. C) Finally, there is a lack of effective ways to direct and support young people in the search for work. We are, in addition, one of the European countries that invests less in third-level education, in active policies for work, and in research and development. Italy is benefitting from the funds of the Youth Guarantee, the European plan to fight youth unemployment, which envisages funding for member states with levels of unemployment above 25%, to be invested in active policies for direction, training and formation, and entering work, to support young people who are neither involved in a work activity nor placed in an academic or training course. Have concrete improvements followed such funding for the category of the NEETs? The principal measure put into play in Italy to reactivate the NEETs is the plan ‘Youth Guarantee’, financed by the EU and put into effect in May 2014. What was proposed for the under-30s who subscribe on the dedicated portal – within four months of leaving education or at the beginning of unemployment – is an offer of work, internship, or other training that is ‘qualitatively’ satisfactory. This plan has obtained results below expectations. When it
INTERVIEW TO ALESSANDRO ROSINA
was implemented there were about 2.4 million NEETs, and in the first semester of 2016 it was still well above 2 million. Those subscribed to the portal are around one million, but only a minority have received an activity that has led to a stable entry into the world of work. Moreover highly qualified and active young people are over-represented among those subscribed, and they have often not received offers of work at the level of their expectations, while those with lower qualifications and less social support have remained largely below the radar, although they are the ones who could gain the greatest benefit from the plan. ‘Youth Guarantee’ however has left at least two positive legacies. The first is the greater awareness and determination to proceed towards an enhancement of services for efficient employment in the whole national territory. The second is the numerous initiatives working together with Youth Guarantee that arose spontaneously on the ground, and in collaboration with non-profit organisations. In ‘NEET: young people who neither study nor work’, you highlighted how instead of taking the new generation into consideration as the front line of change, there is a tendency to relegate them to the back bench; what do you propose that would raise them to the point of ‘playing in the front line’? In addition, what are the costs, including social ones, of the defensive scheme adopted up to now? As various studies have recorded, the negative fallout is of various types: lower tax revenues, higher costs for social benefits, social unrest. The social cost is estimated by Eurofound to be at 1.2% of European GDP, which rises to around 2% in Italy. Then there are individual costs too, both material and psychological, which are hard to quantify. The phenomenon should not however be interpreted only in terms of cost, but also as a lost opportunity for the national system to put its most precious and dynamic component in a position to contribute fully to the production of growth, both present and future.
The young who are often described by leading figures as â€˜big babiesâ€™, choosy and fussy, say, according to statistics, that they want take a prominent place in their day, and believe that they are the driving force that can make the difference, bringing a positive change. According to you, which of the two perceptions approximates better with the reality of the facts? And how is it possible that there is a dichotomy so pronounced between how the under-30s see themselves and how they are viewed by older generations? The reasons for this dichotomy are various. The world changes quickly and becomes ever more complex. What the parental generation value counts increasingly less for their children. Above all in countries like Italy, which is poorly equipped to interpret and manage the change, the younger generations want to grasp the new opportunities of their own time, but are not aided by adequate means of doing so. The older generations on the other hand continue to interpret reality with outdated thinking, confusing the potential and the fragility of the younger generations, not putting them in a position to give the best of themselves, so that their failure becomes a negative self-fulfilling prophecy. The youth of today want take a prominent place in the change both at a personal and level, but often they donâ€™t have the necessary abilities and skills. What are the skills that young people ought to acquire and where should this learning take place? One of the key principles is an upward shift in the relationship between the evaluation of human capital and the competitiveness of businesses, at the centre of which is the improvement of the quality of job offers and the required skills. It is clear that young Italians face inefficiencies in the world of work but also have an increasingly powerful understanding of some of their own weaknesses, which limit their ability to grasp to the fullest extent the opportunities that the market offers and, even more, to prepare themselves to be ready for the qualitative changes in the productive system of the next decades.
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Staying with the theme of the reform of the Renzi government, do you think that the alternation between school and the world of work introduced by the ‘Good School’ policy can promote entry into the world of work? A research study recently published by the Toniolo Institute in collaboration with McDonald’s shows that the understanding of the importance of these sorts of skills is very strong, not only among businessmen but also among young people themselves. According to the young people interviewed, the alternating projects between school and work, which envisage a concrete experience in businesses, can bring about wide-ranging benefits. Not only students of technical institutes think this, those of humanities-based schools do too, with a percentage of around 88%. The percentage rises further to 93% among those who have already encountered the world of work and therefore have experience of useful skills on the ground. More specifically, the soft skills that we expect to improve are initiative, teamwork, problem solving, self-sufficiency, and knowing how to make decisions. These same young people are however also aware that such projects on their own are not enough to fill the gap in terms of what is asked for in the world of work. Efficacious informal contexts that complement and reinforce life skills are also experiences external to school and business, as indicated by a research study promoted by the National Youth Agency. Good examples of this are voluntary work in large events and the European Civilian Service (‘Servizio civile europea – SVE). All these programmes should however allow effective access to all, and a measurable improvement of the skills acquired, in order to become part of a concrete process of repositioning the younger generations to the centre of the country’s development.
In an article in Il Foglio of 1 February 2017 you wrote: ‘What makes tomorrow different from today is above all the younger generations. To make tomorrow better than today requires a reformism capable of assigning them a central rôle in the process of development.’ Do you think that the Jobs Act is compatible with the substance of this sort of reformism? The Jobs Act is a step forward towards greater stabilisation of the working pathways of the young, but it is certainly not able to put the younger generations at the centre of our model of development. This is also because there is no real model of development in our country. What do we want to be ten years from now? What are the strategic sectors we should invest in? What do we do so that those who are being trained today will become indispensable to expanding these sectors? Start-ups have become a fundamental reality of today’s economy, although in Italy their diffusion is not widespread and is limited to a few centres. What are the measures that would allow our country to become a land of opportunity? Within the Jobs Act are there incentives to become an independent entrepreneur? In recent years a lot of attention had built up around start-ups, the incentive to become independent entrepreneurs, and the initiatives that promote the skills of success. We ought though also to bear in mind the risk that the phenomenon might grow quantitatively without improving the conditions of the younger generations overall. It is not enough that ever more young people are incentivised to try. All the surrounding conditions have to improve also so that a good circuit is triggered between innovation, high quality employment and concrete growth in an ever more competitive world. One can then learn more from instances of failure than of success. These can tell us much about what road we ought to take to give real and effective support to the growing tendency toward enterprise in the younger generations. It is not only the lack of funding and excessive bureaucracy, but also a shortfall in training and low levels of investment in research and development that make the experience of the young Italian potential start-upper more difficult and frustrating. How are we assisting young people who fail having made the attempt to move into an experience that is useful for their future path? There are many of these whom we praise in newspapers and conferences. It is with
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them that the true challenge is overcome. Otherwise we could risk creating an elite and self-referential world, one with great resolve and enthusiasm within itself, but fundamentally disconnected from everything else. If the objective is not only the success of a few hundred or thousand chosen young people but the real growth of Italy through the younger generations, we ought to start from startups but think of them as part of a wider project of reinforcing the connection between the ability and skills of the young and the opportunity of enhancement in the world of work. Individual experiences of excellence have never been wanting in our land. But, even in the case of the young, concentrating only on these will not help us make the real leap of systemic quality that for too long is still wanting.
3 The South: crisis and development perspectives by Davide Maramotti
UniversitĂ degli Studi di Torino
ABSTRACT The present work is intended to offer to the reader an historical and present day overview of the socio-economic conditions of the regions of the southern Italy. To make reading it easier the accuracy of the data has taken priority over content that is more strictly technical. The study is divided into three parts: the introduction traces the development of the south from the middle of the 19th century to today; the central sections analyze the present situation in more detail, concentrating on various socio-economic points, looking for a possible solution that would give a new impetus to the development of the macro-region being dealt with; the final section is intended to be a reflection on the possibility of reforming the institutional system so that it could benefit the south.
Introduction In the economic and occupational panorama of Italy, a central point that attention should be focused on is without doubt the backwardness that characterizes southern Italy. In order to understand its origins and characteristic features it is necessary to trace its history, from Unification to today. In the first twenty years after Unification, the regional dispersal of income in Italy remained low, both in terms of the values it would reach afterwards, and also compared to the disparities observable at the time in other European countries with similar levels of development. This initial situation can be better understood if one takes into account that around 1861: – no Italian region had yet embarked on massive industrialization, and in agriculture, the dominant sector, productivity did not vary greatly between regions; – the starting levels of commercial relationships between the geographical areas of the country were very modest, and their growth was hindered by the backwardness of the transport systems; – there were important urban areas in both in the North and in the South, typically coinciding with capitals or historical commercial hubs. The relative uniformity of income per capita did not however mean that the living conditions of the population were similar in the different regions. In 1861, the percentage of the population classified as poor was at 52% in the South and 37% in the Central North, and in the South life expectancy at birth in 1871 was two years and two months less than in the rest of the country. Even wider was the gap in the prerequisites for industrial development. The presence of key factors, like the supply of fundamental resources (water) and proximity to European markets, was decidedly more advantageous in the North. The South was moreover disadvantaged in terms of other prerequisites, like infrastructures, the availability of human capital and the question
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of law and order. It was therefore the advent of industrialisation that accentuated the North-South gap in economic development. In addition, Unification brought about the consolidation of the public debt, of which around two thirds came from Piedmont. For the net cost of the War of Independence, according to the Bank of Italy, the debt per capita was 188 lire in Piedmont against 84 in the Kingdom of the Two Sicilies and 55 in the Grand Duchy of Tuscany: unification of the debt therefore prompted a transfer of material resources from the South to the North of the country. The same thing happened through taxation, which was particularly low in the South before Unification, as was public expenditure. Between the final decades of the 19th century and the advent of the fascist regime, many economic policies were put into
effect to resolve the southern problem, but none was ever really effective, and in the period between the two world wars the situation only worsened. Autarchy damaged the South, determining, in 1951, new ‘conditions of departure’ which were in many ways worse than those of 1861. From 1951 on the other hand, for around twenty years, the South enjoyed a period of exceptional development: in the period of greatest overall growth in Italian economic history, for the first and last time since Unification, the gap between income in the South and Central North was significantly reduced. This recovery was due to an increase in productivity and a relative decline in the population. The broadening of the South’s industrial basis however proved to be insufficient for a number of businesses and it did not withstand the powerful changes in the competitive scenario that arose from the ’70s. The decline in the population, brought about by massive movements of people to northern Italy, offered important opportunities to the inhabitants of the South, but at the same time deprived these regions of many of the most resourceful elements of their labor force. Emigration therefore contributed to the weakening of the fabric of specific types of expertise, in crafts and industry, that had roots in the South from before the war and which could have contributed to development. For these reasons, from the ’70s to today, the gap between the South and the rest of Italy has increased again.
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A great obstacle to entrepreneurship continues to be the presence of many businesses with reference to public holdings (national, regional and local). The dismantling of some of these in recent years has brought about the collapse of a traditional prop to the southern economy. It is therefore possible that public intervention contributed to widening the economic and social gaps between the South and the rest of the country.
The present situation 2015, the last year for which we have complete data, was without doubt exceptional for the South: indeed it halted a collapse in GDP that lasted seven years, and growth was even greater than that recorded in the Central North. The increase in GDP in the regions of the South was aided by some distinctive conditions: a particularly good agricultural year and the growth in services, especially the tourism sector. The net external demand also had a positive effect, with a rise in exports to the rest of the world of 4%. This outcome only partially reduced the depletion of the Southâ€™s resources and productive potential. In fact the heavy fall of investments structurally reduced industrial capacity over time, which therefore lost competitiveness. The South thus remains in a situation characterized by low productivity, low growth, and lower overall welfare. The considerable recovery in employment that began in Italy from the second half of the â€™90s and reached its peak in 2008, stopped in the South in the first years of the new millennium. From 2002 records show a significant stagnation in the southern labor market, which was followed by inevitable collapse during the crisis. Whereas the 1992 level of employment in both macro-areas was 100, today it stands at 112 in the Centre North, with the South a little over 90. The response strategies (characterized by closure and protectionism) to strong international competition for products with a low innovation content, generated a growth in untrained employment and the worrying phenomenon of a downgrading of employment. Connected to these phenomena are: the slowing of employment growth in big businesses that are characterized by a more highly professionally qualified labor demand, and the tendency of the productive system to maintain competitiveness
more by lowering costs than by a growth in productivity with technological innovation. The explosion of forms of part-time work doubtlessly had an impact on these dynamics: one of these was the use of vouchers for ‘occasional work’ – in 2015, 88 million out of 1.38 million workers received these. Although only a quarter of these were used in the South, this is the area where the greatest increases were recorded. Putting all this evidence together leads to some problematical considerations: the intervention in employment, represented by the combination of the Jobs Act and the reduction in contributions, although registering a few positive signs, did not succeed in changing the prevailing behavior of businesses, which still tend to favor fixed term and atypical employment as the first form of hiring. The most serious aspect of the bad condition the economy is heading towards, not only in the South but in all of Italy, is youth unemployment. Italy has levels of youth employment lower than all the other countries. The South in particular comes in at the bottom of every European ranking, registering a youth situation in the employment market worse not only than Spain, but even Greece. Even the statistics concerning professional training are negative: the most recent years were characterized by the reversal of the process of accumulating human capital that Italy was approaching (the South included) compared to the levels of tertiary education in the main European countries. The indispensable precondition for development is the protection of the rule of law which, in the South, means the fight against corruption and combatting Mafia-type organized crime. The stringent conditions for access to credit, exacerbated during the crisis, represent a further weakness that heightens the vulnerability of southern businesses.
Incomes and work According to the latest available ISTAT survey, in the report ‘We Italy, 100 characteristics for understanding the country we live in’,
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the per capita GDP in the South (€16,761) is around half that of the North West (€30,821). With regard to the labor policies projected for 2017, the reduction in contributions for those newly hired on permanent contracts in the South, foreseen in the Jobs Act, will only count for youth and the unemployed. The reduction in contributions will be complete, up to €8,060, for 12 months for entrepreneurs in the southern regions who hire young people between 15 and 24, and those over 24 who have been unemployed at least six months, on permanent contracts or in apprenticeships. In this connection it is useful to reflect on the interaction between unemployment and irregular sectors, and on the longterm effects of the economic crisis with regard to these two variables. In the South, irregular work has contributed to absorbing (at least partially) the effects of the economic crisis on the fall in employment. Nevertheless, and precisely for this reason, the groups usually already at the margins of the labor market risk entering it in an irregular way, with negative effects in terms of social and insurance protection, and of the under-use of human capital – thinking also of the lack of ongoing training in these types of work. Tied to employment policies are European funds, from which the South benefits greatly. The bank of Italy provides data about the financial progress at the end of 2013 of around 750,000 projects jointly funded by European funds, with public resources equal to over 50 billion euros. The data confirm a financial progress that is low overall, better in the regions of the Central North (65.5%) compared to those of the South (50.1%); at the same time they confirm that the average extent of interventions is higher in the South. The main conclusion that one can draw from this is that the inferior financial progress of the South can be entirely explained by the worse performance of public works in these regions. In fact, at the net balance of public works the gap between the South and the Central North closes (70.1% compared to 70.9%). For the 18.8 billion euros for projects in the South and for the 10.6 billion for those of the Central North that aren’t public works, the speed of execution is the same. It is therefore the execution of public works that makes the difference; and public works in the South
make up much more of total planning than in the Central North (50% and 19.8% respectively): 18.8 billion of financing compared to 2.6 billion. It is therefore necessary to focus attention on the innumerable weaknesses that arise from the execution of public works in the whole country, and particularly in Campania, Calabria and Sicily, connected both to their size and the multiplicity of bodies executing them, and their managerial abilities. The policy of public spending, both Italian and European, should therefore be rethought, to the advantage of the poorer areas, which are those of the South.
Community funding For the period 2007-2013, around 28 billion euros were allocated to Italy, while for the period 2014-2020 the figure rose to nearly 33 billion. To these sums should also be added those derived from national joint financing, which amounts to around 27 billion for the period 2007-2013 and expected to be around 20 billion for the present period. Most of these resources are directed to the southern regions, since they come into the category of the â€˜least developed regionsâ€™. Given the important stock of resources put into play, it would be necessary, and perhaps best, to rethink the use of funds from a perspective of fiscal easing aimed at the underdeveloped regions, by means of reductions in Irap (regional tax on productive activities), Ires (tax on corporate earnings), the tax wedge, IMU (property tax) on business and commercial property, which would have a major impact on growth. This measure would give relief to existing businesses, and above all would be a vital incentive for those intending to invest in the South. Even the young would benefit, having more possibilities to undertake a work activity in their own locality.
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Proposals for development After this long examination of the problems of the South, it will now be interesting to mention a serious and complete proposal, formulated a few years ago by the Bruno Leoni Institute. According to the Research Institute of Turin, the South should abandon the path of welfarism, implementing the so-called ‘No Tax Region’: choosing the road of competition would put it in a position to become one of the most dynamic areas in the Euro-Mediterranean zone. The proposal consists of abolishing Ires for ten years for businesses that invest in the South, with the eventual prospect of a reduced rate for a period of a further five years. Those who invest in the South won’t pay taxes on profits. The fall of fiscal revenue would be financed by the abolition of an equal amount of business subsidies. The reduction of fiscal pressure is a lever for attracting private investments, but it is above all a clear message of ‘abstention’ by politics and bureaucracy from economic dynamics.
Federalist Hypothesis The above proposal forms part of the present scope of the constitutional order. It might be interesting, though, to try to reflect on an alternative hypothesis: a federalist reform. From the beginning of the Risorgimento, the political/cultural contribution of the federalists (for instance Carlo Cattaneo or Giuseppe Ferrari) has been important. Federalism was put forward, and is still being put forward, as a possible solution to the southern problem. It would lead to strong competition between local authorities and between regions, which could on the one hand reduce taxes and public spending to attract people, and on the other to create a simple, streamlined bureaucratic system to attract business and capital. There has never been any real federalism in Italy, therefore it is sensible to ask if the implementation of fiscal federalism could bring advantages over the present system. The results of
the present model are under everyone’s eyes. A vicious circle, once triggered, is always hard to stop, but even more so in a territory that lives (or survives) on welfarism and cronyism, fostered by state transfers that absorb resources coming from other regions. In this economic system, more empowerment in terms of fiscal autonomy could be a significant incentive for the executive class to act knowingly and seriously, not being able to count on a continual flow of funding from Rome or Brussels.
Sources Toniolo G., (edited by) L’Italia e l’economia mondiale, Dall’ Unità ad oggi, (2013), Venezia Rapporto Svimez 2016 sull’economia del Mezzogiorno L’economia delle regioni italiane. Dinamiche recenti e aspetti strutturali, (2014) ‘Condizioni economiche delle famiglie’, su Noi-Italia.istat.it - bit.ly/2r8w6N1 ‘Poletti: dal 1° gennaio 2017 decontribuzione totale per le assunzioni di giovani e di disoccupati al Sud’ su Lavoro.gov.it, 16 novembre 2016 - bit.ly/2fYr3Z0 ‘La rivincita del Mezzogiorno parte dalla NoTax Region’, su Brunoleoni.it, 28 agosto 2009 - bit.ly/2r6T1Y4
THE SOUTH: CRISIS AND DEVELOPMENT PERSPECTIVES
4 The reforms of the labor market in Italy, from 2000 to the Jobs Act by Umberto Rogna Maggi
UniversitĂ degli Studi di Torino
ABSTRACT The Italian labor market has been the subject of various reforms in recent years, whose common denominator has been the aim of increasing efficiency. The objective of this chapter is to outline an excursus of them, highlighting the changes introduced and proposing a first evaluation of their effects. The reforms to be examined are the Biagi Law, the Fornero Law and finally the Jobs Act. The first law aimed at making the labor market more flexible, introducing new contractual forms; the other two, on the contrary, had the objective of stabilizing workersâ€™ positions, overcoming the segmentation of the labor market between protected and unprotected workers.
THE BIAGI LAW The Introduction to the Reform The bill that took the name ‘Biagi Law’ was presented to Parliament in 2001, with the intention of making the labor market more efficient and reducing the gap between the percentage of employed people in Italy and those foreseen for the European targets. The contents of the Law falls in the category of draft reforms proposed by the ‘Libro Bianco sul mercato del lavoro in Italia. Proposte per una società attiva e per un lavoro di qualità [White paper on the Italian labor market. Proposals for an active society and quality of work] published by an employment group coordinated by Maurizio Sacconi and Marco Biagi. This reform was effected definitively with the approval of the Senate in 2003, to then be submitted to some variations under the second Prodi government in 2004 and modified again in 2008 by the fourth Berlusconi government.
The Contents The reform introduced new contractual provisions like collaborative and project contracts (known as co.co.pro), supply, which substituted temporary work, and other typologies like the apprenticeship contract and the short term contract. Moreover, reductions in pension and assistance contributions were envisaged in favor of employers who employed women. The Biagi reform also introduced ‘certification’, a special procedure finalized to certify that the contract that one wished to sign had the formal and content requisites required by law. It was a voluntary procedure, which could only be executed at the request of both parties (the future worker and employer), on all the contractual typologies, and it had the aim of reducing judicial disputes about the qualification of some employment contracts. If the declared intention of the introduction of this instrument was to guarantee greater certainty of the law, reducing judicial disputes on the qualification of employment contracts, it
THE REFORMS OF THE LABOR MARKET IN ITALY, FROM 2000 TO THE JOBS ACT
is also evident how this represented a valid method to incentivize resorting to flexible labor relations, for which it indeed guaranteed greater certainty.
The effects on the labor market The introduction of this Reform continued the tendency, also prevalent at European level and already initiated toward the end of the â€™90s, to reduce protection for workers and incentivize flexibility in working relationships, with the aim of increasing employment.
The law seems to have produced its effects in a relatively brief timeframe: after the first years from its introduction, levels of employment, driven by fixed term contracts, did register a strong increase. In 2006, Istat certified a decrease in the level of unemployment, which thus returned to the levels of 1992. An increase was also registered in female employment. These were the years in which the increased flexibility of the market brought about consistent increases in employment, greater even that tho-
se anticipated. The ‘honeymoon’ effect, which is signaled in the opening chapter and in the interview with Prof. Pietro Garibaldi, would then end with the arrival of the Great Crisis. Critics of this reform were not lacking however, from the time of its approval: in particular, the implicit assumption of a correlation between flexibility and employment was particularly criticized, the promoters of the Biagi Law being accused of having destabilized the world of work without a solid theoretical and empirical basis about the opportunities of these measures.
THE FORNERO REFORM The inauguration of the Monti government In November 2011, Silvio Berlusconi, already politically weakened by personal scandals, put in his resignation as President of the Council of Deputies following growing pressure and the instability of the financial markets. Substituting him was Mario Monti, heading a ‘technical’ government that benefitted from a large parliamentary consensus. The Monti government is remembered primarily for austerity measures and for the reform of pensions that took the name of the then Minister for Employment, Elsa Fornero.
The approval of the reform Among the measures taken by this government was the Labor Reform, approved in June 2012. This law did not receive the consensus of all the political parties: some exponents of the center right refused to vote on it, while there were many criticisms from the left, in particular because of changes to the legislation on dismissals, judged to be liberalist and therefore harmful.
THE REFORMS OF THE LABOR MARKET IN ITALY, FROM 2000 TO THE JOBS ACT
However, despite this disapproval, the law was passed without encountering particular obstacles: despite the frictions within the majority and demonstrations organized by the trade unions, the numbers in Parliament were sufficient to guarantee its approval.
The contents Law 92/2012 can by summarized in three points:
1. The rationalization of existing contractual typologies was put in place, with the objective of incentivizing the use of permanent contracts. Apprenticeship became the privileged contract for access to the world of work and its possibilities of use were consequently widened.
A redistribution of employee protection was also introduced: on the one hand it countered the improper use of outgoing flexibility, on the other it modified Article 18. In particular, leaving the discriminatory dismissal guidelines unchanged, it modified the disciplinary and economic dismissal regime. In these last two cases a punitive regime was adopted, differentiated according to the gravity of the cases where unlawful dismissal is confirmed: in the most serious cases reintegration is called for, while for less serious cases a compensatory payment is envisaged. Finally, a specific procedure was introduced for judicial disputes around legal challenges against dismissals.
2. The law makes a wide revision of the instruments for income protection, in the first place through the creation of a single social insurance (ASpI) which combines mobility allowance and unemployment allowance. The new buffer widens both the field of beneficiaries and care: in particular as well as the extension to categories previously excluded â€“ like apprentices â€“ it provides insurance cover for those who enter the labor market for the first time and those who have had short periods of employment. ASpI
substitutes the supplementary employment benefit (CIGS, Cassa integrazione straordinaria) which was used to cover requirements not connected with preserving jobs. Finally, Cassa Integrazione Ordinaria was confirmed [this supplements or substitutes income in cases where a worker is suspended or demoted for temporary reasons that are not the fault of either the employer or employee].
3. Finally, the law introduced instruments intended to reinforce the active employment policies and the rôle of employment services, for which essential levels of service consistent throughout the country were identified. In addition, it envisaged incentives for increasing the participation of women in the labor market – for example with the introduction of regulations against ‘blank resignations’ and measures supporting parenthood – and supporting the oldest workers.
Effects on the labor market This labor reform was introduced in a period of prolonged recession, and one must keep this factor in mind when measuring its effects. Analysing the percentages of levels of variation in contract initiations we see how, following the reform, apprentice contracts, sub-contracts and temporary contracts decreased – the last undergoing a genuine collapse. On the other hand, per-
THE REFORMS OF THE LABOR MARKET IN ITALY, FROM 2000 TO THE JOBS ACT
manent contracts increased and, so did fixed term contracts, if only slightly. The contract initiations for permanent and fixed term contracts lead one to suppose that there was a movement from some more flexible contract forms to more stable ones, but with an initiation volume in decline overall. Various econometric analyses conducted on the time series of initiations, of total payment between initiation and cessation and, finally, of the employed, would confirm the negative association between the reform and the dynamics of the overall volume of employment. Although we canâ€™t draw definitive conclusions, the effect of the reform seems to have been double: on the one hand, it produced a mechanism of substitution between the different forms of work, reducing the distortions and abuses in the use of some atypical contracts; on the other, it dis-incentivized businesses from hiring new workers or renewing contracts coming up for expiry.
THE JOBS ACT The approval process, for and against In January 2014 the Secretary of the Democratic Party, Matteo Renzi, launched the process of a reform of the labor market that introduced the single contract with increasing protection, a simplification of existing rules, a change in union representation, a universal unemployment allowance and a National Employment Agency. With the birth of the Renzi government, the reform was introduced via two provisions: the so-called Poletti Decree (from the name of the Minister of Employment in March 2014), and a law in December of the same year, that served to complete the plan. The mandates were implemented the following year through the enactment of legislative decrees. The labor reform not only caused various protest demonstrations by trade unionists, but also frictions within the principal party of the majority, the PD: in fact the left wing of the party dismissed the Jobs Act as excessively favoring businesses. A nega-
tive opinion of the law was also taken by the opposition parties. In favor of the reform were the majority of the Democrats, the centrists, and Confindustria [the Italian employersâ€™ federation and national Chamber of Commerce].
The Reform The Poletti decree A ceiling was set on the number of fixed term contracts a business could agree. The employer could enter into fixed term contracts up to the limit of 20% of the number of workers hired full time on the first of January of the year they were hired. For national collective employment contracts, entered into by union members comparatively more representative, the possibility remained of identifying different quantitative limits for the recourse to fixed term contracts. For businesses that do not respect the 20% limit an administrative sanction against the employer is envisaged.
The right of precedence of women in maternity leave for hirings by the employer was reinforced for the 12 months following, in relation to the same tasks of the fixed term contract.
With regard to the stabilization of the apprentice contract, the Decree Law reduced the obligations envisaged by the previous legislation for new apprentice hirings (the obligation to stabilize 30% of apprentices in businesses with more than 10 employees). On the one hand, the application of the regulation was limited to businesses with more than 50 employees, on the other hand the percentage to be stabilized was reduced to 20%.
THE REFORMS OF THE LABOR MARKET IN ITALY, FROM 2000 TO THE JOBS ACT
The enabling act and implementing decrees With the contract of increasing protection the guidelines for dismissal changed. For economic dismissals the possibility of returning to the job was excluded. Instead a certain economic compensation that increased with seniority was envisaged. The right to reintegration was limited to invalid and discriminatory dismissals, and to particular cases of unjustified disciplinary dismissal. Certain terms for appeal against dismissal were also envisaged.
The system of social insurance was reformed: the NASpI was born (taking the place of ASpI), which provides an economic benefit for workers who find themselves unemployed for reasons distinct from their wishes. An unemployment allowance for those who have used the entire duration of their NASpI without having found a new job and find themselves in need was introduced. The allowance is paid monthly for a maximum duration of six months and its amount is equal to 75% of the last NASpI benefit received.
A single agency for inspections of work was set up, called the Inspectorate of Employment, which undertakes inspections previously carried out by the Territorial Labor Managements, by INPS and INAIL.
Measures addressing the protection of maternity and favoring the reconciliation of life and work were introduced, to guarantee adequate support for parental care.
The guidelines of many employment contracts (project collaboration, supply, on-call work, ancillary work, apprenticeship, part-time) were changed. These measures also were aimed at making permanent employment contracts the main form of working relationships.
Various novelties were introduced about tasks and jus variandi held by the employer: the possibility was introduced of changing tasks for all the tasks coming into the same level and legal category (not only for ‘equivalent’ tasks); it became possible to assign the worker tasks of a lower level, while remaining at the same legal level and classification (so-called ‘detasking’) in case of changes in the businesses organizational assets or in other hypothetical conditions envisaged by collective contracts (including business), with the right to keep the same salary; finally the possibility was introduced of entering into individual agreements to change tasks, legal category and level of classification and relative remuneration, when this constitutes the only possible alternative to dismissal.
The ANPAL was instituted [Agenzia nazionale per le politiche attive del lavoro – national agency for active employment policies – which has a legal identity in public law and is under the supervision of the Minister of Employment and Social Policy] with the principal purpose of coordinating active employment policies.
It set out that dismissals and consensual resolutions of labor relations will be made, on penalty of being void, only by electronic means on the relative forms made available by the Employment Ministry and the prerequisites for using the instruments from which they derive are extended also to the possibility of monitoring workers at a distance. Finally a series of regulations was introduced toward simplifying entering the world of work for people with disabilities.
THE REFORMS OF THE LABOR MARKET IN ITALY, FROM 2000 TO THE JOBS ACT
The effects on the labor market Contradictory opinions have been expressed about the effects of the Jobs Act (and in particular about its impact on unemployment): the majority in the government describe it as a success, while the opposition opinion is the opposite. It is probably still early to make a definitive judgement, however it is possible to make a few preliminary considerations. If there has been a general economic improvement, it is still not yet clear what the rĂ´le has been of the global economic situation on the one hand, and on the other of the decrease in contributions envisaged by the Stability Law that came into effect from January 2015: this measure has brought about a significant lowering of the non-salary cost of employment, thus encouraging hiring.
Sources “An Analysis of the Biagi Law”, Eryk Wdowiak, 2017. Banche Dati de IlSole24Ore. Economia e Politica, rivista online. Gazzetta Ufficiale Istat.it Lavoce.info Senato.it
THE REFORMS OF THE LABOR MARKET IN ITALY, FROM 2000 TO THE JOBS ACT
original photo by NiccolĂ˛ Caranti
interview ELSA FORNERO Elsa Fornero is Full Professor of Political Economics at the University of Turin and scientific coordinator of CeRP (Center for Research on Pensions and Welfare Policies). From 2011 to 2013 she was Minister of Labor, Social Policies and equal opportunities during Monti government. In this period she conducted the implementation of two important reforms: the pension and the labor reforms, respectively approved in 2011 and 2012. Following the change of government in 2013, she returned to dedicate to her academic activity. She is currently Vice-President of Share Eric and Honorary Senior Fellow at Collegio Carlo Alberto. Her fields of interests include savings and pensions economics.
by Francesco Beraldi
UniversitĂ degli Studi di Torino & Collegio Carlo Alberto
International observers lose no opportunity to point out that Italy needs to undertake a series of structural reforms, almost as if there hadn’t been a lot of such reforms before now. How is it that this pervasive sense of unfinished business persists, given that many sectors, including the labor market, have undergone many important reform actions in the last decade? To answer this capital question, I think we should start from a critical analysis of the concept of reform. I am convinced that in the past two decades attention has focused mainly on technicalities based upon an underlying and excessively abstract idea of the market. It has often been assumed that, in order to obtain the desired results, it would be sufficient to approve laws introducing changes in regulations. This “narrow” approach has been recommended, with dogged persistence, also by the IMF, OCDE and the World Bank. This may be all right for reforms with a limited scope but for those affecting the individuals’ fundamental life-cycle choices such as whether to invest in one’s own human capital, whether to retire early or late, etc. this is clearly inadequate. To be successful, reforms must introduce changes in behavior and in the determinants of individuals’ choice parameters, not merely in legal provisions. If this does not happen – as it did not happen in Italy up to 2011-12 – reforms will be diluted, put off, distorted and even legally abolished. The lack of results in reforms prior to 2011-12 could be traced back to their failure in penetrating to the “heart “of society and this is where the role of politicians and political parties is important. They should be a go-between society and technicians. The so-called “technocratic government”, of which I was a member as Minister of Labor and Social Welfare, introduced the reforms (that are usually referred to with my name) that were – mostly unwillingly - approved by Parliament for emergency reasons but where unsupported in political dialogue with public opinion. The result is that reforms still stand, their effect on state finances has been fundamental to save Italy from bankruptcy, but are mostly resented public opinion as an imposition and ways are often sought, both by individuals and political parties, to circumvent their logic and to “sweeten” them.
INTERVIEW TO ELSA FORNERO
Let’s start with the labor market reform. From the end of the ‘90s onwards, in the context of strong European integration, Italy launched a series of reforms aimed at liberalizing the labor market. The starting point, on which I would ask your explanation, is obviously the requirements of the productive system at the basis of this need to make work flexible. What have been the consequences of the increased flexibility your reform introduces on the heavily segmented labor market that characterized Italy when started work on it? Italy traditionally had a rather rigid labor market, upon which successive reforms (such as those introduced by Tiziano Treu and Marco Biagi) introduced liberalizing legislation under pressure to increase productivity and regain competition ability in global markets. The result of these well-meaning reforms was, however, mainly to create insecurity for the segment of traditionally ‘protected’ workers, identifiable, broadly speaking, with male adults, without changing its general segmented structure. Dismissals were still ruled by Article 18, extremely protective towards workers to the point of making firing nearly impossible. This made employers wary of hiring new workers and led them to rely on “anomalous” contracts (such as project contracts, limited period hiring, etc). Flexibility therefore resulted mainly in marginalization, and in some cases in complete exclusion from work for those outside “protected” work. This has the case of the young, and in particular the Neets, who find themselves in the worst possible state: that of finding no use for their own human capital, and thus putting it at risk of deterioration; of women, all too often seen as mere providers of wages supplementary to those of their husbands; and of older workers, channeled into schemes of social protection while awaiting (early) retirement while their employment difficulties are not yet addressed by active policies. The excessive weight of national level labor contracts adds to rigidity, since the sector and regional peculiarities tend to be overlooked. More flexibility for the labor market was therefore a response to the practical need of adjusting this market to economic changes. It was also based on a recent scientific approach which gave priority to the dynamic analysis of flows (entries into and exits from the market) over static analysis of stock (numbers of employed/unemployed). It is based on the principle that difficulty
in leaving and entering the labor market are parallel. Rather than looking at the unemployed at any given period it investigates the processes of leaving unemployment for work, analyzes obstacles and assesses long-term or indeed permanent unemployment. This stressed the need to make the labor market more flexible as a vital condition for overcoming segmentation and marginalization and making work more dynamic and inclusive. This was, in particular, the rationale of the ‘Treu package’. The resulting reforms did make the labor market formally more accessible, in practice however they created massive insecurity, from which it has been increasingly difficult to escape, exacerbated also by the Great Recession. Flexibility was used by employers mainly as a tool only to keep labor costs down, a reasonable objective per se, insufficient, however, to achieve a permanent increase in competitiveness without built-in incentives to invest, innovate and reorganize. This kind of flexibility was hailed in particular by small and very small businesses, for whom the lowering of labor costs is often a condition of survival. This kind of flexibility may help businesses to stay afloat, it hardly represents an important success factor in global competition. It is hardly surprising that these reforms were confronted with intense social opposition, which not infrequently discredited not only their results but also their aims. The identity crisis of trade unionism and a fragmented and barely cohesive social structure contributed largely to limiting the efficiency of the process of reforms aimed at modernizing the world of work. While in past decades citizens felt themselves represented and protected by parties and unions, and were able to accept more easily reforms with which they did not entirely agree with, this link is now much weaker. The surge of “direct democracy” has reduced the popularity of both parties and unions making it more difficult for them to act as go-betweens. Misunderstandings of the logic of reforms are much more likely, and citizens end up by equating reforms with loss of rights, which must be opposed. This, in my opinion, is the crucial difficulty for present day reforms.
INTERVIEW TO ELSA FORNERO
The 2012 labor reform, which carries your name, has among its objectives that of overcoming the traditional Italian lack of active employments policies; what in your judgement are the obstacles, both political and cultural, that still restrict their implementation, and how should one evaluate the measures of the Jobs Act that go in this direction? Part of this winding reform path is the Reform of 2012, which carries my name, and the next, more radical Jobs Act of the Renzi government. As for the objective, emphasized in Article 1, was certainly in the spirit of both Treu and Biagi: to make the labor market more inclusive and dynamic, combining a fair protection of the worker with an acceptance of greater mobility and flexibility. In particular, I think that the modification of Article 18, subsequently superseded by the Jobs Act, was unjustly unappreciated, as Pietro Ichino has shown (Corriere della Sera, 17 February 2017), with regard to the ‘normalization’ of the redundancy processes that followed our reform. Turning to active policies, they are fundamental for promoting employment on two levels: people’s employability and the greater efficiency of the labor market. To be effective, they however require great professional skills, and this is one of the weak points of our country. I often make the comparison between financial markets and labor markets. We generally accept that at the basis of the financial markets there are specialized professional skills, for which we are also ready to pay large sums, because we think that the technicians in this sector are in possession of ‘esoteric’ forms of knowledge which are difficult, for a citizen lacking adequate training, to acquire or even understand. The labor market, is even more complex than the financial market. For this reason, its rationale and mechanisms should be completely understood not only by the technicians who inspire legislative changes, but also by those who work in the field. However, specialized professional skills are hardly ever considered to be an indispensable prerequisite for the proper functioning of public employment agencies. It should be unthinkable that some public employee might be transferred, without adequate training, into an employment office, because that person wouldn’t have the necessary knowledge to help someone enter or re-enter employment. Given this situation, cooperation between public and private agencies is a positive development: the latter, to succeed, must
be able to show appreciable results, and this has triggered an improvement in the performance of public employment offices also. The other example is of what is called ‘life-long learning’, that is, ‘permanent training’. Today the initial training of one’s life cycle is no longer sufficient. In the past there were periodic refreshers, but today not even that is enough. ‘Permanent training’ involves above all a consistent offer of training at business level to keeping staff up to date, but it is also important to take care of the ‘human capital’ of those without work: when people remain out of the market they tend rapidly to lose both professional skills and the ability to acquire new ones. Overcoming the many obstacles to a greater presence and a greater efficiency of active policies was a fundamental objective of my reform. Unfortunately, I had to stop before this was achieved; also because the active policies are still largely decentralized at regional level (it was one of the innovations that the constitutional modification aimed to overcome, and which was stopped with the victory of the ‘no’ vote in the referendum) and lacked the support of the regions because of the premature disbandment of a few of them (Lazio, Lombardy and Molise). In any case, turning to my opening statement, “permanent training” is really a reform of our ‘way of thinking’: it is necessary to reverse a ‘culture’ made up of resources often wasted in ineffective training courses, of a lack of professional skills, and of cronyism. For this reason, we introduced ASpI, the acronym: ‘Assicurazione Sociale per l’impiego’ – Social Insurance for Employment. ASpI - was intended precisely as a form of financial assistance for people engaged in seeking a (new) job a pre-requisite and basis for active policies. It was definitely one of the most important innovations of our reform.
INTERVIEW TO ELSA FORNERO
Digital and automation revolutions represent a great opportunity for development, but are also a danger to the stability of millions of jobs. Do you think this risk is plausible, and what solutions do you think could mitigate these negative effects, both in preventive terms for workers, and from the standpoint of re-employment for the unemployed? Benoît Hamon, winner of the primaries of the French left, included in his election manifesto the toughening of taxes on businesses whose factories have been ‘robotized’, in which, that is, robots have taken the place of workers. I think that the objective of saving jobs is a noble one, but this formula is inadequate, a rearguard action. History has always shown that new technologies might bring about severe hardship to workers employed in old technology activities. Trying to block the spread of new technologies is, at best, a short-term tactic and nonsubstitute for mid-term strategies. Acceptance of technological innovation implies recognition that robot/human substitution will produce major difficulties for the workers involved: these difficulties can be countered not stopping innovation but providing benefits (i.e. new training and relocation) to those who have been or are about to be substituted, the ‘relocation’ allowance, introduced by the Jobs Act, is an instrument. It will be necessary to monitor its effects and integrate it with other measures designed to improve people’s employability. Above all it will be necessary to create new work opportunities, and these will be found in activities in which adequately prepared workers will be competitive with machines. Regrettably, actual developments show that most alternative work opportunities are in the field of ‘poor work’: the United States have created work primarily in the non-competitive service sector, in particular personal care services, which don’t require high qualifications. We can’t limit ourselves to similar results: many studies show that a large number of professions will disappear in of the next 20 years or so. It is easy to understand the sense of fear that this can generate. Shutting oneself off, however, doesn’t help. Again, the search for solutions will have to look at education and permanent training, which are no longer optional, but necessary. Further, I am not convinced that reducing ‘work per employee’ is the right road, even if it has been followed in the past: with technological progress the working timetable has, indeed, been considerably reduced. Much depends on the way in which
production is organized and by the possibility of introducing a more intensive rotation of workers. It however seems to be a more workable way forward than the old solution of sending people into early retirement in order to substitute old workers with young ones. One final observation on this point: not all the problems of the labor market can be resolved by changes in regulation of the market. To create new jobs, investment and growth will be needed above all. The severe recession that followed the financial instability of 2011 has exacerbated the dualism of youth/adults in the labor market, harming the conditions of the young, despite some advantages – like the strengthening of apprenticeships – which had been envisaged for them in the reform of 2012. Bearing these results in mind, what do you think might be the most appropriate ways to coordinate education, business and employment centers, to counter youth unemployment? And how do you assess the alternation between school and work introduced in 2015? I am convinced that one of the greatest structural weaknesses in our employment market is the lack of dialogue between the world of training and the world of work. There are a few areas of the country, I speak particularly of the North East and specifically South Tyrol, in which this dialogue is not only present, but also fruitful and based on a strong tradition: rooted in society for a long time. More generally however, in Italy this dialogue is very difficult, above all because of strong reciprocal prejudices. The prejudice of the “world of education” against the “world of work” is perfectly plain and sometimes clearly ideological: the labor market is seen, by a certain part of the education community, as a place of ‘profit’ and “exploitation”, from which it is better to remain distanced in order to dedicate oneself to the “construction” of the citizen, often with an anti-business slant. On the other side, the world of work considers the incorporation, even if only temporary, of students in factories and offices as a loss of time and an additional cost. This is, in my opinion, a very myopic approach, and was one of the reasons why I insisted on apprenticeship in my reform, even as a preparation for a
INTERVIEW TO ELSA FORNERO
working life that will inevitably be marked by greater mobility both of functions and employers. Apprenticeship should be conceived as ‘applied training’ which allows the acquisition of values typical of the productive world, as for example the value of competitiveness and the acceptance of ‘challenges’. All this, however, cannot be achieved in a short time. Many businesses are willing to employ apprentices, but are unfortunately mainly interested in their low cost. When I made the proposal of linking the possibility of having new apprentices to the actual hiring of some of the present ones– with the aim of preventing businesses using apprenticeship just to save money – many business organizations cried out about the scandal and I was criticized for introducing rigidity. This is another demonstration of the Italian tendency to use flexibility not so much to improve productivity, but mainly to reduce employments costs. I am moreover decidedly in favor of ‘dual’ apprenticeship, even if I think that this might represent the point of arrival of an even greater understanding between school and work. The dual apprenticeship represents a more difficult challenge than the simple apprenticeship in a business, because it requires a greater integration between the two worlds. The challenge is great also from the point of view of the student, who has to find a way to adapt to both school and work, and thus have a high degree of mental elasticity. Present demographic developments and the progressive rise of the pension age lead to a reflection on the role of the over-55s in the labor market: this group now represents over a fifth of the working-age population and is still characterized, despite gradual improvements, by lower than in most of Europe. What are the instruments at the disposal of lawmakers in order to increase the involvement of these cohorts with work and to stimulate (if you think this is desirable) the voluntary continuation of work even after retirement age? I have always been in favor of the flexibility of retirement starting from a minimum age, for example for those 63 years old and over, but it is necessary that beside the principle of flexibility there be that of responsibility. That is, retirement should become increasingly more like a personal account, financed with one’s own
pension contributions, and on the basis of this account, workers should have the ability to decide the date of their own retirement. This is possible with a contributive calculation to determine pensions, which will allow workers, when it is fully operative, to choose the age of retirement in conformity with personal and family considerations and in agreement with their own employer. We are however in a phase in which the negative heredity that the pension system of the past has bequeathed to us is still too heavy, severely limiting possible choices. In particular, the combination of flexibility of the retirement age and the remunerative method to determine pensions will end up being a burden on the young and future generations and this is socially unacceptable, because it is the young who today constitute the weakest segment of our society. It remains true that active ageing is one of the problems to address, because the labor market is stingy with jobs, not only with regard to the young, but also with regard to older workers who, if they lose work, relocate with difficulty (even if our market, in recent years, seems to show the contrary). Policies on active ageing were studied and applied in different ways in various countries, from the generational relay to gradual retirement, which might have a partial pension or remuneration. There are no miraculous solutions, and it is therefore necessary to proceed pragmatically, possibly replicating experimental solutions that have been successful in other countries (in Northern European countries, for example). It is furthermore good to remember that, with the modification of Article 18, introduced by the Fornero Reform and made more radical by the Renzi government, not-so-young or indeed old workers are highly exposed to the risk of dismissal. The problem of losing a job in these age ranges should therefore be properly addressed. The first policy response should, once again, have to do with training. Those who lose a job at or over 55 canâ€™t be left on their own or simply placed, as in the old scheme, on a mobility experience that â€˜accompaniesâ€™ them towards retirement. For these cases also we introduced ASpl, which on the one hand provides the unemployed with the means to live, and on the other directs them towards training activities and new work opportunities. Clearly the training of 55 years old workers should
INTERVIEW TO ELSA FORNERO
be different from that of young people; the active policies should therefore have specific, not vague, targets. For those who are no longer young, therefore, it is also necessary to think in a perspective of opportunities of re-employment and not simply of early retirement. Again, this implies a radical change of mentality, that isn’t achieved solely through the approval of a reform, but requires a change in the way one confronts problems, a new attitude on the part of unions and political parties, who should have as their objective not only the protection of the income of the unemployed, but, above all, promoting their re-entry into the world of work. Recent research by Boeri and Garibaldi has shed light on the presence of a displacement effect harmful to the young which is the consequence of raising the age of retirement in 2012 (if the old work longer, the young remain unemployed). Is it therefore necessary to think about the involvement in the labor market of the over-55 cohorts and the reduction of youth unemployment as two conflicting objectives? Perhaps in the short term. To start with, I note that both the authors have changed their minds: Boeri, in particular, has indeed often asserted that one should not give weight to the principle of substitution. I agree with saying that, in the context of crisis, in extending the pensionable age the employment of young people was made more difficult, but I don’t think it is right to assert this without considering the state of necessity and financial crisis in which the reform of pensions was conceived and approved by Parliament, and that these difficulties are presented almost as if they were a structural characteristic, and therefore as if the ‘fixed number of jobs’ rule should apply, by which ‘one entering employment is at the expense of another exiting it’. Empirical research agrees in showing that countries that are able to create employment do so for both old and young workers. There is therefore not a negative link, but rather a positive one. We should therefore think of the unemployment of the young and of those over-55s as of two compatible objectives. Otherwise we commit the same serious mistake that has kept women out of the labor market. The work of women has always been seen as complementary to that of men, and therefore, in times of a shortage of employment, it was (and is) women who have to
leave the labor market to return to their traditional role in the family. The real challenge is to know how to make the labor market genuinely inclusive. I have always fought, together with Boeri among others, against the idea of a market with a fixed number of jobs, and I remain of this opinion. It is obvious that in a situation of recession the constraints on job creation become tighter, but that ought to elicit a greater and thorough effort to improve the functioning of the labor market, also helping businesses to withstand the impact of the crisis and to invest, making the worlds of training and work more synergetic, to improve people’s employability. To indulge in the old practice of ‘pre-retirement’, in a period, among other things, of a significant lifespan lengthening, seems like a return to the past rather than a strategic vision. And, to conclude, I would also like to recall how, in hindsight, one can always argue that things should have been done better. To have to introduce important reforms under the threat of a financial crisis – afterword resolved also thanks to those reforms –is however a very different thing, which I wouldn’t wish on any of my successors.
* Art 1: “La presente legge dispone misure e interventi intesi a realizzare un mercato del lavoro inclusivo e dinamico, in grado dicontribuire alla creazione di occupazione, in quantita’ e qualita’,alla crescita sociale ed economica e alla riduzione permanente del tasso di disoccupazione”.
INTERVIEW TO ELSA FORNERO
5 The trend of contracts and the market after the introduction of the Jobs Act by Francesco Beraldi
UniversitĂ degli Studi di Torino & Collegio Carlo Alberto
and Ivan Lagrosa
UniversitĂ Bocconi & IGIER
ABSTRACT The following chapter aims to look at how the dynamics of the Italian labor market evolved following the introduction of the Jobs Act. It will analyse the economic recovery that began in 2014, dwelling on the trend in data for production and employment, which will be studied in comparison with the European results, in order to analyse the role that the continental economic conjuncture might have had on our market. After this, we will concentrate on the effect of the sharp reduction in contributions envisaged since the beginning of 2015, on the trend in single contracts, and, finally, on the numerical evolution of dismissals and terminations.
INTRODUCTION In evaluating a reform of the labor market it is possible and necessary to dwell on a variety of aspects. But often the public debate ends up considering partial data which, without being contextualised, can lead to purely political interpretations. On the other hand, evaluating the effects of a reform that has numerous provisions isnâ€™t an easy task. There are two principal difficulties that arise in considering the contribution of the Jobs Act: (i) a national, and above all international, economic conjuncture that is markedly improving, to which many of the positive results we are seeing can be attributed; (ii) a significant reduction in contributions on the contracts that should benefit most from the reform: i.e. permanent ones.
THE CASE OF ITALY Italian performance in the European economy As foreseen in the beginning of this chapter, attributing all the results observed since 2015 to the innovations of the Jobs Act alone would be a gross error. This section aims to evaluate the performance of the Italian economy and labor market in the European context, in an attempt to understand whether at least part of the Italian recovery might be attributed to elements of the international economy, rather than to the labor reform (understood as the combination of regulatory innovations and contribution reductions). In order to make this analysis, we decided to use the data relative to 2011-2016, since we thought that the data relative to the deep recession of 2009 might be a distraction from the trends of the period when the Jobs Act was introduced â€“ which would lead to an over-estimation of their effect. After a brief period of growth in the two-year period 20102011, when the European economy seemed to have left the great crisis behind, in 2011 the deterioration of public finances in the countries of southern Europe, and of expectations about how the single currency would hold up, marked a serious breaking point THE TREND OF CONTRACTS AND THE MARKET AFTER THE INTRODUCTION OF THE JOBS ACT
in the progress of the recovery. 2012 and 2013 in fact saw another two years of recession for the Italian and European economies. From 2014, thanks to the fall in the price of commodities, a moderate fiscal expansion and, above all, strong monetary stimulus coming from the European Central Bank, a weak recovery began to emerge and gradually gain impetus. In this context of strong variations in levels of growth between the economies, one factor remained more or less constant: the fact that Italy lagged behind. In figure 5.1 we can see how the gap in Italian growth, measured simply as the difference between the level of Italyâ€™s real growth and that of the Euro area, held a reasonably constant value in the period 2011-2016 (despite a slight and gradual improvement from the negative spike of 2012) of around -1%. Therefore, if the Italian economy set out on a weak recovery from 2014, this can easily be put in the framework of a European conjuncture that saw the Euro zone grow in the three-year period 2014-2016 at a pace of between 1.2% and 2%. In contrast, progress in closing the gap in Italian growth is scarce, even if not totally absent. An analysis similar to that of the trend of GDP can be made for the trend in employment. In this case, the datum to be analysed has to do with the variation in the level of employment for those aged 15-64, expressed by percentage points, compared to the end of the previous year. The data are also correct for seasonality. Even in this context the Italian results end up being consistently inferior to those of Europe. Indeed, with the exception of 2012 â€“ the worst year in terms of GDP and the gap in growth, but surprisingly better in terms of employment gaps â€“ the growth in Italian employment ended up being equal to or less than the Eurozone average in each of the years looked at, from 2011. So, in Italy, both in terms of production and number of jobs, the recession hit harder than in the rest of the euro area, and the subsequent recovery was weaker. As in the case of production, even the increase in registered employed people in the three-year period 2014-2016 seems to a large degree framable within the broadest trend of improvement of the European labor market.
In particular, the excellent results achieved in 2015 (which was also thanks to the reduction in contributions) meant that the gap with the rest of the euro area reached zero for the first time after three years, only to return to the negative in 2016.
THE TREND OF CONTRACTS AND THE MARKET AFTER THE INTRODUCTION OF THE JOBS ACT
However, in absolute terms, and therefore beyond the European comparison, the gradual improvement in employment conditions is evident, both in Italy and Europe. Finally it is interesting to analyse the Italian number of employed people per quarter, starting in 2011. The identifiable trend is clearly negative between 2011 and the middle of 2013 (-578,000 employed). From the second half of 2013, on the other hand, the trend looks positive, and generally in line with the European data; and this is so even when Italy finally manages to catch the recovery â€“ which was only from the second half of 2013 (and with less impetus). The employment recovery brought about the creation of 583,000 jobs, cancelling out the employment loss that came about between 2011 and 2013. The strong acceleration in the increase in the number of those employed that took place from the second quarter of 2015, that is, following the introduction of the Jobs Act, made possible the creation of over 400,000 jobs (68% of posts created from the beginning of the recovery) in just the four quarters between April 2015 and April 2016.
Trends in GDP and employment before and after the Jobs Act One of the pillars of the Jobs Act is the reduction of dismissal costs for permanent contracts. This is aimed at creating greater dynamism in the labor market, facilitating the movement of workers from declining businesses into expanding ones, and thus enabling a better allocation of work in the long term. However, this would not necessarily have a positive impact on the number of jobs available in the market, which depends mostly on other factors. It is nonetheless interesting to analyze the dynamics of the data for employment and GDP for the period 2011-2016. To do so we use the quarterly data for GDP and number of employed persons, corrected for seasonality. Both data are standardised at 100 for the first quarter of 2011. Between 2011 and the first half of 2013, the recession hit GDP hard, rather than the number of employed. Following this, in the middle of 2013, employment grew in step with GDP, or even faster.
The recovery that came about following the middle of 2013 (vi) can in its turn be divided into two phases: before (vii) and after (viii) the introduction of the Jobs Act. The data seem to indicate that the acceleration of the recovery occurred since 2015 (viii), and therefore after the introduction of the Jobs Act, had a greater impact on employment than on GDP. Of the 2.6 points gained in employment during the recovery, 1.9 came about after the introduction of the Jobs Act, while of the 2.0 points gained in GDP, only 1.1 was added following the regulatory innovations. The analysis therefore means that, although the appearance (2014) and acceleration of the recovery (2015-2016) are framable in the context of a more extensive recovery at European level, it is probable that the introduction of the Jobs Act brought about an acceleration in employment, without however having a significant impact on the dynamics of production. The analysis of these data though is not sufficient to determine how much of the effects on occupation can be attributed to the new contractual regulation, and how much to the reduction in contributions. This point will be addressed in the next section. THE TREND OF CONTRACTS AND THE MARKET AFTER THE INTRODUCTION OF THE JOBS ACT
With regard to the future development of the two indicators, on the other hand, sooner or later GDP will have to return to growth in a way that is persistently greater than employment. This is for obvious reasons, given that the increase of numbers employed occurred in recent years, also considering the demographic dynamics of our country, is to be considered a conjunctural element of the labor market rather than a structural one. How much growth can continue to strengthen will also depend on the actual ability of the Jobs Act to improve the allocation of workers in the productive fabric.
THE JOBS ACT: HIRINGS, CONTRACT CONVERSIONS AND DISMISSALS As foreseen in the preceding sections, one of the major difficulties in evaluating the effects of the Jobs Act lies is the fact that the introduction of the single contract with increasing protection (March 2015) was accompanied and anticipated (January 2015) by a strong contribution exemption for businesses that chose to hire with the permanent contract, or to stabilize temporary work already in existence. This exemption (L. 208/2015) envisages a cut in pension contributions for three years with a maximum annual ceiling of â‚Ź8,060 and an overall saving for the employer, over the period, of â‚Ź24,180. Contribution reduction is applied to new hirings on permanent contracts (whether full-time or part-time; in the latter case with an adjustment proportional to working hours) and on the conversion of fixed term contracts to permanent contracts. Even though the range of potential beneficiaries is quite extensive, in our opinion there are three principal restrictions envisaged: (i) the first, as was noted, is the fact that new legislation of this kind is not applicable to public undertakings; (ii) the exemption is not envisaged for workers who had a permanent job during the previous 6 months, with any employer whatsoever; (iii) and, finally, reduction in contributions is not applied to contract conversions for apprentices, though it is for fixed term contract conversion. Contribution reduction was subsequently also renewed, to a significantly reduced extent, in the Stability Law of 2016. What the relative effect might be of the two measures (the single contract with greater ease of dismissal, and contribution reduction) remains an open question and, at a distance of two years, is still much debated. It is probable that the exemptions from
pension contributions simply concentrated, during the first months, a rise in hiring on permanent contracts that would otherwise have been spread over a longer period [Ichino, 2016]. So what are the numbers that characterised the introduction of the Jobs Act? In the two sections that follow we will address one of the aspects of the Jobs Act that more than any other will have an impact on employment structure: the introduction of the single contract with increasing protection. There are two central aspects of these new contractual guidelines: (i) the first has to do with the initial transition period, lasting three years, during which the protection envisaged for the worker is extremely low; (ii) the second is that, contrary to what happened before with Article 18, after the first three years the protection starts to grow over time, with seniority of service. A first and immediate economic insight that is useful for understanding the effectiveness of this sort of contract, and in particular of the initial transition period, has to do with the informational asymmetry that exists between businesses and workers: given the uncertainty about the real skills of workers, businesses are motivated to envisage temporary contracts, which are more convenient and less subject to the high costs of dismissal, in order to limit expenses in case the worker turns out not to be suitable for the position to which s/he was hired. The initial period, during which dismissal costs are significantly restricted thus gives a strong stimulus for the business to prefer permanent contracts from the outset, which has the advantage of offering more stability in the working relationship over time. The increasing protection over time then responds to a risk of dismissal that, in the context of (i) salaries that increase with seniority, (ii) uncertainty as to demand and (iii) the need for a workerâ€™s continuous training, increases with seniority for those employed (on this subject see the interview with Prof. Pietro Garibaldi contained in this report or, for a more detailed treatment, the work Inside severance pay by Boeri, Garibaldi and Moen). Since the details of the dismissal guidelines and the specific contents of the Jobs Act are addressed exhaustively in other chapters, in what follows we will provide a complete framework for the economic dynamics that have characterised the introduction of the Reform, examining the evolution of employment through varying contractual typologies. THE TREND OF CONTRACTS AND THE MARKET AFTER THE INTRODUCTION OF THE JOBS ACT
The central objective of the Jobs Act, and in particular of the single contract with increasing protection, is to reduce job insecurity and the duality of the Italian labor market, increasing the proportion of workers with permanent contracts among the total of those employed; a long term objective for which there are not now clear and unambiguous results (Figure 5.5). As for the number of employed, as is easily seen, if on the one hand the initial reduction in protection makes dismissal easier, on the other it represents an incentive for businesses to hire on permanent contracts. The impact of the measure on employment is therefore very ambiguous and, in the long term, one can expect an effect in both directions, with levels of entry and exit from unemployment significantly higher than those which had previously characterised our market (Figure 5.6). This increased ease of relocating workers in the market surely represents an
efficacious means of gaining a more efficient allocation of human capital, with businesses that are in difficulty only having minor dismissal costs to suffer, and expanding businesses that would have major incentives to hire [Ichino, 2016].
Hirings and contract conversions in a context of reduced contributions Table 2 shows the percentage variations on an annual basis of the number of hirings and contract conversions for different contractual typologies. A first analysis of the data shows how the numbers of those hired on permanent contracts and of the stabilisation of insecure contracts are very positive at the end of the first year the Jobs Act was in effect, 2015. The fall seen in 2016 is physiological and characterised by variations that nevertheless remain positive in absolute value (+1,266,786 hirings on permanent contracts and +436,966 stabilisations of insecure contracts). With demand in (slight) growth at the end of the recession it is indeed probable that many businesses needed to expand their workforce and therefore in the first instance they took the contractual conditions that were clearly the most favourable. To isolate the effect of contributions from the simple percentages shown is practically impossible; in what follows we obtained some additional information, analysing the time trends. Nevertheless, a first sign is observable: given that the reduction in contributions was not applicable to apprentice contract conversions, the +24.7% of 2015 of this datum shows how it was the new regulation envisaged by the contract of increasing protection that drove this increase. THE TREND OF CONTRACTS AND THE MARKET AFTER THE INTRODUCTION OF THE JOBS ACT
The time trends, as mentioned above, allow us to evaluate more visibly the impact of contribution reductions on employment trends. In graph 5.7, data for new hirings are indexed compared to the mean of each contractual typology for the entire period under consideration. The trends show how for all of 2015 there was a significant increase in new hirings with permanent contracts, that were higher than those effected through the other two contractual formulas; to be noted is the absence of clearly
positive leaps in March 2015, when the single contract was introduced. Moreover, the spike of December 2016 clearly shows how the +51% shown in the preceding table was mostly driven by the willingness, on the part of businesses, to take advantage of contribution exemptions; as mentioned before, this was in fact the last month in which they were envisaged in such a generous way. This (perfectly sensible) behaviour did not in any case exclude the possibility that the same hirings would be seen subsequently, even without the exemption. What is evident is that the reduction in contributions had a significant impact on businessesâ€™ decisional timeframes in terms of hirings. Graph 5.8 confirms numbers on average higher for all of 2015 and a strong effect from contribution reductions. Finally, an analogous argument goes for reading graph 5.9, where it is possible to observe a net discontinuity only for contractual typologies whose conversion is covered by the contribution exemption â€“ that of permanent contracts.
THE TREND OF CONTRACTS AND THE MARKET AFTER THE INTRODUCTION OF THE JOBS ACT
Finally, it is interesting to note how the use of contribution reductions was distributed for workers of different age ranges. In 2015, around 40% of reductions was used to hire workers over 40 years old. This datum is principally due to the greater magnitude that these age groups cover in numerical terms compared with the total of those employed. In fact, it is the opposite of the conclusion one draws from analysing figure 5.11, which shows the number of new hirings with exemptions by age group, related to the number of employed that each of the three groups expresses. In this case, the datum for young people turns out to be consistently higher compared to that of the other categories; moreover, it is useful to note how the spike – previously observed – in December 2016 (which can essentially be seen as a measurement of the effect of contribution reductions) turned out to be considerably higher for the youngest workers, if related to the influence they have on the market in terms of employment.Figure 5.10 New hirings with exemption, 2015.
Terminations and dismissals If on the one hand contribution reduction in the first months concentrated the positive effect on the number of new hirings and conversions, on the other it delayed the increase in the number of dismissals, which, as mentioned above and given the ‘softest’ guidelines for them, could on balance be expected. Beyond the fact that too little time has passed to have an adequate number of dismissals of workers hired with the new contract, we ought to consider how a good percentage of new permanent contracts is still taking advantage of fiscal exemptions. Therefore, as can be expected, the data do not show any particularly relevant trend either in the number of terminations, or in the number of dismissals. And the same analysis also goes for businesses with more than 15 employees, who were constrained by the severe restriction of Article 18.
To Conclude The trends subjected to analysis confirm a slow but net improvement of the labor market following the introduction of the Jobs
Act, which has however only partly prevented a delay in recovery compared to our European partners. The majority of new hirings and conversions can certainly be attributed to the contribution exemptions envisaged by the guidelines of the single contract; with regard to this, a recent study conducted by the Bank of Italy about Venetian data estimates that the effect of contribution reductions is responsible for 40% of the increase in permanent hirings while the new contractual guidelines are responsible for 5%. The same study also addresses the role that the lighter guidelines on dismissals, as was mentioned at the beginning, might have on a businessâ€™s choice to hire a worker in a stable way from the outset, even facing uncertainty about his or her actual skills. On the other hand, the exemptions initially envisaged also for the conversion of insecure contracts to stable contracts might for the moment have reduced this effect, it being sensible for a business to trial a worker to start with, hiring him or her temporarily and then, afterwards, converting the contract and taking advantage of contribution reduction. THE TREND OF CONTRACTS AND THE MARKET AFTER THE INTRODUCTION OF THE JOBS ACT
interview PIETRO GARIBALDI Pietro Garibaldi is Professor of Political Economics at the University of Turin, and Director of the Student Programme at the Carlo Alberto College; he is also Scientific director of the Visitinps Programme of the Inps (Istituto Nazionale Previdenza Sociale â€“ the national institute for social welfare). He was economic advisor to the Minister of the Economy and Finance, a consultant for the Treasury Department, and he worked at the International Monetary Fund. He is also a Research Fellow at the Centre for Economic Policy Research in London and the Institute for the Future of Work in Bonn. He has published in the major scientific journals.
by Ivan Lagrosa
UniversitĂ Bocconi & IGIER
Professor, you were among the first in Italy to propose the adoption of the single contract with increasing protection as the primary way to enter the labor market. This measure, now a law, was one of the fundamental components of the Jobs Act. What is the objective and economic presupposition of this contractual form? Are you satisfied with its implementation or are there still aspects to be resolved? To start with the objective, there is a lot of ambiguity about this; for myself, I think the fundamental objective of the single contract with increasing protection is to reduce job insecurity, raising the proportion of permanent contracts within the totality of contractual forms, and to decrease litigation in the labor market, reducing the number of legal recourses about work-related matters. Taking a step back and coming to the economic presupposition of this sort of contract, perhaps the best response is in the work Inside severance pay, recently published in the Journal of Public Economics by me with Tito Boeri and Espen Moen. In it we show an economic model that explains in detail in what conditions it would be optimal to have a labor contract that foresees increasing compensation over time in case of dismissal for economic reasons. Basically, the conditions (which arenâ€™t simple) are: (i) uncertainty about a businessâ€™s productivity; (ii) informational asymmetry between workers and businesses about the state of demand for work; (iii) and lastly, a context in which the worker has to invest continually and increasingly over time to maintain skills. If these three conditions are present, it is desirable in terms of efficiency to have compensation that grows over time in case of dismissal. The economic insight of these conditions lies in the fact that, in a labor market, almost by definition, salary has to rise over time in order to incentivize workers to continue to invest in their present position; if to a salary that grows over time we then add uncertainty of demand (the second of the conditions above), businesses find themselves in a condition where they have a strong incentive to dismiss more senior workers. This phenomenon therefore justifies an intervention that has to be external to the market.
INTERVIEW TO PIETRO GARIBALDI
With regard to the second question, I am certainly satisfied with the action of the government: the proposal we advanced together with Tito Boeri was actually more tentative than that which was implemented. Certainly the reform of the labor market, together with the political insight to help this reform with reduced insurance contributions, was one of the moments of greatest political courage of the Renzi government. As for the criticisms that were raised about the decision to leave the guidelines unchanged for those who already had a contract in progress, even I was in favor of the reform being applied only to new contracts and not just to â€˜stockâ€™. And among other things, the transition came about pretty quickly: in December we had calculated that of around 10 million permanent contracts in the private sector, a million and a half were under the new contractual typology. The transition was therefore proceeding at a very sustained pace, and we will soon reach the stage when we have a labor market where in the private sector permanent contracts will all be with increasing protection; in the public sector the discourse is different. Returning for a minute to the three conditions that you mentioned, do you think it plausible that the third, which regards continual investment in skills, would be plausible especially taking into consideration an historic period like this one, characterized by massive technological innovation? Yes, obviously on this point we have first to work out how we decide to interpret what in a model is only a criterion; if we interpret it as an investment in skills it is certainly possible that it would be more urgent in an historic moment like the one we are going through. In any case many other countries have for some while had compensation that increases over time. And in this regard Italy was therefore a little anomalous: Article 18 represented a strong protection for workers, but it didnâ€™t increase over time. This is to highlight how, despite the urgency of continual investment in skills (and therefore compensation that increases over time) might be more urgent today than in the past, many countries had for some time taken note of the dynamics at work in the labor market and acted in consequence.
And lastly the evaluation. To evaluate a labor market reform isnâ€™t an easy task. If on the one hand evaluations end up being based too often exclusively on occupational data, on the other, above all due to the lack of a good counterfactual, even a more articulated evaluation of the effects of a reform like the Jobs Act is complex. A large part of the results could indeed be attributed to a global economic situation that in the last two years has improved significantly; not to mention that the evaluation is further complicated by the presence of a significant reduction in compensation foreseen for the first years. So how do we overcome these problems? When we talk about a labor reform this extensive, with many implementing decrees that are heterogeneous even among themselves, it is always necessary to narrow the field of evaluation. In its broad sense, a labor market reform obviously has the task of increasing employment, reducing insecurity and unemployment, and increasing fairness in the market. This broad combination of interventions includes within itself objectives that have very much to do with policy. If on the other hand we want to narrow the field and stay with an evaluation of a single contract with increasing protection, the difficulties mentioned in your question obviously remain, above all because of the conjunction with the introduction of a reduction in contributions, which started in January 2015 (the single contract came into effect in March of the same year). There have already been two papers published on the evaluation of this contractual measure; the first was by the Bank of Italy, undertaken by Paolo Sestito and Eliana Viviano; the second by Marco Leonardi and Tommaso Nannicini. Both the works highlight how very important reduction in contributions will have been for the rise in the use of the permanent contract. My impression is that while these works only concerned the dynamics of hiring, an important point for the purpose of the evaluation would be to consider the dynamics of dismissal. And, an important consideration for having an uncontaminated evaluation, reduction in contributions should not have any effect here. To do this obviously it is necessary only to take into consideration all jobs effected with the new type of contract, and not those previously in existence.
INTERVIEW TO PIETRO GARIBALDI
Staying with the Italian labor market, the employment situation of the youngest remains particularly serious. According to the OECD, in 2015 in Italy 27.4% of young people between 15 and 29 were considered to be NEETs (not in education, employment or training); in Germany, this percentage falls to 8.6%. What impact do these figures have on a country’s growth? And, in your opinion, what causes such an inefficient allocation of resources? The effect of this phenomenon on GDP is a large permanent layer effect – thus it is not a matter of growth, unless in the transition period. How large is difficult to estimate. One can obtain an imprecise measurement by looking at the absolute number of NEETs and multiplying it by the mean productivity of the employed. This number, which is around 170 billion, is however certainly overestimated because the mean productivity of NEETs is lower than that of the employed. As regards inefficiency, it is a plastic representation of the great Italian mismatch – the difference between employment supply and demand in terms of required skills – which in our country is the highest in Europe. The phenomenon of the NEETs is thus closely connected to the educational system, which in Italy does not adequately prepare young people to enter the labor market. This is obviously not the only problem: in addition to having an adequate educational system, it is necessary to aim at optimizing the transition processes which, again, are not assisted in Italy. At the end of the day a labor reform this structural obviously takes several years to produce visible positive results. Today, however, what we observe is that, when compared to other European countries, our principal indicators of employment and unemployment remain among the worst; moreover, while other partners in the Union are rapidly recovering ground lost during the great crisis, our economy still seems far from restarting. How should these data be read? These are the glaring structural problems of Italy. When there is a recession it always does worse than the other countries, and when there is a boom it typically does worse. Paradoxically Italy is a country that has no condition for growth that we recognize: in the structure of the State, in demographic dynamics, in taxation. It is
not a country designed for growth. As Solow said, ‘When it comes to growth, we know the ingredients but not the recipe’. And we know that we don’t have the ingredients; it would be very strange if such a country managed to grow. Enlarging on the last discussion, the labor market and the goods market – which determines GDP – have always been thought to reflect each other. And yet, in the first years of this century, before the great crisis, in Italy we created new jobs without (uniquely among OCSE countries) the economy growing; today, on the other hand, many economists have gone back to speaking of recovery without the creation of new jobs – ‘jobless recovery’ – and the respective data (GDP and employment) at European level seem to confirm this tendency. How does one evaluate these dynamics? Should we get used to a structural discrepancy between GDP and employment or are the abovementioned dynamics only cyclical? Perhaps at the Italian level the real anomaly is that which we had from 2000 to 2006, a period in which we had growth in employment without economic growth. And this was the effect of the great job insecurity, that I studied and explained in the work entitled ‘Honeymoon effect’. The effect of the reforms at the margins then ended with the great crisis, when we saw the beginning of the expulsion of young people from the labor market. However, these continue to be very exceptional years: the reform of temporary employment worked better than anyone could have imagined, bringing a great number of people into the labor market. Then in 2007 the ‘toy’ was completely broken, and in this regard Italy is among the countries that has paid the greatest price for the crisis. Thus today we have returned to a radically different labor market which comes nearer to a model of jobless growth. This goes above all for Europe: in Italy the reality was no growth and no jobs until 2014. Then in that year the recovery had effects of similar importance for both economic growth and employment, although the latter was bought at gold-price with decreased contributions.
INTERVIEW TO PIETRO GARIBALDI
6 The evolution of dismissal legislation by Francesco Mosetto
Università degli Studi di Torino
ABSTRACT With a short legal excursus the principal and most recent changes to dismissal legislation in Italy can be retraced. Such evolution can be observed in the transition, with the Fornero Act of 2012, from a very linear (if not even uniform) protection system to a diversified one, partly modified by the Jobs Act of 2015, with the introduction of further automatic compensation mechanisms. By describing the current legislation, it should not be forgotten that the type of dismissal from which the worker enjoys legal protection is only unlawful dismissal. Therefore the question could be, whether there is still a true ‘unlawfulness’, if the system largely provides rather compensation than substantial protection, except for serious cases, as the worker is compensated for the injury suffered according to automatic criteria and not following a concrete evaluation of damage.
Introduction The general perspective of this report is primarily economic, although one of the themes periodically inflaming every single debate about eventual reforms of the labor market is dismissal legislation. To understand the problem a short legal excursus can be useful, without going in depth for each point, rather trying to propose the reader a general framework and some simple reflections.
Dismissal Dismissal is a cause of termination of the working relationship. The Civil Code model (of 1942) is formal contractual parity and employment at will: if the contract is permanent, each of the parties can withdraw, giving notice within a certain time, determined by established uses or according to fairness (Art. 1218), or if there is a so called ‘just cause’ even without notice (Art. 1219). Dismissal is therefore termination by the employer, while resignation is termination by the employee. Nevertheless dismissal was afterwards regulated along very different principles from Act 604 of 1966 (the so-called ‘Justified Reason Act’) and Act 300 of 1970 (‘Statute of Workers Act’), by order of which dismissal should always have a just cause or a justified reason. A just cause occurs in case of a major contract breach causing an impossibility to further continue the working relationship; objective justified reasons are linked to production, organisation, and regular functioning of the business. The ratio legis behind this choice does not even need an explanation: the worker’s contractual strength is very different from that of the employer, above all when labor supply exceeds labor demand, so that it would be unfair to legally consider employer and employee on the same level. Therefore, the worker can now terminate a contract freely by giving notice, while the employer can terminate a contract only if there is a just cause or a justified reason for dismissal. The Civil Code based regulation still applies only in certain special cases, e.g. for managers, who have greater contractual strength than other workers, or for workers on probation and as well for those who have already reached the age required for retirement as for domestic workers.
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Special attention must be paid to the fact that an employer can dismiss an employee lawfully, even when there is no disciplinary violation (i.e. a breach of the contract), for example in the case of a renewal of the company organisation. One should always remember that discussions about ‘Article 18’ (regulating unlawful dismissal in the Statute of Workers Act), which are so popular in Italy, always refer to unlawful dismissal, i.e. to cases in which the employer exercised a withdrawal, without having right to it (for instance because the reason declared did not exist) or cases in which the employer had a right to withdraw, but did not exercise it the forms intended by the law (for example orally instead of in writing).
The legislation in force up to 2012 The relevant sources concerning dismissal, apart from the Civil Code, were (and in part still are) those already named in the preceding section: Act 604/66 for businesses with fewer than a given threshold of employees, and the Statute of Workers, for those over such a threshold. The essential difference between the Act of 1966 and the Statute of Workers is in the type of protection provided for to unfairly dismissed workers: the first is compensatory, the other substantial. The unfairly dismissed actually had the right to be reinstated to their job or, if they preferred, to receive a flat-rate compensation for fifteen months’ work, if their business was over the application threshold of the Statute. Nevertheless, if the business was under the threshold, the employee had a right to compensation consisting of a sum corresponding to 2.5 up to 6 months’ salary or (by the employer’s choice) to be reinstated. This means that a small business or a non-profit organisation (for example a religious school), to which Act 604 was applied, could dismiss without restriction: at zero cost if there was a just cause or justified reason, paying compensation in other cases. The majority of Italian companies have therefore always tried to stay under the threshold where the Statute of Workers comes into effect, but this does not mean that the rules of the Statute are only rarely applied, because obviously the large employers also employ a greater number of employees.
After this brief summary the conflicting interests should be clear: employers are interested in managing the workforce with highest level of freedom and calculating costs with the highest level of precision; employees on the other hand are interested in the stability of their jobs, and want to be protected from those employers who use the threat of dismissal as a blackmailing weapon to obtain undue services.
The legislation of the so-called ‘Fornero Act’ Act 92 of 2012, known as ‘Fornero Act’, intervened to modify the legislation of Article 18 of the Statute of Workers, which provided for substantial job protection in case of unlawful dismissal. While the old Article 18 called for protection in terms of reinstatement in every case, the new Article 18 distinguishes different types of protection. 1. Strong substantial protection (Art. 18 sections 1-3) Strong substantial protection remains, consisting of reinstatement or a forfeit sum corresponding to 15 months’ wage (beyond of course compensation for damages, with a minimum threshold of 5 months’ wage), in four cases: a) discriminatory dismissal, b) dismissal for unlawful essential reasons, c) verbal dismissal, d) other cases by law. In all of the above mentioned cases a void dismissal occurs: void dismissal cannot have a legal result, the consequence is therefore reinstatement to the job. Naturally it frequently happens that workers do not want to return to a job in which they suffered such a seriously unlawful dismissal, and that is why they are allowed to ask for a compensatory indemnity instead of reinstatement. Discriminatory dismissal is intended either to influence membership or non-membership of a trade union, to inhibit a worker’s participation in union activity, or to discriminate the worker for his or her political views, religion, race, language,
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gender, disability, age, sexual orientation or personal convictions (Article 15 of the Statute of Workers). This strong protection is applied to all businesses and even to managers, because it regulates extremely serious cases. 2. Weak substantial protection (Art. 18 section 4) Weak substantial protection also compels to reinstatement or compensation, but the compensation is limited to a maximum of twelve months’ wages. It should be noted that this compensation does not really involve damages, as it would be usual in Italian law, but rather an indemnity. Such indemnity corresponds to not received wages in the period between dismissal and reinstatement, being of course deducted the aliunde perceptum (incomes enjoyed by the worker by undertaking other work) and the aliunde percipiendum (incomes the worker might have received through diligent dedication to seeking a new job). A calculation of compensation according to these criteria leads to a greater predictability of the maximum cost of dismissal, as well as motivating the worker to seek new employment. Such a protection applies when, in the case of disciplinary dismissal, a) the fact constituting a just cause does not exist or b) the collective contract or disciplinary code specifically provides such conduct with a different sanction. Indeed, not all breaches of contract result in dismissal: an employer can impose other sanctions, called ‘conservative’ as the worker does not lose the job, extending from a simple verbal reprimand to suspension from work for up to ten days. It also applies to other cases along Article 18 section 7, among which stands out the self-evident non-existence of the fact on which the objective reason bases: the non-existence must here be evident, because the employer’s discretional choice in business management comes into play, and such a free choice cannot be investigated by a judge.
3. Strong compensatory protection (Art. 15 section 5) Strong compensatory protection consists of the payment to the worker of a comprehensive compensatory indemnity corresponding to 12 up to 24 monthsâ€™ wages, with no prejudice to the effectiveness of the dismissal. In this case unlawful dismissal has a high cost, but it still has a foreseen maximum cost: the judge must in every case declare the working relationship terminated from the date of dismissal, therefore the employer can make a dismissal, paying the compensation determined by law. The compensation is calculated by the judge taking into account as well the seniority of the worker, the number of employees in the business, the scale of its economic activity, as the conduct of the parties and their situation. This remedy is clearly a mixture of indemnity and damages: it is not a real compensation of damages, as there is a maximum limit and it might therefore not cover the whole loss. Moreover, it is proportioned to characteristics of the parties beyond the seriousness of the loss. On the other side, it is not a simple compensation because it evaluates the conduct of the parties. This protection applies to all other cases in which neither a justified reason nor a just cause occurs, but a breach has actually taken place and the conduct (if the dismissal is disciplinary) is not otherwise specifically sanctioned by the collective contract or the disciplinary code. That is e.g. the case of an employer dismissing a worker operating within a certain productive activity, because of the bid of a new machine performing the same activity unsupervised (objective justified reason), if the employer could have relocated the worker in the business organisation with not unsustainable costs. 4. Weak compensatory protection (Art. 18 section 6) Weak compensatory protection consists of a sum corresponding to six up to twelve monthsâ€™ wage.
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It applies for formal or procedural violations and the compensation is proportional exclusively to the gravity of the violation. Its nature is therefore primarily punitive, as it involves cases in which the employer did have the right to terminate the contract, but still did not exercise it in the forms of law. For instance, when a worker commits a proved serious disciplinary offence and the employer does not allow him or her to have assistance by a union representative when presenting his or her defence, this protection would be applied. Naturally the dismissal would still be effective.
The legislation of the so-called ‘Jobs Act’ The so-called ‘Jobs Act’ was famously constituted by an enabling act (n. 183 of 2014) followed by numerous legislative decrees. The one concerning protection against unlawful dismissal is Legislative Decree 23 of 2015, which applies to all permanent work contracts entered into force from 7th March 2015. The field of application therefore does not take into account the size of the business, as L.D. 23/2015 did not modify the Statute of Workers Act: it introduces new legislation, although differentiated for small businesses and non-profit making organisations. The system outlined by L.D. 23/2015 was defined by the legislator as ‘increasing protection’ system, because the protection for victims of unlawful dismissal, while remaining very similar to those introduced by the Fornero Act, increases according to seniority. 1. Strong substantial protection (Art. 2) Strong substantial protection remains identical to that of Art. 18 Statute of Workers (see above, section 4.1) and applies to cases of a) discriminatory dismissal, b) verbal dismissal, c) dismissal lacking an objective justified reason in relation to physical or mental disability, d) other cases of voidance expressly provided by law.
The application area is thus very similar to the provision of the Fornero Act: it reasonably draws into this protection field the – clearly discriminatory – case of a not justifiable objective reason of disability, previously covered by weak substantial protection (Art. 18 section 7 Statute of Workers). 2. Weak substantial protection (Art. 3 section 2) Weak substantial protection is similar in its contents to that introduced by the Fornero Act (see above section 4.2), but it solely applies to cases of disciplinary dismissal in which the material fact on which the just cause bases does not exist. The adjective ‘material’ is critically important, because it excludes the possibility for the judge to evaluate the non-existence of the legal fact, for example for a patently disproportionate punishment, to the extent that the norm expressly sets out that ‘every evaluation about the disproportion of the dismissal would be excluded’. In this way the application of substantial protection, even if in its weak form, is notably reduced. It should further be noticed how, in calculating the compensatory indemnity, the aliunde percipiendum would no longer be calculated as the repayment of what workers would have been able to receive if they diligently dedicated themselves to seeking new employment, but only as the repayment of what they would have earned by accepting a reasonable offer from an employment agency: another step in the direction of the predictability of dismissal costs. This form of protection does not apply to small businesses or to non-profit making organisations, which was also the case under the previous legislation. 3. Strong compensatory protection (Art. 3 section 1) Strong compensatory protection has a very wide spectrum of applicability: all cases in which neither a justified reason nor a just cause occurs. It consists of a payment to the unlawfully dismissed worker of a sum corresponding to four up to twenty-four months’ wage, at the rate of two months’ wage for every year of
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employment. It should be noted that a) the minimum would be reduced from twelve to four months’ pay and b) the sum would be predictable with further certainty, because it is the result of a simple arithmetical operation. For small businesses and non-profit organisations the amounts are halved. 4. Weak compensatory protection (Art. 4) Weak compensatory protection applies when (existing) reasons are not clarified in the written act of dismissal or when the procedure has not been respected in cases of disciplinary dismissal, providing the worker with a series of defensive guarantees. It consists of a sum corresponding to two up to twelve months’ wage, one for every year of seniority: in this case, too, the minimum threshold is reduced and the sum can be calculated precisely. As already in the case described above (see section 5.3), the amounts are halved for small businesses and non-profit making organisations. 5. Conciliation offer (Art. 6) It is perfectly clear how in the system outlined by L.D. 23 of 2015 the calculation of compensation is much more automatic and simplified compared to the previous legislation. As we have shown, this carries an advantage for the employer, who can calculate the exact cost of an unlawful dismissal, but it has another consequence, too: it makes the role of the judge superfluous when the unlawfulness is self-evident. Hence the legislator introduces the possibility for the employer to offer the (unlawfully) dismissed worker a sum corresponding to two up to eighteen months’ wage, at a rate of one month’s pay for every year of employment. The offer can be made before the deadline for judicial action against the dismissal: in doubtful cases the employer can wait, hoping that the worker will not appeal against the dismissal. Offering conciliation can be particularly advantageous, e.g. in the case of a worker with a high level of seniority who might have been dismissed for a justified
reason or a just cause, but with an irregular procedure. For instance, if the worker has a fifteen years seniority and decides to challenge the dismissal before a judge, he or she can obtain up to twelve monthsâ€™ pay; if instead he or she accepts conciliation, he or she can immediately obtain up to fifteen monthsâ€™ pay with no legal expenses. Conciliation is obviously very advantageous for the employer too, because it takes the matter out of the hands of a judge, who might find there had been a greater infringement, and it saves legal expenses, which are awarded against the losing party following Art. 91 of the Civil Procedure Code. The amounts to be offered in conciliation are also halved for small businesses and non-profit organisations.
Concluding comments After this summary exposition of the evolution of dismissal legislation, in particular with regard to protection from unlawful dismissal, it seems evident that the constant tendency of the legislator would be to make the cost of unlawful dismissal as predictable as possible. This choice has obviously many advantages: it makes the calculations easier and allows greater flexibility, because it basically allows freedom to dismiss at a price, except for extremely serious cases. Nevertheless at least three points ought to be developed to stimulate further reflections. First. If the legislator wants to liberalise dismissal, why not introducing an automatic obligatory indemnity to overcome any unlawfulness, except for the major ones? If compensation is automatically calculated on the basis of seniority, losing every connection with the loss suffered, there is in reality no action for damages. Thus, if the consequence of a disproportionate dismissal only involves the obligation to pay a seniority indemnity, then can that dismissal still be said to be unlawful? It would make perhaps more sense to explicitly say that dismissal is always allowed: either for a just cause or a justified
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reason, or with an indemnity by law. This being the general rule, there would be special cases with substantial protection: orality, discrimination, voidance for other reasons determined by law (strong substantial protection) or non-existence of a material fact for disciplinary dismissal (weak substantial protection). Second. If it is basically always possible to dismiss (provided it is notified in writing), the power of the employer in the development of the relationship is greatly increased. The threat of dismissal is thus an even more powerful weapon, above all if one takes into account the new formulation of Art. 2110 of the Civil Code (introduced by L.D. 81 of 2015, a decree enabled by the ‘Jobs Act’): the worker can be demoted for a ‘modification of the organisational setup involving the worker’s position’ (section 2). If demotion is refused, it violates the duty of obedience set out in Art. 2014 of the Civil Code and therefore the employer can punish the worker, knowing that the punishment could always be dismissal too, even if patently unproportioned, above all if the worker has not got a high seniority. Naturally it is not a scandal that an employer can dismiss more freely his or her employees, with an indemnity for the worker in those cases where the just cause or justified reason is not so evident, but it would be preferable to avoid the hair-splitting of unlawfulness and ‘compensatory’ indemnity, running the risk of an unreasonable provision, which is the object of the third consideration. It is in fact undisputed that work is not only a source of livelihood under provision of Article 36 of the Constitution, but also the context of the development of personality under provision of Articles 1, 2, 4 and 35 of the Constitution. Thus, if a worker is unlawfully dismissed, it is unreasonable that the compensation mechanism turns in a way that only takes into account the worker’s seniority. There are two possible solutions. The first is considering dismissal without just cause or justified reason unlawful: damages are fully compensated, or at least compensated according to the normal criteria of compensation of damages, as size of the loss, situation of the parties, seriousness of infringement. In this case, we would obviously give up the perfect predictability of costs by unlawful dismissal.
The second way is considering dismissal without just cause or justified reason not unlawful, except for the most serious cases (that is, those who currently have substantial protection): this way, no compensation would be due and it would therefore be reasonable for the law to foresee the employerâ€™s obligation to pay the worker a simple indemnity, in order to pay the workers for the flexibility whose consequences they (hopefully temporarily) suffer.
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original photo by di Niccolò Caranti
interview ANDREA ICHINO Andrea Ichino is Professor at the European University Institute of Fiesole. He was previously Professor of Economics at the University of Bologna and Researcher at the Bocconi University. Together with Alberto Alesina he published ‘L’Italia fatta in casa. Indagine sulla vera ricchezza degli Italiani’ (‘Home-made Italy. An investigation into the true wealth of Italians’) (Mondadori 2009), and with Daniele Terlizzese, ‘Facoltà di Scelta. L’Università salvata dagli studenti. Una modesta proposta’ (‘The Power of Choice. The University saved by students. A humble suggestion’) (Rizzoli, 2013). His research interests primarily have to do with labor economics, education and the family. He has published in many academic journals, such as the Quarterly Journal of Economics, the Journal of Labor Economics and the American Economic Review.
by Ivan Lagrosa
Università Bocconi & IGIER
Professor, a reform of the labor market can only be evaluated in terms of the efficiency of the market and the rights of workers. In the case of the Jobs Act, the debate surrounding the abolition of Article 18 was emblematic. Do you think that there is a trade-off between guaranteed rights and market efficiency? And how does the Jobs Act fit into this debate? Before speaking of the efficiency of the market, we have to ask ourselves if there is a trade-off between the rights of insiders and those of outsiders. This trade-off doesn’t exist in the hypothetical world sketched out, for example, in Robert Solow’s book ‘The labor market as a social institution’ (The Royer Lectures 1990). In this world the labor market is dual, with the insiders protected in the primary sector – within the walls of the citadel – and the outsiders left to their own resources in the secondary sector – outside the walls. However, it is also better for the outsiders that there aren’t many protected jobs within the walls, as long as the waiting period to enter isn’t too long. In this case the value of waiting without rights in order to enter into the citadel later and enjoy full rights is greater than the value of downward competition that gives an immediate profit, but shortly afterwards leads to the destruction of the walls of the citadel and, therefore, to the elimination of the benefits of protection for everyone. Leaving the metaphor aside, minimum wages and protection against dismissal are rights that can’t be offered to everyone, above all in the present conditions of global economic growth. They can therefore be deemed to be the result of a ‘cartel’ that hinders competition, favouring the insiders. In the past, the waiting time to enter into the primary market and enjoy these rights was relatively short, and therefore keeping them suited the outsiders too. Today, as I see it, this is no longer the case. Therefore, the first question we have to ask ourselves is whether the system prior to the Jobs Act really guaranteed the rights of all, or only of a few. I think that it only guaranteed the rights of a few, and that the Jobs Act was a step in the direction of a fairer extension of rights, even if this step is not nearly large enough. In addition to the trade-off between insiders and outsiders, there is then the trade-off between rights and market efficiency that you mentioned in your question. For an economist, the two fundamental Welfare theorems apply, which affirm the Pareto optimality of a competitive market without imperfections and the possibility of redistributing efficiency gains
INTERVIEW TO ANDREA ICHINO
in the preferred. Starting from a hypothetical world of a perfectly competitive market, it is indisputable that infringements on competition, such as those produced by protection against dismissal and minimum wages, produce losses of efficiency. To justify these deviations from competition in terms of efficiency, we must therefore reason with the so-called ‘Second Best’ logic. Namely, we need to first understand whether there are pre-existent market imperfections (informational asymmetries, missing markets, externalities, etc.) so that the deviations become efficient, given the existence of these imperfections. For example, in the world of Marx and Engels the disparity in power between the proletariat and the owners of the means of production could be described as an informational asymmetry that violates the hypotheses for the validity of the Welfare theorems, and that therefore makes a competitive equilibrium inefficient. In this context, the rights guaranteed by the Statuto dei lavoratori can become a Second Best. But do we really think we are still in the world described by Marx and Engels? I do not think so. If someone convinces me to the contrary, however, I will be the first to say that the Jobs Act is a step in the wrong direction. Otherwise, the step is in the right direction. A fundamental contribution of this latest reform was having rethought the dismissal guidelines, restricting a judge’s room to manoeuvre. What is your assessment of this intervention? Do you think that it is possible and desirable to imagine a labor market where the intervention of a judge is not envisaged? In the past you undertook studies that highlighted great uncertainty in sentencing and a high dependency of the outcome of judicial proceedings on the local socio-economic context. I think that to have reduced a judge’s room to manoeuvre in the dismissal guidelines is one of the most important benefits of the Jobs Act, not only in the interest of efficiency, but also in the interests of the insiders who are protected by unions. Let’s take for example individual dismissals for economic reasons. An employer resorts to this reason for a dismissal when it is expected that the future profit generated by the worker will
be negative. It is however possible that this profit will be negative through the employer’s fault, for example because it made a bad investment, and, in that case, there is no reason why the worker should bear the cost of the employer’s errors or incompetence. To entrust to a judge the decision about the fairness of a dismissal in this situation means exposing the worker to a form of ‘Russian roulette’. As I did illustrate in some articles with Paolo Pinotti, not all judges think in the same way: there are judges who tend to decide systematically in favour of workers, and judges who tend to decide systematically in favour of businesses. Since trials are assigned randomly to the judges of a given court, the same case could be judged very differently by different judges. This doesn’t seem to be a particularly attractive or transparent system. Let’s suppose instead that the Parliament establishes a compensation that the employer has to pay to workers in order to dismiss them. This compensation can be made as high as is desired, thus increasing the protection offered to a worker. In fact, the employer would only dismiss workers for whom the expected loss of profit is greater than the current value of the compensation. The dismissal would thus have a valid ‘objective reason’ only when the expected loss was over the minimum threshold decided by the collectivity. This is the system that the Jobs Act aims to implement and it seems to me much more transparent and efficient. It doesn’t leave the evaluation of the ‘objective’ reason for a dismissal to the ‘subjective’ opinion of a judge. As you have often reminded us, the Jobs Act, with the lowering of the cost of dismissal, should not be seen as a magic wand to create jobs, but rather as a measure for increasing efficiency in the allocation of workers.However, perhaps due to the reduction of contributions, in the last two years it seems that the growth in the number of people in work has been more robust than that of the gross domestic product. What do you think of the present dynamics of such data, and how do you think this could evolve in the future? As you have rightly reminded us in your question, economic theory says that the immediate effect of a reduction in dismissals on levels of employment is unclear: businesses that can hire will do so more willingly, but at the same time those that want to dismiss can do so at lower cost. Nothing guarantees that the net effect
INTERVIEW TO ANDREA ICHINO
will be positive. I still cannot understand why the policy debate doesn’t take this into account. In the long term, however, if a reduction in dismissal costs facilitates a reduction in the number of workers who hold unproductive posts, and an increase in the numbers of those employed where they can be more productive, then this reduction has positive effects on the average levels of employment, as well as on the efficiency of the productive system – namely on the size of the cake that citizens are able to divide among themselves. Is it conceivable that the reduction of dismissal costs contained in the Jobs Act immediately produced these long-term effects? I think not, above all for one reason. If the businesses that can hire fear that, after the reform, a counter-reform might follow, they will think twice before hiring. In the light of the end of the Renzi government, the counter-reform is not that remote a possibility – it’s enough to remember the most recent ‘voucher’ affair. In these conditions, the system could end up stuck in ‘mid-stream’ while crossing the river, with the negative effects of flexible legislation – whoever wants to dismiss does so as soon as possible to take advantage of the window of opportunity offered by the reform –, without enjoying the positive effects – whoever could hire doesn’t do so for fear of a counter-reform. It must be said that the Jobs Act can’t have had significant effects on dismissals because it only applies to the newly hired. I don’t think, however, that it has yet been able to express the long-term effects recorded above. Therefore, my impression is that the immediate positive effect of the Jobs Act on employment is to be attributed above all to fiscal incentives to hire. With the passing of time, and the strengthening of positive effects, however, I think that the expansive long-term effect of the reduction of dismissal costs will make itself felt on employment levels. In any case, it is early to draw conclusions and the effects will be more positive if the ‘winds against the reform’ becomes weaker.
With regard to reforms of the labor market brought into play in other countries, like France or Spain, our legislative intervention was decidedly tentative if we look at the negotiating guidelines, which remain primarily displaced at the national level to the disadvantage of business level negotiation. You have conducted studies on the impact that these sorts of guidelines have on development in the South. Would you say that an intervention of this sort is crucial and, if so, what is stopping its adoption? Together with Tito Boeri and Enrico Moretti we demonstrated the distortions generated by the equalisation of nominal wages imposed by national union negotiation. If the North is more productive than the South, national bargaining that fixes the nominal salary at one level, low for the North and high for the South, increases the labor demand in the North and reduces it in the South. Consequently, a migratory flow to the North is generated, which increases the price of housing in that region. Higher housing prices involve higher prices for all goods, and therefore real salaries that are lower. There follows a balance in which the North is characterised by real salaries lower than those of the South, but in conditions of full employment. The South on the other hand is characterised by real salaries that are higher for those who work, while the rest of the labor force is unemployed. No one moves because the expected (average) income of the two regions is equivalent. That this situation is unjust and absurd seems self-evident. We have never maintained that liberalising collective bargaining alone, bringing it to the plant level, can resolve the problem of low productivity in the South, but it would certainly promote a fairer an more efficient balance for the given productive differential between the two regions. The recent refusal of the teachers hired in the South to move to the North, where they would have suffered a sharp drop in the purchasing power of their salaries, is the most obvious demonstration of what Enrico, Tito and I argue. Why the trade unions â€“ and the general population of the South too â€“ donâ€™t take account of this is inexplicable to me. Ask them, perhaps, not me.
INTERVIEW TO ANDREA ICHINO
One of your fields of interest has to do with the world of education, and its relationship with the labor market. Some interventions towards their greater integration were also made in the Jobs Act. However, if compared to countries like Germany, in Italy the two systems seem to speak different languages: the public institutions are diffident towards private businesses, which in their turn have little confidence in the educational system. From this arise phenomena like skill mismatch. What is your opinion about this, and how do you think it is necessary to intervene? The integration of school and work cannot be centrally managed by the Minister for Education: an elephant that takes up nearly a million people can’t materially move efficiently in this area, which requires rapid adaptations to local market situations. Even if the Italian public administration were very efficient, and it isn’t, a business of these dimensions couldn’t function well. As I have advocated with Guido Tabellini (‘Freeing the Italian school system, Labor economics, 2014), the only solution is to move to a system of authentic and complete scholastic autonomy (following the model of the Charter School in the USA or the School Academies in the UK) in terms of school curricula within limits fixed by the Ministry, and above all in the selection and remuneration of teachers.
interview PIERO MARTELLO
Piero Martello is currently President of the Labor section of the Tribunal of Milan. From 2002 to 2005, he has been Vice President of National Association of Magistrates and, from 2009 to 2011, Vice Head Department of Judicial Affairs for the Ministry of Justice. He is a journalist and has been a speaker in several public events and training courses of the High Council of the Judiciary and of the High School for the Magistracy. The text was transcribed by the author after the interview.
by Tommaso Portaluri ETH ZĂźrich
The Jobs Act, as many commentators have observed, brought to completion the transition – begun with the Fornero reform – from a real protection regime to a regime of compensatory protection, significantly restricting the possibility of reinstatement in favour of monetary compensation of an assured amount. In your opinion, what advantages and disadvantages arose from this transition, and how did relations between worker and employer change? It is difficult to speak of advantages in absolute terms, because often if the regulations create advantages for one side, they will probably create disadvantages for the other party in the relationship. There is one necessary premise: in the face of the legislative innovations it is always necessary to recognise the primacy of the political sphere and Institutional Decision Makers, which is to say the parties who in our system have the power and the duty to adopt regulatory provisions: Parliament and government. This means that it is incumbent on Institutional Decision Makers to identify the objectives and values to be pursued, to set priorities, to identify the protection to be provided for such rights, and to establish the extent of the protection. Obviously it is also incumbent on this primacy and this power to assume responsibility, first and foremost for not leaving margins of ambiguity in the formulation of laws that are sometimes written in a vague or imperfect way (and sometimes both), with the result, desired or not, of delegating to the judiciary the task of filling in these gaps. To reply to the question, it is a happy fact that the entirety of the labor legislation of recent times has resulted in a shift of the regulatory and cultural paradigm of the past. Indeed, labor legislation comes into being and develops on the presupposition, both implicit and explicit, of the existence of an asymmetry between the parties in the working relationship, that is, it was assumed – and still is – that the parties of the working relationship, worker and employer, do not find themselves with an equal amount of contractual power. Therefore labor legislation had among other objectives that of correcting this disparity, giving support to the party that was considered (I think correctly) the weaker party in the labor relationship. A typical example of the detachment exercised by the most recent legislation with regard to this approach is the emphasis that was put on the concept of flexibility.
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I want to clarify that these considerations are simply descriptive, and entirely non-judgmental: there isn’t a political evaluation on the primacy of politics. Also because it is not incumbent on a judge to evaluate policies on the basis of these choices of value. It is incumbent on a judge to apply the law, obviously exercising his power/duty to interpret the rules, in the light of the Constitution, of the general principles of the system, of national and local regulations. My impression, to turn to the results of this transition, is that there was a compression of workers’ rights. It is just an observation, based on statements that members of government have made, justifying this compression with a sort of axiom, which is ‘the less protection, the more contracts of work’ or more simply: fewer employment rights equals more employment. We can call this approach the exchange of workers’ rights for jobs; moreover, the phenomenon of the exchange of rights for other values can be seen not only in the employment sphere but also in other sectors; one thinks for example of privacy, in which the right to privacy is compressed in exchange for security. The theory that more flexibility of and in the labor market in itself creates growth in employment sparked off a battle of numbers, which has political profiles that have no place for a judge. What is however useful to highlight on the technical level is an overall weakening of the position of the worker. There is moreover a weakening that has to do not only with the final moment of the work relationship (dismissal) but also with all of its development. Indeed it is evident that if it becomes easier for an employer to dismiss – and in parallel the more likely the prospect of being dismissed becomes – a weakness is also generated in the position of the worker during the work relationship, which will perhaps lead him/her to accept even situations that are harmful, for fear of being dismissed. To summarise briefly this paradigm shift it could be said that while the common sanction envisaged by the previous legislation facing an illegal dismissal was reinstatement, in the new regulatory framework this becomes an hypothesis that is perhaps not negligible but at least collateral, while the general hypothesis, which is more ordinary, is the payment of a compensatory reimbursement. Despite still dealing with an unjustified dismissal (meaning: the worker shouldn’t have been dismissed) one no longer has the ‘perfect sanction’ of re-establishing the work
relationship that was illegally dissolved, but a sanction of economic equivalent. I speak of ‘perfect sanction’ because, in the world of law, the ‘perfect sanction’ when faced with an illegal act is to recreate the situation as it was before that act, eliminating the violation of the law. Instead the compensation sanction is a surrogate solution, adopted when it is impossible or difficult to recreate the status quo ante. Another aspect linked to the change of paradigm, from real protection to compensation, concerns the famous ‘contract with gradually increasing protection’. Sometimes the regulations are made too hurriedly, often being subject to media manipulation. I am the first to take account of the fact that politics is also communication but sometimes the communication requirements come before substance. ‘Increasing protection’ is without doubt a beautiful expression to hear, but ultimately it has nothing to do with reality because protection is always one and its nature is always the same: compensatory. Put another way, it isn’t the protection that ‘increases’ or is reinforced, it is the compensation, in that it is connected to seniority; it would therefore be proper to speak of ‘increasing compensation’ on the basis of seniority. As has often been highlighted, there is a primacy of politics to respect, but one asks oneself, what rôle remains for a judge? Put more explicitly, do you think that, without making value judgements about the objectives set by institutional decision makers, it is possible to make a valuation of the suitability of the instruments adopted for their declared aims? And, if so, how do we evaluate the effects of this reform with regard to the times and organisation of the trial? I think that a judge must first of all take note of the legislation, in order not to make value judgments about the objectives of the law. But alongside this, judges – and other legal professionals – can and certainly should evaluate the adequacy of the instruments adopted for the declared aims, or rather evaluate the suitability of the means with respect to the ends. And here the function comes into play that is typical of a jurist – or more specifically judges, barristers, legal scholars and academics – which is that of interpreting the regulations. Interpretation is not only a power but also a duty and, obviously, among all the interpreters the one with the greatest responsibility is the judge because his interpretation is translated into a restrictive decision for the
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parties. How far does the power/duty of a judge extend? The answer isn’t easy but I think that, having due respect for the regulations and the legislation, judges have the power/duty to interpret individual regulations, integrating them into the overall judicial system, therefore in the light firstly of the Constitution, then of the national and international regulatory systems (I refer both to the international conventions and to the directives and rules of the European Union, which have a direct effect on the judicial system of each individual State). To this end I think that the judge can and should avail itself of what I would call the ‘hermeneutical keyboard’, that is of all the possibilities the legislative system permits, but avoiding interpretative twists, that is avoiding making the regulation into something it isn’t and doesn’t mean. It is fundamental to respect this limit for two reasons: first of all because it is a restriction of the law, and the public function of a judge carries the obligation to take into account the limits of such power; and secondly, to empower legislators also, because sometimes regulations that are unclear or incomplete constrain a judge to a supplementation that, if it is too expansive, can end up disempowering legislators and induce them to continue to make generalised, incomplete regulations.
The answer therefore is affirmative, there remains space to evaluate the suitability of the means towards the ends. As for the effects of the legislation, I would say that there were no effects on the timescale of trials, because their length depends on other questions and on how the Labor Tribunal of each court functions. I think though that there are repercussions on having recourse to litigation. In particular, this legislation can have an effect both before the trial, if the parties reach agreement beforehand, and on mediation once the case has started, leading the parties to agreement. There might also be the case where a worker doesn’t turn to litigation, preferring to settle out of court; a worker knows that now, even if s/he is in the right, that is if the dismissal would be regarded as unlawful, it will be difficult to get his/her job back. The difference from the past lies in the fact that, since the consequences of unlawful dismissal were more serious for the employer, it was the employer who was inclined to conciliation, while now it is the opposite that happens, for evident and identical reasons.
The legislation of recent years has introduced a relative certainty limited to the effects, because in case of compensation the law sets out a minimum and maximum amount, but I want to clarify that this is related to the predictability of outcomes and not to legal certainty, which is a separate concept. I would also like to highlight that, during the formulation phase of these laws, those who supported compensatory protection proposed the provision of a very high value of compensation, so as to discourage further possible abuses by employers; then, in the finalised regulations, this intention suffered a revision and the compensation levels were fixed at a much lower level. The possibility of reinstatement ex Article 18 remains, among a few other cases, for discriminatory or retaliatory dismissals, but the judge is required to ascertain the unfoundedness of the grounds for dismissal, with the burden of proof falling on the worker. How real do you think the risk is that an employer would disguise an unfounded discriminatory action behind an ‘economic’ or disciplinary dismissal? The risk is there but I don’t think it is easy to quantify it, also because the number of cases is not yet high enough. But I think that the risk is real because dismissal that qualifies as disciplinary or as having an alleged motive that is justified brings with it, in most cases, the payment by the employer of a compensation for which the law sets a minimum and maximum, while discriminatory or retaliatory dismissal brings with it the full sanction of reinstatement. It is therefore foreseeable that there would be attempts to disguise a discriminatory dismissal as an ‘economic’ dismissal. If the worker proves that behind this label there is hidden a discriminatory intention then it is foreseeable that the consequence will be that of reinstatement.
In parallel, it must be said that analogous attempts are made by the other side, by workers resorting to their lawyers, who often put forward the existence of a discriminatory intent – sometimes well founded and sometimes not – in order to be granted an expedited hearing, the ‘Fornero hearing’, and to be able to have a chance of reinstatement. Even here, the trial is essential so that an investigation into the specific case takes place, in order to know whether there really was discrimination.
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One of the themes that has dominated public debate is the question of demotion: the reformulation of Article 2103 c.c. which regulates workers’ positions saw the removal of the requirement, in the case of change a change of position, to ensure the equivalence between the previous level of responsibility and the new assignment. In other words, the single restriction on demotion will now be the organisational level and legal category of a worker (manual, office, manager, director) – which remain unchanged – but no longer job equivalence with respect to professional content or a worker’s professional background. But it’s something jurisprudence has often made statements about over the years; where do you think the stratified jurisprudence concerning the protection of equivalence of positions will end up? Will it be totally abandoned in favour of the letter of the law, or should the employment judge come back into the equation in some way? It’s clear that jurisprudence has been formed over the course of decades on the old text that envisaged particularly incisive restrictions on legal changes of position. The new regulations work instead from the perspective of pretty much completely removing restrictions from employers who intend to change a worker’s position. With the new regulations, a new interpretative phase will be necessary in which, wherever possible, account will also be taken of the judicial reflections of these years, but obviously in the light of the new formulation. What can be hypothesised is that various perspectives will be taken on the unconstitutionality of demotion – indeed there are those who have already taken some. For example, there are those who hold (I think with some foundation) that the legislative decree goes beyond the limits of the enabling act ex Article 76 of the Constitution. It was in fact envisaged with the enabling act that the revision of the regulations should take account of processes of reorganisation, restructuring or business conversion identified on the basis of objective parameters but perhaps – and this is a personal opinion – these parameters have not been objectively identified. Another constitutional profile has to do with the hypothesis that the scale of the change to workers’ demotions violates the constitutional principles regarding the protection of personal dignity. Besides this, it is useful to highlight that these new regulations in theory seem to give a greater rôle to collective bargai-
ning, because they envisage that in some cases the changes to positions can be made by collective contracts; in reality, on a closer reading, it seems probable that not even the rôle of bargaining will be enhanced. One can therefore conclude that these regulations restrict the field as much for judicial interpretation as for collective bargaining. Some economists (Ichino & Pinotti, 2012, 20 observed – analysing average times and result of sentences in three different Italian law courts (Milan, Rome and Turin) – significant divergences in time frames and sentences in the area of labor law, reinforcing the conclusion that it would not be advantageous, above all to the worker, to trust such a ‘Russian roulette’. The solution that the authors propose is that of a certain compensation, arrived at quickly; how much do you think this proposal would protect workers, and which would be integrative or alternative protection? How much, and in what way, is the rôle of the judge important in protecting workers? I think that the expression ‘Russian roulette’ has no meaning for those who understand the function and the nature of trials; I can understand this, because it comes from economists, that is to say from scholars who have no familiarity with the content and the function of trials. In the same way if I wrote on economics I would risk saying vague things; this is a rather rash definition. As already mentioned, the average times of trials have no correlation with the nature of protection; they depend on the organisation of each judicial office. In these economists’ study there is also a mistake in calculating average times, because the average times of the Labor Tribunal of Milan are very short; they are the shortest in Italy, and are under the European average. This is an absolutely important datum: the average time of resolving a trial at the Labor Tribunal of Milan at 31/12/2016 was 144 days (four and a half months), a very short time, a record, if one considers that the average length in Italy is 1009 days (three years or a little less). If the objective however is to have a trial that is as quick as possible, without reference to the importance of its function, one could immediately eliminate the trial, which seems to be the idea, in my opinion a superficial one, of the authors of this work, who seem to prefer always and in any case a negotiated resolution between employer and worker. Obviously anything is possible if legislators
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want it, but it doesn’t seem to me that the removal of judicial protection is among the objective of legislators at this time. It also seems to me that in this research there is more than one fallacious presupposition. Above all because the cases taken into consideration are different from each other, and therefore they can’t all be decided in the same way; but also if, to hypothesise, the cases were the same it is characteristic of the jurisdiction that every judge forms his own opinion, as soon as the investigation is made and the acts of the parties read and the results of the investigation. But fortunately this is the norm of trials; if one party thinks that the judge’s decision when first tried is wrong, s/he is able to appeal. It is moreover necessary to note that the distribution of cases between judges happens automatically and apart from the protection of the parties. The automatic nature of assignment, the consequences of which are analysed in the study, is a principle of legal culture that guarantees the impartiality of judges. Indeed, if it was the head of office who assigned cases to individual judges, there would be a risk of interfering in the result of the trial. The perspective of the authors, who seem to me to be rather naïve, suggests rather that every time one faces a case of dismissal it would be possible to know in advance what the solution would be and that if instead the solution is different from that foreseen, it is a case of ‘Russian roulette’. The variability of decisions is in fact a normal part of trials and is found in many other spheres: in the sphere of universities, for example, it doesn’t seem to me that students go forward early, some go forward and others don’t, but only after having taken an exam; is that a ‘Russian roulette’? Against the image of ‘Russian roulette’ one could place that of the ‘jukebox’, with pre-determined results; but this vision is incompatible with the administration of justice, where trials serve to adapt the regulations, which have a general application, to particular cases. If on the one hand it is necessary that when faced with analogous situations there are analogous results, because it is right that a party can have some idea of what result a case will have, one cannot expect that the results are determined ex ante. To find the right balance between these aspects isn’t simple. One way forward in my opinion might be that of getting judges to talk to each other, so that they examine the entirety of common questions and face various positions with the hope, that cannot be an
obligation, that they all converge together to the same position. But we are still departing from the presupposition that we are dealing with identical trials, in reality one case is often different from another. Itâ€™s a matter of what is done at the Labor Tribunal in Milan, where we hold periodic reunions where all the judges meet together to try to arrive at a common position. Obviously agreement can sometimes only be discretionary, because the autonomy of a judge means that every judge decides and chooses in conscience, on the basis of the conviction reached. There is then another system that I have often used: when identical cases arise that are assigned to different judges, it is possible to combine them in a way that they all go to the same judge, in order to have a unifying trend in jurisprudence.
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7 Labor policy after the Jobs Act by Cedomir Malgieri
UniversitĂ degli Studi di Torino & Collegio Carlo Alberto
ABSTRACT The Jobs Act has brought about substantial changes to the system of labor policy. In order to identify and clearly understand the new features that have been introduced and the direction our system is taking, it is necessary to start with a brief analysis that shows the various typologies of employment policy that a country can choose to adopt. Having briefly reviewed the steps taken by the latest reforms of employment policy, we can look at the Jobs Act, and the principal innovations it introduced, with appropriate interpretative instruments.
What are employment policies Passive Labor Policies In general, passive policies consist of monetary benefits in favour of the unemployed. Depending on the source of the resources distributed, passive policies can follow two different patterns. According to the national insurance pattern, the subsidy is given from contributions previously made by the employee and the employer, and the amount and duration are proportional to them. In all European countries there is obligatory insurance against unemployment, which can vary from one country to another in terms of the generosity of the benefit, the relationship between employee/employer contributions and restrictions on activation. The welfare pattern, on the other hand, takes resources from general taxation to finance unemployment subsidies in favour of those who have not paid the necessary contributions to be covered by national insurance, or for those who have already used it up. Access to this type of benefit is subject to income prerequisites (the so-called proof of means) and, with regard to the recipient group, we can distinguish between the dedicated welfare scheme, which only protects workers, and the general welfare scheme, which envisages a minimum subsidy for all those who find themselves in poverty â€“ which approaches the idea of a basic income. Active Labor Policies Active labor policies have to do with those interventions aimed at directly affecting the labor market, creating new employment or intervening, with a preventive or remedial objective, in possible causes of unemployment. The OCSE has proposed a classification for this, distinguishing five general types: 1. Employment subsidies 2. Immediate and temporary job creation 3. Professional training
LABOR POLICIES AFTER THE JOBS ACT
4. Financial support and services for new entrepreneurship 5. Services for work orientation and placement From this comes the term WORKFARE (from welfare to workfare), that is, a social state that tends to help the individual remain active and competitive in the world of work, benefitting from insurance that is tied to one’s own professional condition rather than depending on welfare.
The background of the Jobs Act Over the last twenty years, labor policy reforms have seen two contrasting visions of welfare: one inspired by the model of ‘flexicurity’ and the European Employment Strategy, and another that is largely based on compensation, concentrating above all on providing a remedy for inequality, redistributing income in favour of the medium to low earning section of the population. The Biagi Law 2003, introduced and regulated new contract typologies – in particular forms of atypical work – and thus opened the door to flexibility, bringing many significant changes to the structure of the labor market. The Reform of social buffers that began in 2007, on the other hand, set out some principles that were later taken up and implemented in the 2012 Fornero Reform. This began a process of standardising the care of the unemployed which led to the creation of a single instrument, aimed at sustaining income and re-entry into the market. This involved national insurance (ASpl: Assicurazione Sociale per l’impiego), a new insurance against unemployment aimed at extending unemployment protection to a wider range of people than those who had benefitted from the old unemployment allowance and Cassa Integrazione (for suspended or reduced-hour workers) allowance. These institutions were not in fact adequate for dealing with the new atypical forms of work introduced by the Biagi Law, since they left a significant section of workers without protection. Moreover, Cassa Integrazione had turned out to be an inappropriate instrument in a modern system of protection, because it was often improperly used and, according to the Wall Street Journal, the ASpl would have progressively substituted ‘that thing’ (as the
American newspaper rather disdainfully defined it) ‘called “cassa integrazione”, a sort of unemployment subsidy thanks to which those with permanent contracts receive a substantial amount of their salary, mainly from the State, without either working or being counted among the unemployed’. In 2012 the debate would concentrate on the connection between buffers and active policy (Workfare). Although this is a cornerstone of flexicurity, the active policy would long remain a weak point in a protection and re-entry system which was not completely implemented. The Jobs Act would come on stage in a context in which there were clear boundaries to national labor policy, to which the last reform of 2012 had begun responding, and which could be summarised by two general points: first, the obvious inadequacy of the systems of income support and unemployment subsidy, which, already too tied to Cassa Integrazione, turned out to be unable to deal with the new contractual realities and to give effective extended assistance to real unemployment; the second arose with the need to design active labor policies that were able to facilitate employment and the professional requalification of the unemployed.
The innovations of the Jobs Act Protection of the unemployed In terms of unemployment assistance, the Jobs Act implemented a real and genuinely consistent system of subsidies able to ‘communicate’ among themselves, providing a powerful alternative to Cassa Integrazione. Continuing the work begun with the Fornero reform, it takes the direction of a major universalisation of subsidies, in a way that an ever increasing range of people can benefit from it, thus breaking the dualism that had characterised the previous systems of protection; these saw, on the one hand, workers with more secure contracts, and on the other, (much less protected) young and insecure workers. The new principles saw the introduction of new institutes like NASpl (monthly unemployment allowance), ASDI (social unemployment allowance), and DIS-COLL (monthly unem-
LABOR POLICIES AFTER THE JOBS ACT
ployment allowance for co.co.co â€“ self-employed collaboration contracts â€“ and co.co.pro â€“ individual project based contracts). NASpI arises in continuity with ASpI, carrying on its model and improving its benefits. Access to the subsidy is made easier, because a smaller number of contributory weeks are required. Greater accessibility is counterbalanced by how long the benefit is payable, which is no longer a fixed period but is proportionate to the contributory period. Greater generosity, apart from
the duration of payment, is due to a raising of the ceilings, and a smaller reduction, over time, of the amount received. In this way the benefit becomes more universal, in that it widens the range of potential recipients. However it harms those in unsecured or seasonal work for two reasons: (i) the duration of the benefit is no longer fixed, but proportional to the contributional period, and (ii) calculation of duration doesn’t take into account periods in which one has already received a benefit. An analysis by lavoce.info has estimated the results of the New ASpl, showing how the new way of calculating the amount of the subsidy would favour the young at the expense of older workers, while, on average, the major proportion of beneficiaries will see the duration of the subsidy lengthen. In fact the percentage of those who would have a reduction in the duration of the subsidy grows with the growth in the number of periods of unemployment observed in the four years prior to the most recent termination. ASDI is the new social allowance for unemployment introduced by the Jobs Act. Being a form of welfare, it is for workers who have exhausted the entire duration of Naspi and find themselves still unemployed, provided that that they suffer from economic need attested by an Isee (Indicatore della situazione economica equivalente – an instrument for evaluating the economic condition of those requesting assistance) equal to or less than €5,000. Moreover, support is only granted to workers with nuclear families with underage children, or workers who are at least 55 years old and who have not reached pension or early retirement age. The number of unemployment periods for this social buffer is reduced, because the maximum equates to €448 a month (liable to increases up to €611.36). ASDI does not have the same importance as the old unemployment benefit, leading to the supposition that political will is to move from a system that is primarily focused on welfare to one that is based more on insurance.
LABOR POLICIES AFTER THE JOBS ACT
DIS-COLL is a social buffer introduced in 2015 in an experimental way, intended for those workers hired on self-employed collaborative ongoing contracts (co.co.co) and also for individual project-based contracts (co.co.pro), who do not normally have access to unemployment benefit. The measure was extended for 2017, with a view to the establishment of a new structural norm in the enabling act on non-entrepreneurial self-employment under examination by the Chamber of Deputies. Self-employment and the various forms of collaboration remain in part a convoluted reality, and at the moment it is still without a stable system of protection. Suspended workers An important merit of the Jobs Act, again in the wake of the Fornero Reform, is found in Article 1 of Law no. 183/2015, which distinguishes between and separates ‘instruments of protection in a constant working relationship’ from ‘instruments of support in the case of involuntary unemployment’, highlighting the necessity to avoid confusing Cassa Integrazione with unemployment. The Jobs Act reordered the legislation of Cassa Integrazione, bringing in significant changes. The greatest innovation is changes in time limits. Now, the ‘overall maximum duration’ is fixed at 24 months in a ‘mobile’ five-year period, as opposed to maximum of 36 months in a ‘fixed’ five-year period. In the old, fixed five-year period the limit of three years was easy to bypass, by taking advantage of one at the end of a five-year period and then another at the beginning of the next, making possible a continuous 6 year Cassa Integrazione. The new regulations about the Solidarity Fund establish the basis for a dual system, the public one (Cassa Integrazione) for high-risk activities, and a private one, for activities of lower risk, which, even though they are distinct from each other retain a degree of universality, because the Solidarity Fund has become obligatory for all businesses with more than 5 employees.
Active policies The Jobs Act tried to design and launch active employment policies which could give coherence to an entire system that aims at the re-entry of unemployed people into the labor market. In the Reform, the active policies try to favour the effective relocation of workers, through avenues that are personalised and assist in the acquisition of new skills. The starting point is the instrument of conditionality, which stipulates the passage from a merely welfare-based system to a coherent combination of policies that begin with welfare and end with re-entry into the market. The instruments of conditionality were introduced to all intents with the NASpi of 2017, which oblige beneficiaries to participate regularly in the active policies proposed by the Employment Service. Employment Centres sign, together with the user, a Pact of Personalised Service that sets out the actions aimed at facilitating entry or re-entry into the world of work. It foresees the so-called ‘presa in carico’ (taking on responsibility) of the user by the Employment Centre, at the same time binding the beneficiary to participate in its activities, or else suffer the penalty of losing unemployment status. It is a typical welfare-to-work model, which tries to tie provision of a passive policy (a subsidy), to the active participation of the unemployed user in the search for work. Re-qualification of the unemployed will be facilitated by the new Relocation allowance. The voucher is worth between €1,000 and €5,000. Individuals with at least 4 months of NASpi behind them will receive one and can redeem it at employment offices and private agencies. The allowance came into effect in an experimental form for 30,000 beneficiaries, to evaluate the efficiency and impact on the information system. Then the Jobs Act instituted the new National Agency for Active Labor Policies which, as with many novelties introduced, never acquired its own identity. The role of the body should be to co-ordinate the new public/private network of employment centres.
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Although the first concrete signs relating to active policies are relatively recent, there has indeed been movement and there are already positive experiences that serve as reference points, like the public/private network of employment services active in the Veneto, which is trialling the innovations of the Jobs Act with good results, and looks like being a reference experience for Anpal (the new National Agency for Active Policies).
Concluding considerations In terms of passive policies the direction is positive, heading towards a greater universalisation of subsidies founded on a national insurance scheme. The legislation of Cassa Integrazione has been revisited, reorganising it into a Consolidated Law and distinguishing the ‘instruments of protection during an employment relationship’ from ‘instruments of support in case of involuntary unemployment’, avoiding improper uses of the CIG and re-emphasising the importance of the Solidarity Fund. With regard to active policies, the attempted reform follows the European model of ‘flexicurity’. The implementation of the provision has not, up to now, been easy or immediate, therefore it would perhaps be premature to draw conclusions about it. It will certainly be necessary to develop an efficient mechanism of active policy measures to prevent the labor policy system being reduced to a bureaucratic machine based on mere welfarism. At this juncture it should be noted that the numbers available are not auspicious, in that today only 3% of those employed find work through employment centres. In recent months there has been a return to speaking of policy measures for income assistance with the approval by part of the Chamber and Senate of the enabling bill to fight poverty, which introduces a social inclusion income (reddito di inclusione: REI). It is an important step in the fight against poverty, but it also clearly identifies a policy line that aims at a greater universalisation of subsidies according to a welfare dynamics that goes beyond the national insurance scheme. A provision of this sort would require in even greater measure the implementation of a network of employment centres capable of creating a stable bridge between welfare and re-employment.
Bibliography “La Cassa Integrazione dopo il Jobs Act”, Michele Miscione, Dottrina Lavoro “Origine ed evoluzione delle politche del lavoro in Italia”, Angelo Marchioro, Quaderno di Lavoro “Per il nuovo paracadute decisive le agenzie private”, Agnese Morriconi, Bollettino ADAPT Decreto Legislativo 4 marzo 2015 n.22 Decreto legislativo 14 settembre 2015 n.150 Decreto legislativo 14 settembre 2015 n.148 Inps, Istituto Nazionale della Previdenza Sociale Ministero del Lavoro e delle Politiche Sociali, portale “Jobs Act, l’Italia cambia il lavoro” “Vincitori e vinti con la Naspi”, lavoce.info, 2015
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interview MAURIZIO FERRERA Maurizio Ferrera is Professor of Political Science at the University of Milan. His scientific interests mainly regard comparative politics and analysis of public policies, with a particular attention to the issues of welfare state and European integration. He took part in several Commissions and working groups of the Italian government, the European Union, the OCSE and the ILO. Currently he is the President of the Network for the Advancement of Social and Political Studies (NASP) among universities in Piedmont and Lombardy, member of the Directive Board of the Centre of Research “Luigi Einaudi” and columnist at “Corriere della Sera”. In 2013 he won an ERC Advanced Grant of five tears for a research project entitled “Reconciling Economic and Social Europe”.
by Umberto Rogna Maggi
Università Degli Studi di Torino
Professor, two years have passed since the approval of the Jobs Act, one of the most important interventions in the labor market of recent years. How do you see the reform? In evaluating the effect of a reform like the Jobs Act it is necessary on the one hand to define what the expected result was, and on the other to take into account that legislative interventions of this sort are only one of the causes that have an impact on the outcomes considered: it is therefore necessary to look at economic and demographic factors in order to avoid the error of attributing to the reform results that are the product of other processes. At present, however, there are no definitive evaluations, and the data we do have arenâ€™t sufficient for us to determine its effects. With regard to the objectives of the reform, the Jobs Act was supposed to be a kind of Italian way to flexicurity: on the one hand overcoming the dualism of our labor market (businesses with fewer than 15 employees and businesses with more than 15 employees; businesses that are highly unionized and less unionized), with the restitution to businesses of the right amount of flexibility to compete in the present European and world context. On the other hand, intervening in favor of the range of workers â€˜trappedâ€™ in co.co.co (self-employed collaboration) contracts and co.co.pro (individual project-based) contracts, offering them the opportunity of more secure employment, with a single contract with increasing security. There was the desire to incentivize job security and the propensity of businesses to invest in their own employees. We can consider that the objective of stability has been achieved: looking at the present data we see indeed that among all new contracts the proportion of permanent contracts with increasing security has grown to a significant extent. There has moreover been an increase in the number of new jobs and there are data that confirm this, although it is still too early to give a definitive evaluation of this matter.
INTERVIEW TO MAURIZIO FERRERA
Staying on the subject of the number of jobs, a criticism that has often been made of the Jobs Acts has to do with the reduction in contributions: there are many who claim that the increase in the number of jobs is relatively low if compared with the quantity of resources employed. To this low result in employment terms there is in addition the criticism of having generally reduced the rights of workers. What do you think about this? The reduction in contributions, which has been severely criticized, was simply a way of trying to adjust the non-salary costs of work to the standards of the other European countries. Italy actually has a very high non-salary cost of work in terms of welfare expenses, and this makes our businesses much less competitive in comparison with competition in other countries. There was therefore not a waste of resources, but rather an attempt to evaluate whether the reduction of this obstacle could incentivize businesses to hire. The fact that businesses have effectively increased employment as a consequence of this measure (this is admitted even by its detractors) shows that the intuition underlying it was correct. I would furthermore like to recall that those who criticize the reduction in contributions often omit to state that with pension safeguards much more is spent, with the difference that while reduction in contributions lasts only three years, the safeguards last for life. Furthermore they are not only given to those who have lost their jobs, but also to the employed. As far as the second criticism is concerned it should be remembered that an integral part of the Jobs Act was the reformation of social buffers: the creation of NASPI (New Social Employment Insurance) has led to two historic achievements. The first has to do with the length of economic security in unemployment; the second concerns instead the percentage of workers who have the right to unemployment compensation: today this is in fact greater than 90% â€“ before the reform it was some tens of points less. The Jobs Act has therefore universalized the right to economic compensation for unemployment, increasing, not reducing, rights. The certainty of having, in case of unemployment, a consistent and lasting benefit is much more important than the presence of Article 18 for a limited range of workers.
You, together with other experts, were among the first in Italy to shine a spotlight on welfare measures alternative to those provided by the State. You have given these the name of ‘secondary welfare’. Can you explain what they are about, and how many of them there are? I would first of all like to make a clarification: secondary welfare should not be thought of as an alternative measure, but as a supplementary one. It is not in fact a system that aims at being a substitute for state welfare: it would be wrong to think this. It is however clear that the so-called ‘primary welfare’ needs to be rationalized in terms of fairness, as is already being done – one only needs to think of the survivors’ pensions without income threshold, or disability pensions. In other contexts, though, primary welfare needs to be recalibrated: I am thinking of the reinforcement of security against risks such as maternity, the erosion of human capital, or lack of self-sufficiency. Primary welfare, although indispensable, is hindered by spending limits, and in Italy this is around 30% of GDP, in line with the European mean. To think of spending more comes up against the limitations of fiscal pressures, already high, and of the enormous public debt. Therefore, it is possible to imagine a secondary welfare alongside primary welfare, funded by non-public resources, like for example private insurance and foundations. There are then possible combinations between public and private, mixed forms of welfare. I am thinking for example of the latest stability legislation, in which banking foundations earmarked resources to add to state ones, with the aim of fighting educational poverty. There are therefore new possible types of interventions by public and private agencies, with very positive results. Secondary welfare basically produces a situation of optimal solutions: the resources employed don’t reduce the welfare of anyone. Not that it is without problems because of this: for example, it will be easier to find resources for secondary welfare in the north than in the south, and this could exacerbate inequalities that already exist.
INTERVIEW TO MAURIZIO FERRERA
A critical aspect of secondary welfare is that it primarily has to do with big businesses, the only ones with the necessary means to provide additional services to their own employees. In a country like ours, characterized by small and very small businesses and high levels of unemployment, these measures therefore create significant distortions, tending to increase the security of those who are already secure. How is it possible to intervene in this situation? It is possible to intervene, but it is complicated. It requires that the small businesses unite in networks, but this isnâ€™t easy, given the dilemmas of collective action: no one takes the initiative, because no single entity is willing to face the necessary costs. An intervention is therefore needed from a larger agency, such as a local Council, a Region, a foundation, or even a large business, which makes its know-how available with the aim of facilitating the emergence of such networks. For example, a company crĂ¨che; an unused premises could be restored by the large business, and the children of the employees of the small businesses that are allied to the larger one could have access to it on payment of a small contribution. Experiences of this sort are already taking place with success. I am thinking for example of the Luxottica initiative at Agordo, where an outpatient dental clinic was created at affordable prices for its own employees, with which the local Council subsequently entered into agreement, which led to the extension of the service to all citizens. Another interesting development is that of mutual health funds: non-profit societies can be formed which fill the gaps in the national health system. A last example is the repayment of prescription charges by private insurance companies, a laudable system that is already in operation in countries like France, and which Italy could adopt with success.
Italy is a country characterized by a very low birth rate and in consequence by a sharp demographic decline. What policies should be put in place to reverse this tendency? Should primary welfare deal with it? The demographic decline is primarily due to the cost of having children: often the mother is forced to stop working, since the pay doesnâ€™t compensate for the expenses involved, as for example the fee for a nursery school. The absence of monetary transfers and free (or at least subsidized) services constitutes a strong brake on birthrates, as well as severely penalizing female employment and keeping the number of two-income families very low, which in Italy is about half the rate of other European countries. This situation is certainly negative for the aspirations of the young: indeed the polls tell us that young Italian couples would like to have at least two children. Nonetheless, it also represents a serious problem for the country, because to keep a population stable requires a mean of 2,1/2,2 children per couple. Otherwise imbalances arise between the newly born and the elderly, with a consequent demographic fall. We therefore need policies of monetary transfer that reduce to more or less nothing the cost of having children, as is the case for example in other Northern European countries. These are certainly the duties of primary welfare, but as we know there is a problem of funds. Italy already spends on this front as much as other European countries, therefore to find additional resources it would be necessary to take them away from other sectors. This brings us to the problem of the application of public resources, which are too often used for pension payments. It would certainly be more useful if the country used public expenditure otherwise, in a way that would make the State system more efficient.
INTERVIEW TO MAURIZIO FERRERA
8 Reconciling social care, life and work in the Jobs Act by Ornella Darova
Università Bocconi & IBL
and Filippo Palomba
Università Bocconi & IGIER
ABSTRACT Reconciling social care, life and work is a fundamental theme in the debate about policies that fight against disparity between men and women. The Jobs Act intervened on various fronts to improve these policies, but in the complex and comprehensive picture of parental leave there are still serious shortcomings in Italy, which the reform doesn’t seem to provide for. The Jobs Act has certainly ensured greater flexibility in parental leave, even extending the period of the child’s life in which it can be taken, and it increased the access period for parental allowance. Nevertheless, when it comes to obligatory paternity leave, it is not a courageous intervention. A close comparison with the other European countries shows how the reform did indeed put forward serious proposals, but it is still far from the example of the best States. However, the demonstrated impact of some policies could benefit the labor market, which includes Italian women in an unequal way compared to men, and also help to turn direction in a country where paternity leave has not been much used historically, with evident consequences also on the human capital of children.
Introduction The Jobs Act introduced a series of reforms about the measures for reconciling social care, life and work contained in the Law Decree 80/2015. The principal modifications brought about are: greater flexibility given to workers in managing their working timetable during their children’s first years, brought about through the introduction of the ability to request parental leave within a period up to the end of a child’s twelfth year (as opposed to eight in the previous guidelines); and the extension of the right to enjoy parental allowance, equal to 30% of salary, which went from three to six years from the child’s arrival in the family. We will however add some reflections and policy suggestions, in particular with regard to paternity leave. Our analysis will be undertaken on a purely qualitative plan. This choice was prompted by the lack of up to date data about the subject, and by our conviction that the reform has not yet been completely internalised into the decision processes tied to the family sphere. The reasonable assumption we make here is, therefore, that a clearer and sharper effect of the reform dealt with here can be observed in the data of the two-year period 2016-1017, which are obviously not yet available. Nevertheless, this doesn’t prevent us from hypothesising about a theoretical impact that these changes to the guidelines will have on the Italian labor market. Another necessary premise is a lexical specification that it will be important to keep in mind in dealing with this subject. Maternity leave, which is basically a measure for the health and wellbeing of the woman, is distinct from paternity leave, and from parental leave. The difference is significant, in timeframe and in earnings, as well as objective. To give a more precise definition of this difference, Article 2 of the Law of 30 December 1971 states: •
maternity leave means the obligatory abstention from work by the working mother;
paternity leave means the abstention from work by the working father, taken instead of maternity leave;
parental leave means the optional abstention from work by either the female or male worker. RECONCILING SOCIAL CARE, LIFE AND WORK IN THE JOBS ACT
Next, the article is structured as follows: a first, purely descriptive section introduces the guidelines for leave tied to reconciling work and family; there is then a section dedicated to the economic impact of leave; a part dedicated to the rights of the working father; and finally, some concluding considerations.
General framework of the current guidelines Before entering into the specifics it will be useful to try to provide a brief but comprehensive description of the present situation regarding leave, given the number of laws that have touched upon it in recent years. Returning to the law of 30 December 1971, we can identify three legal instruments: Maternity leave Maternity leave is the period of obligatory abstention from work allowed to a female worker during pregnancy or after birth. During the period of obligatory absence the worker receives an economic benefit in place of salary. The right to leave and to the benefit associated with it is given also in cases of adoption or receiving custody of minors. It comprises two months before the presumed date of birth and three after the actual date of birth. During the period of maternity leave the worker has the right to receive an economic benefit equal to 80% of daily pay calculated on the basis of the last pay period finished immediately before the beginning of maternity leave, and therefore, usually, on the basis of the last month of work before the month when leave begins. Obligatory paternity leave (I) Under certain specified conditions that prevent a mother from benefitting from maternity leave, the right of abstention from work and its related benefit is given to the father (paternity leave). These conditions are: the motherâ€™s death or grave illness; a motherâ€™s abandonment of the child; a father having exclusive custody of the child. The duration and remuneration are identical to those cited above for maternity leave.
Obligatory paternity leave (II) The law of 28 June 2012, no. 92, introduced experimentally, for the three-year period 2013-2015, the measures supporting parenting, extended also into 2016 by law 208/2015 (Stability Law for 2016) and subsequently provided: Working employee fathers have, within five months of the birth of a child, the obligation to abstain from work for a period of two days, taken together or separately. This right is given only for births, adoptions and gaining custody taking place in 2016. For events taking place before that year, there abstention was obligatory for only one day. The right of the working father is established as a right that is independent from that of the mother, and can be enjoyed even during the post partum obligatory abstention of the mother. To use it, the father is entitled to an allowance equal to 100% of his salary. For the year 2018 it is envisaged that the number of obligatory days will increase from two to four days. Moreover, in a footnote of the Economic and Finance Document (DEF), published by the Ministry of the Economy and Finance 12 April 2017, it is stated how the days of obligatory paternity leave can be ‘increased to five in substitution for the mother’s, with regard to the period of obligatory abstention due to her.’ Optional leave (Not extended by DEF 2017, therefore no longer in force) The right of the working employee father who adopts or has custody to optional leave of one or two days, separately or together, depends on the choice of the working mother not to use the same amount of her maternity leave, with a consequent anticipation of the final end of the mother’s post partum leave for a number of days equal to the number of days taken by the father. This optional leave can also be taken by the father at the same time as the mother’s leave. It is specified however that optional leave should be taken by the father before the end of a child’s fifth month independently from the ending of the obligatory abstention period due to the mother given a prior renunciation of it for an equivalent period (one or two days). It is as well specified that optional leave is due also if the mother, though having the right to it, doesn’t take advantage of maternity leave. RECONCILING SOCIAL CARE, LIFE AND WORK IN THE JOBS ACT
The working employee father has the right, for the days of optional leave, to a daily allowance against INPS, equal to 100% of his salary. Parental leave Every parent has the right to abstain from work for every child under the age of 13. The relative parental leave of parents cannot exceed ten months in total. The working mother, once the period of maternity leave has been taken, has the right to abstain from work for a continual or broken period of not more than six months. The working father, has, from the birth of the child, the right to abstain for a continual or broken period of not more than six months (possibly extended to seven). For the period of parental leave they can make use of the parental leave allowance: within the first six years of the child’s age for a maximum total period (mother and/or father) with the value of six months of 30% of average daily salary calculated on the basis of the salary of the month preceding the beginning of the allowance period; from six years and one day to eight years of a child’s age, if the parents have not taken advantage of it in the first six years, or for any part they did not use during that period, an allowance of 30% will be given only if the individual salary of the parent is less than 2.5 times the annual amount of the minimum pension payment; from 8 years and one day to 12 years of a child’s age there is no leave allowance.
Comparison with other countries All OECD countries, with the exception of the United States, offer maternity allowance. Over half of these also offer payment for paternity leave. Parental leave, available to both fathers and mothers, is offered by 23 OECD countries but there are still few fathers who take advantage of this service. Canada and Israel don’t provide paternity leave. Various OECD countries make a complete framework of work-family reconciliation, offering maternity, paternity and parental leave specifically for fathers: they are Belgium, Finland, France, Korea, Luxembourg, Portugal and Sweden. Norway, in particular, was the first country to institute paternity leave, in 1993. Today, 97% of fathers take advantage of it. It is one of the most flexible and generous systems, with 35 weeks of maternity leave paid at 100% or 45 weeks at 80%, and up to 10 weeks of paternity leave, to which is added 46 weeks to divide between the two parents at 100% or 56 at 80%.
The Impact of Parental Leave Studying types of parental leave has a double importance. On the one hand, because they have an impact on the participation of women in the labor market and on their employability. On the other, because the length and quality of time spent by parents with children have an effect on the development of the children, on their health, their cognitive ability and their behaviour (Pronzato, 2009).
RECONCILING SOCIAL CARE, LIFE AND WORK IN THE JOBS ACT
Some studies (Del Boca, Pasqua and Pronzato, 2009; Del Boca, 2015) have demonstrated how the length of parental leave has a positive effect on the participation in the labor market, particularly in the case of women, facilitating the continuation of their working history. Nevertheless, the effects of leave are not linear. An excessive length of leave can have the opposite effect, to the point of causing the parent (again, particularly the woman) to leave the labor market, or lose a significant amount of salary (Ruhm, 1998). The period spent out of the labor market can, in fact, undermine a parent’s skills, making them obsolete, and can become a barrier in the development of a career. In the countries of southern Europe, including Italy, not only do a large proportion of women abandon their own job during their children’s early years, but most significantly, they very often don’t return to the market. The women who most need to be assisted to re-enter the ranks of the employed are those who work in the public sector, in large companies or in places where there are more child care services, like kindergartens (Bratti, Del Bono e Vuri, 2005). Parental leave has a proven positive effect on the health of children, in particular on weight at birth and immunisation (Tanaka, 2005), which also involves the best possibility for women to breastfeed their children. At the same time, with regard to a child’s cognitive development, Baum has shown a negative effect of work for mothers during the first year of a child’s life (Baum, 2003), and Ermisch and Francesconi have likewise demonstrated the importance of the parents’ presence (Ermisch and Francesconi, 2002).
Rights (and duties) of the working father Having analysed the impact of leave in a broad sense, we think it is necessary to concentrate on the rights of the working father, choosing as the first plan of analysis that of the equalisation of the rights of working fathers and mothers. Up to now, the working father, subject to the exceptional circumstances spoken of above, is able to enjoy two days of obligatory leave plus two optional days. As mentioned before, all of the (though small) changes made to this instrument are due reforms different than the one which is the subject of analysis here. The
Jobs Act therefore seems not to meet the requirement of greater participation by fathers in the care of children and the passing of legislation that would be gender neutral, in order to give working parents specific rights to taking leave (Recommendation 92/241/ CEE), let alone initiating or stimulating a movement in this direction. All the changes brought about related to parental leave came about in parallel for men and women, thus leaving the gap between the two sexes practically unchanged. Moving on to the purely economic aspect, in Italy the right to paternity leave has not historically been used much. Paternity leave is a central factor in the culture of division of labor in the care of children, favouring a more uniform use of time dedicated to newborns within the family. The first steps in this direction, by mutual agreement with what is required by Recommendation 92/241/CCE, were made with the approval of the budgetary law of 2017 with extension in the two-year period 2017-1018 of measures introduced in 2013. In 2017 the working father will have two days of leave, which will rise to four in 2018 (2017 Budgetary Law, Art. 48 Section 2)*. This small rise, however, still keeps us far from the OCSE average. We must therefore ask ourselves whether it is really a good idea to hope for longer paternity leave, as happens in the majority of other countries. A first justification one might give is building up the human capital of children: the more time parents dedicate to children, the greater impact on their human capital. Recent OCSE data show how, in Italy, Italian fathers aged between 25 and 44 dedicate on average two hours less to child care than women. Some studies on the development of human capital (Heckman 2007) have shown how investment in human capital is essential in the first years of a childâ€™s life, because it profoundly assists their development in the years to come. Considering the present guidelines, two obligatory days on full pay are certainly not enough to reorganise the balance within the Italian family and to favour the development of more solid father-child relationships. According to Del Boca, the opti-
These four compulsory days are the same mentioned in the 2017 DEF, and so, contrary to the two optional days, these have not been cancelled. RECONCILING SOCIAL CARE, LIFE AND WORK IN THE JOBS ACT
mal parental leave should have three characteristics: individuality, non-transferability and good pay. It is clear that the guidelines at present in force, ‘2+2’, cannot satisfy these characteristics. Although seven weeks of pay completely credited, as is the case in Norway, would represent an ideal scenario, one can’t expect to see significant results with only two obligatory days of leave. In addition, it seems logical why the percentage of fathers who voluntarily take advantage of leave is still very low (12%), though growing slightly (INPS data, updated in 2014). In addition to the lack of incisiveness of the formula of two obligatory days and two voluntary days, there might also be another explanation for such low percentages. Considering that on average fathers of families earn more than mothers (Oaxaca 1973), it seems clear how the choice about who should take leave from their job during the first years of a child’s development tends to fall more frequently on the woman, whose opportunity cost is lower compared to her partner. According to Bygren and Duvander, the fact that fathers limit their own use of paternity leave could be put down to the (not necessarily monetary) costs of being absent from work (Bygren and Duvander 2006). Moreover Berggren and Duvander show how often it is women who make the final decision about how parental leave should be shared by spouses (Berggren and Duvander 2003). This, combined with the differences in gender that there are in the labor market, leads to the conclusion that compared with men, women have less to lose in taking a long period of leave (Abrecht, Edin, Sundström and Vroman 1999). The conclusion we reach is therefore that, in order to have significant effects in terms of developing the human capital of children, working fathers should be guaranteed a greater interval in which they would receive compensation for salary at least equal to the opportunity cost. Furthermore, equalising the number of days of leave requested by both partners could serve to avoid falls in productivity due to prolonged absence from work (Lalive and Sweimüller 2009) and assist the allocation of time between work and the care of children in Italian families.
Other reforms contained in the Jobs Act Another important result of the Jobs Act is the concession to parents of children between 0 and 12 years old – instead of 8 as previously – to take advantage of parental leave on a daily or hourly basis, a possibility not envisaged by collective bargaining. A greater flexibility in working timetable is a fundamental aid so that spouses, particularly women, can more efficiently reconcile the responsibilities of work with family needs (European Commission, 2015). This right, in fact, is given to both working mothers and fathers, once the obligatory period of absence is passed; in both cases, as already mentioned, the maximum limit extends to ten months. Despite the fact that the number of days is very low, especially for fathers, the idea of flexibility is certainly a step forward in favour of a more efficient management of time for Italian families. Finally, another fundamental point is that of benefit for parental leave. Following the changes brought about by the provisions contained in the Jobs Act, the period of paid leave was extended from three to six years from a child’s birth. The economic benefit continues to amount to 30% of salary. In the case where a worker’s individual salary is less than 2.5 times the minimum amount of general obligatory pension, the economic benefit is given up to a child’s eighth year.
Conclusions Valuing the rôle of women in the labor market is a fundamental principle for the European Union, because of its positive impact on the economic wellbeing of countries, on working conditions, on decisional aspects of creating a family and on demography. There are various studies on economic loss due to the gender gap, but we think it is worth citing the International Monetary Fund report, ‘Fair Play: More Equal Laws Boost Female Labor Force Participation’, which estimates a growth of 15% of GDP in Italy where the gap is rectified (IMF, 2015). According to the BES report of 2016 published by Istat, the gender gap (measured as difference between levels of employment) returned to increasing the advantages of men even though it had reduced during the crisis, with a gap of 20 percentage poinRECONCILING SOCIAL CARE, LIFE AND WORK IN THE JOBS ACT
ts compared to 19 in 2015. The disparity in terms of lost participation in work remains high: women who want to work but donâ€™t manage to constitute 26%, against 19% of men. Those who are involuntarily part-time are increasing regardless of sex, but in the case of women we are speaking of a very accentuated phenomenon. In particular, we are talking about 19.4% as against 6.4%. Concentrating more specifically on the theme of reconciling work and family, we read, again in the BES report, how although a reduction was recorded between levels of employment between women with pre-school aged children and those without children, the problem remains significant above all for women with low levels of education and immigrant women. The asymmetry between domestic duties for couples has also reduced, but the phenomenon is certainly persistent. Italy therefore finds itself being a country with low levels of fertility (1.4 in 2015, according to the World Bank), and with a low level of female employment, in particular for mothers (among the lowest in Europe, with 55% according to the OECD). However, at the same time, in Italy there is not a training gap between men and women. Parental leave, in this framework, represents a fundamental instrument, guaranteeing both parents the possibility of spending more time with their children, and playing a greater active role in their education. Paternity leave, in particular, allows the rebalancing of the distribution of the domestic burden between the couple.
Bibliography Albrecht, J. W., Edin, P. A., Sundström, M., and Vroman, S. B., 1999. “Career interruptions and subsequent earnings: A reexamination using Swedish data”. Journal of Human Resources, vol. 34, pp. 294 – 311. Baum, C. L., 2003. “Does Early Maternal Employment Harm Child Development? An Analysis of the Potential Benefits of Leave Taking”, Journal of Labor Economics, vol. 21(2), pp. 409-448. Berggren, S. and Duvander, A., 2003. “Family assets—Time and money. Social insurance in Sweden”. Stockholm: National Social Insurance Board. Bratti, M., E. Del Bono and D. Vuri, 2005. “New Mothers’ Labor Force Participation in Italy: The Role of Job Characteristics.” Labor, CEIS, vol. 19(s1), pp. 79-121. Bygren, M. and Duvander, A., 2006. “Parents’ Workplace Situation and Fathers’ Parental Leave Use”. Journal of Marriage and Family,Vol. 68(2), pp. 363–372. Del Boca, D., 2015. “Child Care Arrangements and Labor Supply”. Inter-American Development Bank Working Paper Series; 569. Del Boca, D., 2015. “Perché ai padri (e ai bambini) serve un congedo più lungo”, lavoce.info. Documento di Economia e Finanza (DEF 2017) Del Boca, D., Pasqua, S. e Pronzato, C.D., 2009. “Motherhood and Market Work Decisions in Institutional Contexts.” Oxford Economic Papers, Oxford University Press, vol. 61(suppl_1), pp. 147-171. Del Boca, D., Pasqua, S. e Suardi, S., 2016. “Child Care, Maternal Employment, and Children’s School Outcomes. An Analysis of Italian Data”. European Journal of Population, vol. 32(2), pp. 211229.
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European Commission, 2015. “Labor market participation of women”. Heckman, J., Masterov, D., 2007. “The Productivity Argument for Investing in Young Children” Review of Agricultural Economics, American Agricultural Economics Association, vol. 29(3), pp. 446-493, 09. IMF, 2015. “Fair Play: More equal laws boost female labor force participation”. James-Burdumy, S., 2005. “The Effect of Maternal Labor Force Participation on Child Development”, Journal of Labor Economics, vol. 23(1), pp. 177-211. Lalive, R. and Zweimüller, J., 2009. “How Does Parental Leave Affect Fertility and Return to Work? Evidence from Two Natural Experiments”, The Quarterly Journal of Economics,Vol. 124(3), pp. 1363-1402. Legge 28 Giugno 2012 Legge di Bilancio 2017 Oaxaca R., 1973. “Male-Female Wage Differentials in Urban Labor Markets”. International Economic Review, Vol. 14(3), pp. 693-709. OECD, 2016. “Parental leave: Where are the fathers?”. Policy brief. Pronzato, C. D., 2009. “Return to work after childbirth: does parental leave matter in Europe?”. Review of Economics of the Household, vol. 7(4), pp. 341–360. Ruhm, C. J., 1998. “The economic consequences of parental leave mandates: lessons from Europe”. Quarterly Journal of Economics, vol. 108(1), pp. 285-317. Tanaka, S., 2005. “Parental leave and child health across OECD countries”. The Economic Journal, vol. 115(501), pp. f7-f28.
interview DANIELA DEL BOCA Daniela Del Boca is one of the leading experts in Italy on family economics. She is Professor at the University of Turin, Visiting Professor at New York University, Director of CHILD at the Carlo Alberto College (of which she is a Fellow), Doctoral Director in Vilfredo Pareto Economics, Fellow of CEPR and IZA. Daniela Del Boca, together with Paola Profeta, addressed the Public and Private Work Commission of the Chamber of Deputies on the theme of balancing work and family in April 2015, at the time of the labor reform.
by Ornella Darova
UniversitĂ Bocconi & IBL
and Filippo Palomba
UniversitĂ Bocconi & IGIER
The most delicate point of the Jobs Act regarding balancing work and family seems to be paternity leave. What is the benchmark that Italy must set itself, and what are the steps to take here? The Jobs Act added a day to obligatory paternity leave. Obviously two days are not enough, but if nothing else it gives a signal that the problem is finally gaining importance in the policy debate. However, it will be almost impossible to initiate a serious reform here unless the cost of work is looked at first, in particular that attributable to the tax burden. It is obviously very expensive to pay fathers 100% of their salary. Certainly the Scandinavian countries, like Sweden and Norway, provide laudable examples here, and they should be a model of reference. There is an important body of literature that demonstrates that in some careers, in particular where there is a strong masculine work culture, there would be a backward view of a father taking advantage of parental leave. Various studies, some conducted by yourself, show nonlinear effects of parental leave. In particular, it seems that leave periods that are too long can be harmful for female employment. Can you explain the reasons for this, and the policy recommendations to deal with it? To begin with, it should be highlighted that even though an employer doesnâ€™t have to pay a worker who takes leave, the fact that s/he has to manage without that worker entails a not insignificant cost. And this could certainly work against leave periods that are too long. The intensive utilisation of maternity leave too frequently takes a woman out of the labor market at a central point in her career. One solution is making timetables more flexible, for example through working part-time. In Sweden flexible timetables are granted for leave periods, and Italy followed this example with the Jobs Act. Such flexibility could become invaluable to a couple, to guarantee a balance in the division of time between husband and wife in looking after the family. And flexibility also translates into being able to dilute parental leave over time; the Jobs Act has taken a step forward here also. Another merit is that it extends this right to the self-employed.
INTERVIEW TO DANIELA DEL BOCA
Can one estimate the effect of parental leave on fertility? There are serious problems of endogeneity, for instance it is very difficult to give a strict estimate of the impact here. In particular, with regard to the Jobs Act, it would be too complicated to do so in any case. Both because only two years have passed since its inception, and also because in Italy interventions are never made in a policy evaluation culture, which would make rigorous analyses possible before and after the intervention. How is the division of time spent by husbands and wives in looking after the family evolving in Italy? It is improving. In particular, it is improving among better trained couples and younger couples. However the situation is stable (and totally imbalanced, weighing more on women) for families with older parents in the South. Italy is very backward in this regard, especially when compared in an international context. The OCSE data clearly show that men in Italy dedicate on average more than three hours a day less to looking after the home than women. The OCSE mean is a gap of two hours. Over the years, the total time dedicated to looking after the family remained stable, but increasingly less time was dedicated to housework, and increasingly more to child care; this is an excellent sign, given the importance of developing their human capital.
9 Occasional work and the experience of vouchers by Francesco Beraldi and Federico Boscaino
UniversitĂ degli Studi di Torino & Collegio Carlo Alberto
ABSTRACT Following political events that will be recalled later, in March 2017 vouchers were eliminated from our legislative panorama. However the subject remains a hot topic given that the government has undertaken the framing of a new instrument for legalising temporary work. In this context, the following chapter aims to demonstrate the dynamics of the use of â€˜buoni lavoroâ€™ (vouchers), focusing on legislative interventions which, starting with the Biagi Law, have been introduced and enlarged in their scope of use and on the numerical dynamics that these interventions have created. An identikit of workers and employers who use this instrument will also be outlined, with the additional aim of investigating the possible use of vouchers as substitutes for more stable contracts.
Finally, particular attention will be paid to the relationship between vouchers and unregistered work, to try to understand how much the use of this instrument has facilitated the emergence (or the covering up) of undeclared work.
Occasional work and the objective of vouchers By occasional work is meant employment provision that does not fall into the contractual typologies of regular work or self employment, in that it is characterised by the temporary nature of the employment provision. The regulations for occasional work, implemented from 2003, have always had among their distinctive characteristics an economic limit of provision, at present €7,000 a year per worker and with a ceiling of €2,000 for each employer, established with the aim of identifying a boundary between occasional and regular work. Payment for this provision is made through the acquisition by the provider of an INPS ‘buono del lavoro’, more commonly called a voucher. Taking into account that our economy has a multiplicity of small employment provision delivered temporarily, often in a family context, the legislator introduced and progressively liberalised this instrument, giving the employer a streamlined instrument to legalise this type of activity. Vouchers thus have a double objective: to protect workers who undertake this provision, who would otherwise be unprovided with insurance and contribution cover, and to bring illegal work to the surface; this still represents an enormous structural problem for our economy and the objective of mitigating it through the use of vouchers has turned out to be at least in part unrealistic. The instrument, as just described, will remain available for use by employers until the end of 2017.
OCCASIONAL WORK AND THE EXPERIENCE OF VOUCHERS
Vouchers from the Biagi Law to the Jobs Act Vouchers, then defined as tickets for occasional work provision, were introduced in our legal system during the third Berlusconi administration in the context of the widest scope of the Biagi Law, from the Second Heading of Legislative Decree 276/2003, which defined occasional work as ‘a working activity that is only temporary, provided by workers subject to the risk of social exclusion or in any case not being part of the labor market.’ A characteristic that was immediately introduced was that use of vouchers did not bring about a change in the occupational status of the provider. The field of application is moreover limited, beyond the set economic ceiling of €3,000, from two further perspectives: in terms of the categories of who can provide occasional work – the most important categories included are students, pensioners, and those unemployed for more than one year – and in terms of the typology of the activity that can be undertaken, with stringent requirements that it be temporary. The regulations however remained unimplemented until 2008, when the Prodi government, at the end of its mandate, implemented them with the decree of 12 March of the Ministry of Employment and Social Welfare, first initiating experiments of the instrument, initially limited to provision of temporary work in the context of the seasonal grape harvest. At the same time, the decree raised the limit of workers’ pay to €5,000 a year per employer and eliminated the restriction of 30 days originally envisaged by the Biagi Law. People who could provide work remained exclusively students and pensioners. After a few months, with the Decree Law no. 112 of 25 June 2008, there was a partial liberalisation: first the objective and subjective restrictions on agricultural work were relaxed in favour of businesses which had an annual turnover of less than €7,000, and subsequently commercial, tourism and service activities were included. Apart from minor modifications, the operational character of vouchers remained unchanged: every voucher represented a nominal value of 10 euros, of which €7.50 is pay, €1.30 is put towards pension contributions, 70 cents towards injury at work and 50 cents pays the management cost of the concessionary body, the INPS.
In 2009, two interventions again widened the objective and subjective areas envisaged, including among other things local entities among potential employers. Between 2010 and 2012 the use of vouchers was facilitated by the introduction of three new channels of distribution: tobacconists [in Italy tobacconists are licensed to provide various government permits, tickets, stamps etc.], Popular Banks and post offices, which were added to the two channels initially envisaged (online procedures and receiving paper vouchers at Provincial INPS offices). These first measures constituted an important period of growth in the use of vouchers, set within the period from 2009 to 2012, when the phenomenon was still in an embryonic form. A later and important step in the direction of liberalising the instruments of vouchers was Law 28 of June 2012 no. 92 (the so-called Fornero labor reform). This reform repealed the subjective and objective restrictions, and so the range of potential users was widened to all workers and all typologies of temporary work provision. As a counterbalance to this strong liberalisation the net economic limit was restricted: the ceiling of €5,000 a year no longer applied to every individual employer, rather to all employers together. During the Letta government the legislature inaugurated the chapter in the history of vouchers in the direction of further liberalisation. With the Decree Law 76/2013 the words ‘of purely temporary nature’ were eliminated: the provision of occasional work thus came to be defined solely with respect to economic limits, not its temporary and sporadic character. It was this lack ‘of any reference to the temporary nature of the work provision as a structural prerequisite of the instrument’ that brought about the acceptance of the referendum question regarding the abolition of vouchers on 11 January 2017. These liberalisation measures led to the most marked phase of growth in the use of vouchers, set between 2012 and the middle of 2016.
OCCASIONAL WORK AND THE EXPERIENCE OF VOUCHERS
The Renzi government, in the context of the wider reform of the Jobs Act, intervened about vouchers with three innovations: the extension of the annual maximum payable by voucher to €7,000 (retaining the limit of €2,000 per single employer); the prohibition on using vouchers in public procurement; and the most important change, contained in decree 185/2016, the obligation of the employer to communicate to the Employment Inspectorate at least 60 minutes before the provision of work, not only which worker was involved but also ‘the place, day and hour of the beginning and end of the provision’. This communication could be made by SMS or email. This intervention was designed to limit the use of vouchers to cover illegal work. If one of the objectives of this instrument was to legalise occasional work, in reality vouchers too often did allow cover for illegal work, given that before the Jobs Act it was enough for the worker to register within a given period and use a single voucher to cover work provision that actually lasted much longer. The aim of these regulations was to eliminate this phenomenon through strict traceability, and it was perhaps this restriction that signalled the end of the long growth of the use of this instrument, leading to a stabilisation, if not a contraction, of the use of vouchers.
The political debate and cancellation In recent years the instrument of vouchers has been at the centre of a fierce debate that followed the labor reforms, constituting one of the points of conflict between the government and social partners, and so being elevated into a symbol of the destabilisation of work. Since the reforms progressively liberalised the use of vouchers, the trade unions denounced them as an indiscriminate extension of the instrument that favoured the insecurity of workers and their decreased protection, leading in addition to severe inequality of treatment with workers who undertake similar tasks under a standard contract of employment. In July 2016 the CGIL, the largest Italian trade union, deposited a petition with 3.3 million signatures in support of three referendum questions about the regulations of the labor market, and specifically the modifications introduced by Article 18 of the
Statute of Workers in the Jobs Act; responsibility towards workers in procurement offices and the abolition of vouchers themselves. The changes to vouchers envisaged by the Jobs Act were in reality not thought to be particularly important, but the law that had introduced them completely rewrote the regulations that had previously governed them, thus making it possible to completely cancel this instrument, which had been introduced more than eight years previously, by abolishing some of the articles of the Jobs Act. Of these three questions the Advisory Council, meeting on 11 January 2017, only accepted those about procurement and vouchers, rejecting the question about article 18, which was probably the most important of the three. Despite this, the referendum was a menace to the fragile political stability of the government, which was therefore at pains to defuse this bomb. Government and Parliament in fact made the first move on the referendum vote, which was programmed for 28 May, by repealing the three articles of Legislative Decree 81/2015 concerning the referendum and so the elimination of vouchers. A cancellation that would however take effect from 2018: for all of 2017 employers could still use vouchers already acquired. This provision, beyond its appropriateness, undoubtedly left a regulatory void in the regulations on occasional work, so creating great difficulties for businesses as well as the risk of an increase in illegal work. Therefore the government faced the difficult task of tracing a path towards a new instrument that would be able to respond to the need for flexibility for businesses, while at the same time keeping in mind the requirements expressed by the social partners, in order to avoid dividing the country once again on such a delicate subject. Among options on the table was the possibility of imitating the German model of mini-jobs, which, compared to the old vouchers, provided better pension and insurance cover, or the French model of the labor cheque, which would however be limited to family contexts, greatly limiting the power of the instrument â€“ in 2016 3% of vouchers were commissioned by families.
OCCASIONAL WORK AND THE EXPERIENCE OF VOUCHERS
The numbers of vouchers: was it a real boom? In the light of the numerous legislative interventions described above that over time regulated the instrument of vouchers, we should now take time to consider what the numerical dynamics of the phenomenon were. The first phase starts with 2008, the year that vouchers were introduced, to 2012. In the first year after they were introduced, which was primarily an experimental period, the number of vouchers sold was a little above half a million (535,000). Subsequent years, which saw a progressive relaxation of restrictions in the use of vouchers, were characterised by a slow but progressive spread of the instrument; the enormous levels of growth (more than 250% in 2009 and 2010) are typical of a phenomenon in embryonic phase and hide a scale that was still extremely reduced, that in 2011 involved only 200 thousand workers. The second phase was the period that followed the Fornero reform, up to the first half of 2016. In this period, thanks to the substantial liberalisation introduced to the reform, there was a boom in the spread of vouchers. Sales passed from the 23 million of 2012 to 134 million in 2016.
The beginning of the third phase took place following August 2016, until the decree of cancellation. The month of August, as in the previous year, was characterised by a contraction in voucher sales. In contrast to 2015, which saw a strong recovery in sales in the period from September to December, autumn 2016 saw a
progressive decline in voucher sales. Having reached a maximum of 13.2 million in July 2016, they reached a value of 8.8 million in January 2017 (a contraction of 32%), bringing them back to around the levels observed in January 2016.
The cause of this phenomenon seems to be the important regulatory innovations introduced with the decree of 24 September 2016 and made effective from 1 October, which made the traceability of vouchers much tighter. The INPS itself reported that â€˜the strong downturn in growth, even more marked from October 2016, might also reflect the effects of the legislative degree which introduced the obligation of prior notification of the timetable for work provision undertaken.â€™ But to understand the real scale of the boom that preceded 2016 it is necessary to analyse the data not only in terms of absolute value, but also in relation to the total scale of the Italian labor market. A first datum to take into consideration is that of the number of workers who used vouchers. This datum, which was 216 thousand in 2011 (a value equal to 0.96% of the all people employed in Italy), reached 1.3 million in 2015 (6.1% of those employed). But thinking that workers with vouchers could represent over 6% of our work force would be deceptive and would indicate a phenomenon larger than it really was. The number of vouchers
OCCASIONAL WORK AND THE EXPERIENCE OF VOUCHERS
per worker in one year was in fact only 63, a value that remained more or less stable in the course of the last few years, and therefore it would be more appropriate to consider the evolution of the relationship between hours worked with vouchers with the total of hours worked in Italy. This datum, which effectively saw a rise directly attributable to the boom in voucher sales, did not however reach particularly elevated values. In 2016 the hours worked with vouchers represented only 0.35% of the total hours worked in Italy. This is probably the most illustrative datum for understanding the voucher phenomenon and to reduce worries about the explosion in the use of this instrument, which led to its cancellation. Though monitoring, preventing abuses and the correct regulation of occasional work should remain important points of reference, vouchers â€“ even presupposing possible abuses of them â€“ surely does not represent the biggest problem of the Italian labor market.
Identikit of workers One of the most debated points on the subject of vouchers is their possible use as substitutes for more stable contracts, for example to pay newly hired young people. Using source information from INPS for the end of 2015, we will try to investigate this phenomenon, firstly looking at what might be the distribution of the use of vouchers according to the occupational status of workers, in decreasing order: EMPLOYED in private non-agricultural businesses: equal to around 29% of the total (around 400,000 workers), is by far the most numerous group;
SILENT: around 23%. Of these 40% in 2014 turned out to be active (employed or in receipt of allowance)
RECEIVING ALLOWANCE: (in 2015 most of these received Aspi, MiniAspi and Naspi, and the rest CIG) around 18% (252,000);
NEVER EMPLOYED: equal to 14%; primarily young people with an average age of 23 years.
PENSIONERS: 8%; of which 75% were old age pensioners;
EMPLOYED OTHERWISE: equal to 8%. These are domestic workers, supply workers, agricultural workers and the self-employed.
In order to make a complete analysis of occasional suppliers of work it is moreover necessary to analyse the historical relationship between the numbers of workers and their average age (Figure 9.4) and the division of workers into classes by age (Figure 9.5) From the data represented above it is easy to see how the enormous increase in the number of vouchers collected was accompanied by a constant lowering of the average age of users, going from around 60 years old to just over 35. This phenomenon is perceptible also in the division of working classes: the number of pensioners fell to under 10%, with a net increase of workers between 30 and 50 years old. This tendency is the result, as stated in the previous sections, of continual liberalisations of both subjective and objective restrictions (Fornero law of 2012), as well as annual maximums payable in vouchers (Jobs Act 2016), since these legislative provisions allowed an increase among younger categories as potential providers of occasional work. To analyse the possible abuses of the use of vouchers it is necessary in the first instance to evaluate the quantity of vouchers collected by every single worker, and then to analyse the correlation between total vouchers and the number of working days. As the graph shows, in the period 2013-2015 (in which there was a substantial legislative uniformity) although both the number of workers and the number of vouchers collected more than doubled (+123% of workers and +142% of total vouchers), the distribution of the number of vouchers remained roughly the same, with an average value of take up in one year that went from 58.8% to 63.8% and a median value that remained practically unchanged (from 25 to 29).These data can be understood as a first possible indicator of how the boom in the use of vouchers did not bring about evident abuses and/or distortions in the world of occasional work. It is therefore interesting, finally, to analyse, as
OCCASIONAL WORK AND THE EXPERIENCE OF VOUCHERS
already mentioned, the number of vouchers by year comparing days of work provided and an elaboration of the data relative to the last available year (2015). Before making any analysis it is necessary to state that the data must be used with great caution, since the regulations in force in the period analysed did not oblige employers to declare the envisaged number of days of work precisely, only the days for which collected vouchers applied. But despite this one can deduce some interesting elements.
OCCASIONAL WORK AND THE EXPERIENCE OF VOUCHERS
Analysing Table 1 one notes how: Despite the fact that from 2013 to 2015 there was a rapid increase in vouchers used, the average number of days of work decreased (-40%). This was due to an improvement in traceability of the effective dates of use but, looking at the datum in relation to the average number of vouchers collected per worker (which remained similar), one can affirm that these records tend to disprove a possible use of vouchers as payment for more stable work.
On the other hand, it must be noted that the average number of vouchers per day of work increased to a considerable degree (+183%). On a first analysis this tendency can be an indicator of how in many cases the relationship of occasional work disguises different provisions, like part-time apprenticeships.
In the first part of the table there is then a sort of photograph of the entire sector of occasional work in 2015, in which one can note 4 basic groups: The providers who redeem a maximum of two vouchers a day (and for a number equal or less than 29 in one year), these make up around 33% (439,000) and they represent a median value of the all workers.
Another 22% (around 300,000) were remunerated with a number of between two and four vouchers.
There is also a group of 28% (390,000) who received between 4 and 10 vouchers.
Finally, 18% of the number of workers (250,000) received more than 10 vouchers per day, among whom 100,000 received more than 20.
This representation allows us to understand that the sector was very diverse, with situations very different from each other. But in light of the marked increase in the average number of vouchers per day, it is necessary to highlight the particularity of group no. 4, those who received more than 10 vouchers per working day, because this datum had a significant effect on determining the datum of the aggregate (3.3). The only way to
explain this last section of workers, with a value so distant from the average, is that in these cases the work provided that was paid by voucher was of a considerable value, probably because it took place occasionally, and because the voucher represented the most practical method both logistically and bureaucratically.
Identikit of employers Over the years, the number of businesses that used vouchers to pay their employees increased constantly. This was due both to the same dynamics of liberalisation of the instrument already seen in the section dedicated to providers, and to a modification of the maximum limits of use and easier purchase – from 2012 it was possible to buy vouchers at tobacco shops. This development is easy to see in the following graph (figure 9.7). As can be seen, the total number of employers increased at a sustained pace; in particular between 2013 and 2015 – where we remember there was a general legislative uniformity – there was an increase of around 100% of the total number, in line with the +137% of the number of providers and the +142% of vouchers used. This tendency is moreover perceptible in the number of new entrants, and this datum was also in net increase (+56% between 2012/2013 which was reached also in the comparison between 2013 and 2015, +55%). Concentrating on the last available year (2015) it is useful to reclassify employers in terms of the number of workers paid in this way, and of the number of vouchers used on average for each worker; in this way it is possible to identify 4 sub-categories of use: MARGINAL: Maximum 5 workers and up to 70 vouchers per worker, makes up 64% of employers for 15% of vouchers sold in 2015;
INTENSIVE: Maximum 5 workers and over 70 vouchers per worker, makes up 21% of employers for 29% of vouchers sold in 2015;
EXTENSIVE: Over 5 workers and up to 70 vouchers per worker, makes up 11% of employers for 24% of vouchers sold in 2015;
OCCASIONAL WORK AND THE EXPERIENCE OF VOUCHERS
REMARKABLE: Over 5 workers and over 70 vouchers per worker, makes up 3% of employers, per 33% of vouchers sold in 2015.
From table 2 it is important to highlight how in 2015 67% of vouchers redeemed were used by 15% of employers (adding the value of the first two lines of table 1). At this point, to define the entirety of employers of occasional work comprehensively, it is necessary to make another classification: on the basis of economic sectors. From Table 3 we can see how the use of vouchers was very accentuated in the hotel and catering sector, characterised by a highly seasonal labor demand; this sector is characterised by a number of workers per employer paid with vouchers higher than the national average (7.7% as opposed to 3.7%) and a number of vouchers per employer that is higher (312 as against 186). Also in this sector we find the greatest number of ‘intensive’ employers (401) who can think of the use of vouchers as a relationship with ‘standard’ work, a factor also due to the fact that for many workers this is a second job. In any case it should be noted that the most ‘intensive’ employers, around 700, who represent 0.15% of the total, used around 8 million vouchers, 9% of the entire amount. Finally it is interesting to note that the primary sector now represents only 2% of the total percentage of vouchers acquired, a figure that decreased constantly every year from the 22% of 2008, when many economic sectors had not yet been liberalised. In other sectors no significant distortions were noted; indeed, the value was not far from the general average.
Vouchers and illegal work – the false (?) myth of legalisation Among the most debated themes is that of the possible surfacing effect of illegal work, the declared objective at the time of introduction. The Inps researchers define it as an ‘unrealistic expectation’ and explain that more than a surfacing we are facing a ‘tiny legalisation capable of obscuring the most consistent illegal activity’. Inps in fact signals the existence of curious cases – over 23,000 in 2015 – of legal work providers with one single voucher, and suggests that these might be read from only two perspectives,
OCCASIONAL WORK AND THE EXPERIENCE OF VOUCHERS
leaving to the reader the task of evaluating the more probable option: extreme cases of adherence to legality, or evident cover-ups of illegal working relationships. Effectively, before the Jobs Act, the instrument undeniably served to cover up illegal work. The activation of a singe voucher was sufficient to legalise an entire dayâ€™s work, since in case of inspection it would be sufficient to declare the presence of the worker for only that hour. Thanks to the more stringent notification obligation introduced in September 2016, this type of abuse is no longer possible. Finally, it will be interesting to make a territorial analysis of the intensity of the use of vouchers before the introduction of the obligation to make notification. The voucher scatterplot per inhabitant (2015) â€“ level of illegality of work (2013), regional data, shows that vouchers had a strong development in those regions (primarily centre-north) which already tended to have largely legal work relationships. It therefore seems that the vouchers found a fertile territory not so much where illegal and irregular work were more diffuse, as it might have been more intuitive to expect them, but rather in those regions where economic activity was more developed and that perhaps, being characterized by greater legality, were more prone to adapt to the new instrument.
This datum can be broken down into two parts; in regions with a high rate of illegality it is in fact recorded that there is both a lower number of workers involved in using vouchers (in relation to the population), and, as shown in WORKInps 2/September 2016, a lower average number of voucher per worker. This latter result, which seems to be have the grater impact among the two, might, according to the Inps researchers, indicate a use of vouchers in support of, rather than instead of, submerged work, in the regions with the highest level of illegality. Thanks to the innovations introduced by the Jobs Act, the problem of covering up illegal work seems however to have been overcome. The principal point of discussion concerning vouchers remains, and thus it is the one around which discussions will be based about defining the instrument that should replace vouchers from 2018, and regarding the quality of flexibility that it introduces. Indeed, if correctly regulated and distinct from regular employment, vouchers can only be a positive phenomenon, given that they cover provision of work that would otherwise be undertaken under the surface or not even undertaken at all. Finally, it is necessary to mention what the advantages of surfacing might be. Because of the way vouchers were conceived, that is, exempt from tax, from the fiscal point of view there aren’t any advantages for the exchequer. From the worker’s point of view, the principal advantage is perhaps the Inail insurance cover. Working with vouchers obviously doesn’t guarantee stability of work, nor social buffers. Moreover workers contribute, on average, only negligibly to their own pensions. The percentage necessary to accrue a month of contributions is indeed 130 vouchers, and only 16% of people working with vouchers reach this threshold. This observation should also be a starting point for reflection on the conception of a correct and better regulation of occasional work, which, it is to be hoped, will come into being as soon as possible.
OCCASIONAL WORK AND THE EXPERIENCE OF VOUCHERS
Bibliography Il lavoro accessorio 2008-2015, dossier INPS – Veneto Lavoro; Workinps 2 – September 2016; Simone Ferro. Come si risolve il problema dei voucher, lavoce.info, 2017; Osservatorio sul precariato, monthly report January – December 2016; Osservatorio sul lavoro occasionale accessorio, INPS; Sentence of the Constitutional Court 28/2017, 11 January 2017; Legislative Decree 276/2003; Decree of 12 March 2008 of the Ministry of Employment and Social Welfare; Legislative Decree 185/2016.
10 Germany: from the ‘Hartz Plan’ to the present day by Federico Boscaino
Università degli Studi di Torino & Collegio Carlo Alberto
ABSTRACT In the daily debate about the labor market and economic growth, Germany is commonly used as an example – as the ultimate and ideal objective of future reforms. In this chapter we will try to explore the structure of the German employment sector, starting with an analysis of the reform carried out at the beginning of the millennium: the so-called ‘Hartz Plan’, concentrating on the improvements and advantages it brought about, without overlooking the inevitable weaknesses of the system. To conclude we will try to analyse whether there are elements that could be imported into our country to correct situations of inefficiency, or entire sectors that are inadequately regulated (for example ancillary work).
The situation before the ‘Hartz Plan’: German reunification. German unification, which came about on 3 October 1990, was a turning point in European history, but also a considerable challenge for the economy of the former German Federal Republic (FRG) and for the European Economic Community in general. The German Democratic Republic (GDR) was characterised by an industrial fabric that was markedly backward compared to the West, with low per capita wealth and a currency considerably weaker than the mark of the FRG. This brought about a rapid process of de-industrialisation in the FRG, with a consequent rise in the level of unemployment of over 20% and a constant migration towards the west of the new Germany. The central government made enormous efforts, aided by substantial assistance from the European Community, amounting to around €1,500 billion, which was put to use towards major objectives, among which were: monetary union (the conversion rate is still one of the causes of the competitive defect of eastern Germany today), the privatisation of the businesses of the GDR, and continuing social assistance for the population, which is given every year to compensate for an economic gap that is still in evidence. We will now look at some data that led the German government to undertake a deep structural reform of the labor market. Graphs 10.1 and 10.2 show how reunification represented an important challenge for the central government, with a level of unemployment that rose both in terms of its general benefits and also in relation to the individual regions of the country (the national datum is +44%). It is moreover very important to analyse how the percentage of those unemployed long term (without work for more than 12 months) grew in the same years, an indicator of a labor market and relocation system that are inefficient and not adequate, in order to address a large-scale integration process.
GERMANY: FROM THE ‘HARTZ PLAN’ TO THE PRESENT DAY
The Hartz Plan At the beginning of 2002 a commission was set up by the second SchrĂśder government, made up of fifteen representatives of the German economy: managing directors, university lecturers, workersâ€™ representatives and politicians, having as its president the director of human resources of Volkswagen, Peter Hartz. The aim of this team was to make the labor market as efficient as possible, radically reforming the relocation of the unemployed to avoid a rise in long-term unemployment. The Commission concluded its work in three months, and the draft was divided into four laws that came into force gradually: Hartz I and Hartz II (2003), Hartz III (2004), Hartz IV (2005), with further revisions made in the following years. The following are some of the principal points of the reform packages.
Hartz I and Hartz II These represent the major packages of the reform, both coming into effect in January 2003. In Hartz I we find: •
Incentives for continuous training of workers, and the institution of ‘training vouchers’;
Significant changes in the laws dealing with temporary work: various prohibitions that differentiated temporary from permanent work were eliminated, among which were the prohibition against re-hiring and the limit of employment contract to two years; in addition temporary employment was brought into line with permanent employment in terms of work timetables, remuneration and the right to holidays; but it remained possible to envisage contracts between the parties that have a partial exemption from the regulation.
The institution of two types of welfare provision. He first is an unemployment compensation (ALGI), an insurance financed by contributions, according to the same characteristics as in the past; the second is a Social assistance for those defined as unable to work.
In Hartz II we find: •
Regulation of the employment typologies of ‘mini-jobs’: this reform came into effect from April 2013 and within this category come all workers who earn up to €450 a month (previously €325) to a maximum of €5,400 a year, with a limit of 15 hours a week. These jobs are also charaterised by substantial fiscal easing for the employer: a lump sum for social security that goes up to 28% depending on the contract type, with a tax easing of 2%.
The arrival of ‘one-man enterprises’ (Ich-AG): the unemployed receive three years of incentives for registering an
GERMANY: FROM THE ‘HARTZ PLAN’ TO THE PRESENT DAY
Ich-AG, depending on the profits of the Ich-AG. Such incomes, to which contribution payments must correspond, are subjected to a fixed fiscal tax of 10%. Income must not exceed €25,000. •
The creation of job centres: the transformation of employment offices, at which one is obliged to register as soon as one enters the dismissal process. In the case of registration not being effected, or being subject to a delay, there is a reduction of unemployment compensation for every day of the delay. These employment centres have the task of taking the whole family into consideration, and creating a more rapid mediation to reduce the period of unemployment, assisted by closer contact with businesses. In the case of young unemployed it is also within the power of job centres to grant funding for an apprenticeship, with the aim of facilitating re-entry into the market.
Hartz IV While Hartz III doesn’t contain measures that are particularly innovative and incisive, Hartz IV represents the most controversial part of the reform, which has created the greatest protests in civil society. Unemployment benefit and social assistance have been merged with unemployment benefit II (ALGII). The performance of the old grant was lower than for the new ALGII, but there were often added contributions which are now gone, which made it possible for the old package to exceed the new in value. The new ALGII was instituted with a contribution of €345 in the West and €331 in the East. Moreover, there is the state payment of an added sum for children (according to age) and a sum to pay rent and heating. In exchange, for those who receive ALGII, every job offer should be accepted, on pain of losing the grant; and this is also the case if the remuneration is only one or two euros an hour (the so-called ‘one euro jobs’). As we have seen, there were many interventions, just as there were many people involved in these assistance plans. In particular, it is interesting to make a comparison between certain European countries in relation to the number of people who
entered an assistance plan for unemployment and relative reintegration. Among the three largest countries of the EU, Germany is the only one in which, despite the crisis, the number of necessary interventions is continually decreasing.
GERMANY: FROM THE â€˜HARTZ PLANâ€™ TO THE PRESENT DAY
German growth: the effects of the â€˜Hartz Planâ€™ Having tried to summarise the most important changes introduced by the Hartz Plan, it is necessary to proceed to an analysis of its effects on macroeconomic data, starting with the two data set out at the beginning: the general level of unemployment and long-term unemployment. We will begin by considering the data of 2005, when a large part of the reform had already been implemented, and we will compare them with the corresponding data of other countries, to evaluate the effects of the economic crisis. Comparing the data set out in these two graphs with the two at the beginning of the chapter we can clearly see a net improvement of the labor market. Starting with the level of general unemployment (10.3), it is interesting to note how in Germany this has fallen steadily (-6% in 10 years), without even feeling the effects of the Subprime crisis of 2009 and the debt crisis of 2011. This trend is verifiable also in the data for the level of unemployment in eastern Germany, which has gone from 18.7% in 2005 to 8.5% in 2016 (-10%). There is a different trend in the United States, where there was a surge between 2008 and 2009, coinciding with the failure of Lehman Brothers. In Italy this trend was practically mirrored, with a steadily growing level of unemployment, an element that was probably also characterised by a labor market that was no longer adapted to the challenges of the moment. With regard to the other objective of the ShrĂśder government, that of lowering unemployment of more than twelve months (graph 10.4), we can affirm that this has been partially achieved: having reduced by 20% it has settled at a figure comparable to that of France (44.3%). At first sight, this is a high percentage, but it is in
GERMANY: FROM THE ‘HARTZ PLAN’ TO THE PRESENT DAY
line with the European labor market, which is less flexible than the American one, where the data are decidedly lower. Having looked at the more general data concerning the labor market, it is useful to analyse the general economic trend, looking at some of the indicators to do with German GDP. The data shown confirm a steady growth in GDP – ignoring the big recession produced by the subprime crisis – that comes close to US levels and departs from those of other European countries (in 2015 +1.7% against the +1.3% of France and the +0.8% of Italy). Even more interesting is analysing a more neglected datum: GDP generated by every hour worked, an important indicator of the productivity of work relative to the capital employed. In graph 10.6 we can see how Germany is the country of the G7 with the best performance, with strong growth from 2010 to today (+7%), the result of an important production capacity and of highly qualified human capital. At this point, having considered the datum of ‘GDP per working hour’, it is useful to proceed to an analysis of other more specific indicators concerning labor productivity and remuneration. The OECD data help us appreciate the significant improvement in both remuneration per hour worked and, probably also as a consequence of the first datum, in the cost of every single work unit. This rise is attributable to the net decrease in the level of unemployment and to an extension of employment grants and benefits (ALGII in force from 2006) that brought about a decrease in labor demand, with a consequent increase in the salary offered. It should moreover be underlined how the German workforce, compared to the EU average, can be considered more specialised and employed in precision production, and this brings wages that are on average higher than those of a less qualified work force. It is possible to make one last analysis, that of the structure of German employment timetables, in this case in comparison with the Italian labor market, to extract insights into the labor market of our country, beyond those provided by the Jobs Act. To make this comparison, we will use both the total number of working hours in relation to the variation in working hours per individual worker and to the variation in total productivity.
GERMANY: FROM THE ‘HARTZ PLAN’ TO THE PRESENT DAY
The data we can identify are very interesting for some analytical insights. The first is that in Germany the number of hours worked per employee is decidedly lower than the average of the G7 (around 20% less) and it comes in as one of the lowest data among all the countries analysed by the OCSE. Moreover, we should note a trend towards a further drop, because in 2016 the hours worked per individual employee fell again by 0.8% (a trend opposite that of the US and Italian data). This trend would be incompatible with one of the strongest GDP growths in Europe of the entire G7, but for these two aspects to coexist it is necessary to consider also the datum of job productivity, and here Germany is one of the strongest nations, with the 2016 datum that is the highest of the G7 countries.
Possible criticisms: ‘mini-jobs’ and part time work One possible argument that could partially obscure such a positive scenario might be the fact that in Germany there is a widespread use of contracts with reduced hours, in order to reduce average salaries and devise an artificial lowering of the level of unemployment. This might be partially correct: in fact in recent years there was a robust growth in so-called ‘mini-jobs’. These are instruments of reduced taxation created by the Hartz Plan with the aim of bringing into the open and reducing the amount of black market labor (a problem which found a partial solution in Italy with ‘vouchers’). There are three types of these with different taxes owed by the employer: For the commercial sector, where the employer is called upon to pay 28% for social security (15% towards pensions and 13% as sickness insurance); For domestic services: here the employer pays 10% for social security (5% for pensions and 5% for insurance); Short-term work: in this case the employer does not have to pay anything. Workers are also called upon to pay part of the amount towards pensions: a basic rate of 3.9%, which becomes 13.9% in the case of domestic workers in private homes. It is very important to highlight that carrying out a work activity through a ‘mini-job’
does not lead to losing unemployed status, only to a reduction in allowance in cases where the employment income rises above determined maximums. We here report the number of “mini-jobbers” from the year of their introduction.
The datum is objectively high, but it should be noted that in the last 6 years the number has remained practically constant, with a level of unemployment that has halved in the same period (from 9% to 4.5%), disproving the hypothesis that this reduction was made possible by an abuse of ‘mini-jobs’. The weakness of ‘mini-jobs’ resides in the small size of pension payments, which when used incorrectly (for periods that are too long or in moment central to the work activity) can create serious problems in obtaining of a pension whose value is sufficient for personal maintenance. But this problem isn’t meaningful in the data because most workers with such contracts are retired or young (many are students), the former looking for a small supplement to their pension and the latter to cover small personal purchases. Among those who use them we also find women and mothers – who use them as a form of harmonising life and work – and those unemployed waiting for a standard job. Moreover, there is not even an abuse in their use by employers, because 77% of employers use a maximum of 3 ‘mini-jobbers’ (45% use only one) and even in the duration the data are in line with expectations: 41% of commercial ‘mini-jobs’ (43% in private services) have a maximum duration of a year, and 24% (19% private) between one and two years. After the analysis of the ‘mini-jobs’ phenomenon it is therefore necessary to analyse the sector of part-time contracts through two important data: the percentage of part-time contracts in the total of contracts, and the so-called ‘involuntary’ part-time workers, that is, those who accept a reduction in hours and corresponding contributions in order not to lose their job. From the two graphs we can deduce how part-time contracts in Germany could be over the average compared to two economically similar countries like France and Italy, coming in
GERMANY: FROM THE ‘HARTZ PLAN’ TO THE PRESENT DAY
at around a fifth of total contracts. But the second graph let us form a decidedly different picture: in Germany the number of part-time contracts definable as â€˜involuntaryâ€™ is around 11%, with the datum getting smaller, the opposite compared to the 39.2% of France and the sad 59.6% of Italy. Moreover, in these two countries, the tendency of the datum is a net growth, an indicator of a labor market that finds it difficult to recover from the economic crisis, obliging a substantial portion of workers to accept reduced timetables and pay in order to keep their jobs.
Conclusion: is this true glory? Certainly there are still some elements of the Hartz Plan that could be improved, like the legislation and control of the use of ‘mini-jobs’ – which in some cases could be used in order not to sign more permanent contracts – and with reference to the relationship between unemployment allowance (ALGII) and ‘work for one euro’. But it is clear from all the data analysed how the labor market in Germany improved on many fronts: the number of employed, remuneration and hours worked in relation to productivity are all indicators of meliorating conditions in the market, in which there remain differences between east and west, but that are in any case improving. We should also highlight the use of ‘mini-jobs’ (with some revisions) as an instrument for emerging from the black market, which is a source of inspiration for future Italian legislation on ancillary work. In conclusion, there is evidence of an important phenomenon in the German labor market in clear contrast with the Italian market: working more is not synonymous with economic growth; it is necessary to make much greater efforts on productivity, the great Achilles’ heel of our country.
Bibliography Data banks: OECD.org, ec.europa.eu, destatis.de, istat.it. “La riforma Hartz” di Franco Salvatori, 2005, ADAPT. “Le criticità del salario minimo e dei mini-jobs in Germania” di S. Spattini, 2014, ADAPT.
GERMANY: FROM THE ‘HARTZ PLAN’ TO THE PRESENT DAY
11 Loi Travail: the French way to the Jobs Act by Umberto Rogna Maggi
UniversitĂ degli Studi di Torino
and Damiano Campini
UniversitĂ degli Studi di Torino & Collegio Carlo Alberto
ABSTRACT From the beginning of the crisis the French labor market has been the subject of legislative interventions, with the objective of increasing efficiency and reducing the high rate of unemployment. The last reform, the Loi Travail, is the conclusion of this reformatory process. In this chapter the context of the reform will be analysed, paying attention to both the economic and the political situations. Then a list of the changes introduced by the reform will be given, to proceed to a brief evaluation of its effects and to a comparison with the Italian labor market, and in particular with the last reform that it concerned: the Jobs Act.
Introduction Historically, the French labor market has been regarded as strictly regulated, bureaucratised and characterised by little confidence on the part of the social groups that constitute it. In the country there is moreover a rate of unemployment higher than the European mean: from 1990 this datum has been on average about 9%, higher therefore than countries like the United Kingdom and Germany, and more like Mediterranean countries such as Italy. Particularly high is the rate of youth unemployment, which has seen a strong rise after the crisis. According to institutional observations like the International Monetary Fund and the OCSE, the persistence of high levels of unemployment indicates that it is not a question of a cyclical phenomenon, but a structural one – represented in the graph of the natural level of unemployment, the NAIRU. The possible causes that have brought structural unemployment to levels this high are multiple. For a start, it is possible that the strong and persistent economic crisis has given rise, in addition to phenomena of uncertainty, to hysteresis effects – which happens when the post-crisis rate of unemployment remains at levels higher than they had been before; the natural rate of unemployment, like a dog that bites its tail, is in fact influenced by the performance of these same levels of unemployment. A prolonged phase of economic depression therefore creates a vicious circle in which those workers who lose their jobs encounter difficulties in finding another, and their chances of reemployment decrease bit by bit as the unemployment period is prolonged. This phenomenon also caused a doubling of the rate of long-term unemployment (more than a year), which rose from the pre-crisis level of 2.4% to the present 4.2% – a percentage nevertheless well under that of Italy’s 6.3%. Another possible explanation for high levels of structural unemployment could be identified in salary rigidity. The introduction of the 35 hours week, which came into effect in 2002, was not in fact accompanied by a reduction in the minimum salary, which occupies a very significant role in the dynamics of French wages. The combination of this phenomenon with the loss of flexibility in contracts might have caused a loss of competitiveness from the year 2000 to today, apart from some slight responsiveness of salaries to modifications in the rate of unemployment.
LOI TRAVAIL: THE FRENCH WAY TO THE JOBS ACT
Lastly, we should not forget the effect of fixed term contracts (CDDs), which have constituted an ever greater percentage of total contracts. CDDs of less than a month doubled between 2000 and 2014, indicating the tendency to alternate brief periods of employment with brief periods of inactivity. The creation of a high number of workers who are registered periodically as unemployed has brought about an overall rise in registered unemployment. In situations like those described, one sees the necessity of adopting structural reforms, which would increase productivity in the medium term and which, thanks to the heightened confidence of consumers and businesses, would stimulate aggregate demand in the short term.
Interventions prior to the reform The economic crisis that followed 2008 and which became more acute in the two years 2011/2012 impelled the French presidency to try to make the labor market more dynamic and flexible by means of a series of regulatory interventions. Among these should be recorded the ‘Pact of Responsibility and Solidarity’ of 2013 (the government of J.M. Ayrault II), consisting of a series of regulations for the reduction of employment taxation and an increase in the competitiveness of businesses, with measures like ‘CICE’, a tax credit for businesses. Aimed at increasing productivity and competitiveness is Law no. 2015-990, called ‘Loi Macron’ (the government of M.Valls II), which introduces liberalisation of working days, transport and professional regulation; at the same time Law no. 2015-994, relating to social dialogue, lays the foundation for another revision of business dynamics. These interventions did not however resolve all the pro-
LOI TRAVAIL: THE FRENCH WAY TO THE JOBS ACT
blems inherent in the French labor market: in the first place the strong disparity in security between the two principal types of contract, permanent and fixed term or, in French law, CDIs and CDDs; but also the inflexibility of work schedules, fixed by law at 35 hours a week, and overtime pay, also fixed by law. In addition, economic redundancies are difficult to carry out and the legal cases connected to them often have uncertain results. In this framework, union-employer dialogue remains very adversarial. Law no. 2016-1088 of 8 August 2016, ‘relating to work, to the modernisation of social dialogue and the safeguarding of career paths’, also called ‘Loi Travail’ or ‘Loi El Khomri’, from the name of the Minister of Employment, sets, in this context, the objective of concluding the cycle of reform mentioned above. The procedure and approval of the law were marked by bitter confrontations within the majority and by various demonstrations which called for its repeal.
The discussion process of the reform Various economists, like Jean Tirole, Philippe Aghion, Hélène Rey and Pierre-Olivier Gourinchas, have openly supported the reform, are moreover to be considered as in line with some recommendations by the EU and the IMF. This reception represents a sign of stability and continuity to the European partners and the markets: favourable opinions have also been received from A. Nahles, German Minister of Employment (SPD), and Angela Merkel, who is also faced with a revision of the labor market, in particular with reference to the CPA – ‘a personal account of (a worker’s) activities’, of which we will speak later. Medef, the French association of entrepreneurs, has always been in favour of the law, though with a few reservations about compensation for economic redundancy. However there are also many critics of the bill, even within the government’s own party, the PS. Among the critics are the future presidential candidate, Benoit Hamon, and former ministers like M. Aubry and D. Cohn-Bendit. Even some economists are skeptical about the real impact of this reform; among them are Thomas Piketty and Daniel Cohen. The main preoccupations that they would warn of have to do with the reduction of protection
LOI TRAVAIL: THE FRENCH WAY TO THE JOBS ACT
for disadvantaged categories, the rise in job insecurity and the consequent effects on consumption and social buffers. During all the negotiating with the government before and during the parliamentary procedure afterwards, trade unionists organised large protest demonstrations, which were sometimes also supported by members of the PS. It should be noted that the situation of trade unionists in France is special: they are very strong in mobilising and bargaining, despite the fact that union membership is relatively low.
The reform Redundancies Economic redundancies were already present in French regulation, but their definition is being extended also to cover, for example, cases like the reduction of job orders and the situation in international markets; moreover, the definition is more precise and will be less subject to judicial interpretation. The compensation envisaged for an economic redundancy is proportionate to seniority, and has a minimum for the newly employed. France already boasts a system of increasing protection among the most important in Europe (an example in the graph in case of unemployment) that proportionately protects those recently employed less.
In case of unfair economic redundancy the law does not envisage re-employment except in a few serious cases; instead it has a compensation payment, for which neither a minimum nor a maximum is set; instead there is just a quantitative reference, which does is not restrictive on the ability to calculate. This should not create excessive uncertainty if we start with the assumption that the business would dismiss a worker for economic reasons anyway.
LOI TRAVAIL: THE FRENCH WAY TO THE JOBS ACT
Working time If with the ‘Loi Macron’ working hours were already more flexible with regard to the previous regulation, it is now possible to surmount the 35 hours week and to envisage longer working days, according to the terms of the contract at individual business level. The basic remuneration will generally remain stable, while overtime pay will be restricted by national collective agreements and will therefore depend on business agreements. Overtime was previously paid at 25% of normal salary for the first 8 hours, and at 50% thereafter; now it can be renegotiated up to a minimum of 10%, and its payment can be deferred for three years. Business negotiation and contracts The priority of bargaining at business/local level has been introduced beside that of sector at national level in various areas, like working time and pay. Fixed term and permanent contracts have been reformed: there is an attempt to make CDDs more protected, and slightly reducing the perceived advantages of CDIs after some years of seniority, and so incentivising employment and conversion into CDIs. Contracts of ‘préservation de l’emploi’ (reduction of working hours and salary) have been formalised by agreement at business level, with the approval of the majority of workers by ballot. Therefore, in order to be applicable and replace the original contracts, the economic condition of the business must be compromised. If approved by the majority, an individual worker can reject the contract and he/she will be dismissed for economic reasons with the appropriate compensation. New rights for workers With the aim of recognising the importance of the function of trade unions in businesses and in relation to the new provisions/ obligations regarding business negotiation, working hours have been increased by 20% for Union delegates of every category.
Workers’ right to ‘déconnexion’ has been introduced: the business cannot ask them to perform work activities outside office hours if not explicitly stated in the contract. This was introduced because of the growing tendency to indirectly force workers to spend time working online at home. The CPA (Compte Personnel d’Activité) has been established, which incorporates the right to be exempted from onerous work, and the right to training, to which has been added the recording of activities performed with relative skills acquired and the incentives/accrued contributions to which one has a right. This ‘personal activity account’ is maintained in the course of one’s professional career, and also comprises accrued professional training/upgrading, together with ‘points’ awarded for undertaking onerous work. The application of the CPA, though on the one hand it will be a simple bureaucratic matter (having to do with renaming existing instruments) on the other hand it can turn out to be complicated: in the phase of changing job, for example, the new employer will be neither willing nor able to guarantee the employee’s salary level and accrued incentives from the previous job. The applicative decrees will determine the feasibility of this regulation. The effects The reforms of the labor market might have perceptible positive effects on production and employment in the mid-term, while in the short term their impact seems tightly connected to the typology of the reform and the economic cycle. The introduction of this reform will have an influence on two different causes of the heightened levels of structural unemployment: the inflexibility of salaries, due to surmounting the 35 hours week, and the presence of CDDs following modification of regulations regarding contracts. The first simulations of Loi Travail (Worksim model) show that the impact on total unemployment will be limited. Nevertheless, it will have a major impact on youth unemployment and will encourage the use of CDIs, stabilising the positions of many employees. From these first analyses it would therefore seem that the French labor market will benefit from the reform process.
LOI TRAVAIL: THE FRENCH WAY TO THE JOBS ACT
The Italian context: a comparison In the Italian political debate, Loi Travail is often called the French Jobs Act, thus associating it with the reform process put in place by former Prime Minister Matteo Renzi. In effect, the procedure of the two reforms is similar: both are ideas brought forward by the reformist wing of the Centre Left; they have caused various splits in the majority; they were approved with the support of part of the Right; and they have brought about a relaxation in the relationship between the government and trade unions. In addition to the way in which they were introduced, they have other points in common in terms of their content, for example with regard to reducing the difficulties of dismissals for economic reasons. A big objective of the Jobs Act, then, was to reduce the present dualism of the labor market, favouring the adoption of permanent contracts (with increased security) for the newly employed, in a way that increases the stability of the job and incentivises businesses to invest in new employees. Here too it is possible to identify a common theme with the French reform, which also has among its objectives the incentive towards a greater use of reformed CDIs. The reform of social buffers has instead been a characteristic only of the Italian law: the French counterpart did not introduce major modifications in that sense. The Loi Travail, on the other hand, intervened instead in bargaining, which the Jobs Act was not interested in. If it is therefore true that there are similarities between them, it is likewise true that the two laws present significant differences.
Bibliography Commissione Europea, Winter 2017 Economic Forecast – France International Monetary Fund Country Report No. 16/228 International Monetary Fund Working Paper 16/7, From Containment to Rationalization: Increasing Public Expenditure Efficiency in France International Monetary Fund, World Economic Outlook, April 2016 Goudet, Kant and Ballot, ”WorkSim - a calibrated agent-based model of the labor market accounting for workers’ stocks and gross flows” Texte adopté n° 807, session extraordinaire de 2015-2016, April 21, 2016 Gouvernement.fr, sezione Loi Travail Camera dei Deputati, temi dell’attività parlamentare, Commissione Lavoro Ce que contient la loi travail, Le Monde, 2016 France: les pour et les contre la loi El Khomri, RFI Economie, 2016 Insee - National Institute of Statistics and Economic Studies France Stratégie, note d’analyse n°30
LOI TRAVAIL: THE FRENCH WAY TO THE JOBS ACT
12 Flexibility and instruments for employment. The Spanish formula for the crisis by Giuseppe Grossi
Università degli Studi di Torino
ABSTRACT This work sets out to give an overview of the situation in the Spanish employment market. In order to simplify its reading by a public not much used to judicial and economic technical terms, the accuracy of the data and the logic of the argument have taken priority over the technicality of the text. The core of the work is a presentation of the two main reforms of the Spanish labor market – those of 2011 and 2012 – without failing to consider the historical dynamics of Spain. It also gives an initial excursus into the events that determined some of the dominant characteristics of the labor market.
The case of Spain: a general overview Spain is perhaps the European country that has drawn the most attention from Italian news reporting, because of its ability to recover from an economic crisis that struck it suddenly and profoundly. Indeed, together with Greece, it is probably the Eurozone country that has suffered the most pain, mainly because it has a highly polarised economy that has obvious structural weaknesses. Moreover, the bursting of a big housing bubble aggravated the situation, with serious consequences for the banking sector. Alongside these economic factors, there is a particular political situation: Spanish democracy was left rudderless, without a Government, for more than ten months, until the conservative Mariano Rajoy gained the confidence of parliament on the 29th of October 2016, thanks to the support of the liberals of Ciudadanos and the abstention of the socialist Psoe. The comparison with the Italian situation is straightforward, both because the two countries are part of that ‘Mediterranean block’ considered by many (over the Alps) to be the weak link of ‘multi-speed’ Europe and also because they are united by continual crises of government (accentuated in Spain by the thorny Catalan problem) which undermine the trust necessary to create a calm climate in European institutions and in the larger context of the global market. But what really strikes the eye even of observers unfamiliar with this sort of reporting, was the ‘re-activity’ with which the Spanish formula seems to yield its fruit. This however must not lead us into the error of attributing all the credit for the recent improvements to the reform process: it would in fact be an extremely hasty inference, which would not take into account the facets and ‘wrinkles’ that a labor reform has once it comes to life in the fabric of society. One of the fundamental components of this small Spanish ‘miracle’ is surely the reform of the labor market, whose importance, as well as its content, lies in its historical context, which therefore cannot be ignored. The impact and often the long-term success of a labor reform depends, in addition to economic factors, above all on dynamics external to the reform itself, like its application within the judicial and administrative framework of the state and its articulation with reference to specific local dynamics.
FLEXIBILITY AND INSTRUMENTS FOR EMPLOYMENT. THE SPANISH FORMULA FOR THE CRISIS
The Spanish labor market has particular elements that distinguish it from more homogeneous markets, like the German one. Before the crisis the building sector, for example, had a greater weight (if not excessive) than other productive sectors (an imbalance that was one of the major factors exacerbating the crisis from 2008); moreover, the country prides itself both on its public debt (notably lower than that of Italy), and a level of inflation of 3% (a datum of January 2017). And this last datum, in a period of general stagnation or at least of slow rise in inflation at European level, constitutes a unicum rather than a rarity.
The historical framework The historical development of the Spanish â€˜labor systemâ€™ deserves a separate discussion in this overview. It developed late compared to other European countries in the period immediately after Franco. This temporal dynamics resulted in a continuing highly statist imprint, with a rigid legislative framework and heavy intervention by the Public Administration in regulating individual and collective labor relations. This first phase of centralisation, which was not much different from the prior Fascist experiment, was abandoned in subsequent years, when the entire Spanish jurisprudential structure enjoyed a beneficial osmosis of the other European systems, including the Italian one. In this framework, in 1980 the first text was drafted that could be described as fully organic in terms of being open about labor rights, collective bargaining and trade unions: the Estatuto de los Trabajadores â€“ the linguistic equivalent of the Italian Statute of Workers.
However, the Public Administration continued to have a governing role with regard to the operation of bargaining and union dynamics, and in time this brought about an excessive stiffening of the system, and the need to look at it again and correct some of its most urgent distortions.
Weakness of the labor market The Spanish labor market has always been the object of numerous reprimands by international organisations for its rigidity and the discrepancy between the rules on security for numerous groups of workers: as the OECD proves, the indicators for the level of ‘legal protection’ (which is a crucial factor of rigidity) in the Spanish labor market are among the highest in Europe, together with those of Italy. This datum should not however be confused with the marked volatility that characterises this labor market, which is (as mentioned earlier) primarily due to the excessive weight exerted by the construction sector in the productive area. The first consequence of this is that the labor market experiences large surges in employment in periods of great economic expansion – more than other advanced economies– and equivalently large losses during recessions.
FLEXIBILITY AND INSTRUMENTS FOR EMPLOYMENT. THE SPANISH FORMULA FOR THE CRISIS
This is why the rigidity of the market was used historically to counterbalance the fall in numbers employed in periods of crisis: it was an attempt to secure as many existing jobs as possible during cyclical downturns. This phenomenon emerges from the data relative to the fluctuation in employment and unemployment, from the beginning of the crisis until 2013, before Rajoyâ€™s reform of the labor market bore its first fruit. The level of unemployment went from the 8% of the crisis to a peak of 27.1% in 2013, with a more marked impact among women and young people with a low level of education (55%). Employment collapsed by 16.3% in five years, three times the fall in GDP, significantly widening the social divide. The measures adopted by the first legislative decree of 2011 and the Rajoy reform of 2012 were inspired by the principle of flexicurity, which is commonly used as an indicator by European institutions: it combines the greatest possible ease of hiring and of firing for the employer, together with substantial social shock-absorbers for employed workers.
The impact of the economic crisis and the need for a general re-thinking of the labor market The economic crisis in Spain and the subsequent imposition of corrective measures by the European Union contributed to no small degree to the progressive weakening of trade union powers, and the most evident practical consequence of this was the blockage of wage dynamics compared to levels of inflation which, from 2012, underwent an ongoing though gradual weakening. It is evident how at this time, and above all subsequently, the direction taken by the government from the biennium 2011/2012 was orientated towards greater flexibility, in line with the directions of European institutions and of the Spanish Central Bank itself. A first relief intervention was the reduction to one year of the extended period of collective contracts (or really the principle by which workers have the right to care given when a contract is not renewed on its expiry). This principle was an integral part of
the Spanish trade union tradition, which we in Italy surmounted after the end of the Fascist regime and the corporate period. As its first effect, the measure brought about a reduction in the level of cover for national contracts and consequent contractual decentralisation: today, in most small Spanish businesses, there is no union representative or, if there is, s/he is not called upon to take an active part in contract negotiation. Another important intervention, envisaged by the Socialist government of Zapatero (real decreto-ley n.7/2011) and later perfected by the first Rajoy government (real decreto-ley n.3/2012) was the attempt to overcome the traditional principle of favour, always a keystone of the contractual hierarchy, according to which the conditions negotiated at national level â€“ notably regarding wages â€“ could be modified at local level only in a way that favoured the worker, with the intention of preventing any sort of negative compromise. It is therefore important to note a sole but important difference between the measure adopted in 2011 and that of the following year: while the legislative decree of 2011 allowed the social partners, at national level, to enter into agreements that would take priority over those agreed at decentralised level, that of 2012 favoured bargaining at business level, and in addition allowed businesses to opt out of national negotiation if they recorded reduced profits for a period of six consecutive months. The Spanish constitutional court never listened to the subsequent criticisms and actions of the social partners; instead it confirmed the legality of the measures.
FLEXIBILITY AND INSTRUMENTS FOR EMPLOYMENT. THE SPANISH FORMULA FOR THE CRISIS
The Evolution of the labor market: an in-depth look To look in greater detail, the first significant innovations of the Spanish labor legislation after the crisis surfaced in 2010, were measures towards flexibility and the reduction of severance costs introduced by the Socialist government of José Luis Zapatero. The reduction in costs was initiated by the shortening of the notice period from one month to two weeks (real decreto-ley n.10/2010) and by a progressive reduction of the severance pay for fixed term contracts, calculated on the basis of length, which today is 12 days per year of service. With regard to permanent contracts, Spanish legislation never had an equivalent of our ‘article 18’, authorising payment only in cases of discriminatory dismissal. For these reasons, the Spanish reforms concentrated mainly on the cost of dismissal. Whether individual or collective, in case of dismissal a payment from a minimum of 20 days’ salary per year of service to a maximum of 12 months is envisaged. In case of unfair dismissal, the maximum payment varies between 33 days and 24 months per year of service. Moreover, the possibility of having recourse to temporary employment increases, but the authorisation intervention of the inspectorate of labor was maintained in the case of collective dismissal (at least up to the first reform of 2011, then abolished completely by the People’s Party in 2012). The legislative intervention aimed at streamlining the multiplicity of grounds needed to proceed to collective dismissal; and the progressive reduction of payment in cases of the aforementioned dismissals (when they are made without regard to the legal procedures) went in the same direction, with an estimated reduction of about 27%.
The reform of 2012 Flexibility With the legislative decree of 2012, in addition to introducing the possibility for businesses to free themselves from national bargaining (as mentioned above), new measures were adopted that aimed at encouraging internal flexibility, in order to limit redundancies. Flexibility touches above all on working hours, introducing the possibility on the employerâ€™s part of allocating both full-time and part-time working hours, according to requirement, in the course of the whole year. Rajoy claims to have been inspired by the German Kurzarbeit model, but without its a comprehensive system of social shock absorbers, Spain saw (at least in the immediate term) a reduction of the period of employment benefit eligibility, with a consequent fall in the level of protection in case of loss of work estimated at around 25%. In absolute terms, over 3 million unemployed found themselves without unemployment benefit. But despite this, this aspect of the reform was deemed by Spanish and international institutions to be positive overall, since it gave businesses a powerful additional instrument for confronting possible external shocks, changing the way in which personnel were employed rather than resorting to a reduction in workforce. The same evaluation moreover attributes the signs of recovery primarily to measures of this sort, not only in terms of employment but also of productivity. GDP in 2015 grew by 3.2%, unemployment came in at 20.9%, while in 2016 GDP still sustained a growth rate of around 3.3%, with a fall in unemployment of 18.6%. Dualism of the labor market Rajoyâ€™s declared objective in presenting the 2012 reform was to eliminate dualism in the labor market, always a dominant characteristic of the Spanish labor system. Legislators therefore decided to intervene also on the front of permanent employment. FLEXIBILITY AND INSTRUMENTS FOR EMPLOYMENT. THE SPANISH FORMULA FOR THE CRISIS
The new contract (contrato de apoyo a emprendedores) has a more limited range than our â€˜contract of increasing protectionâ€™, because it is restricted to businesses of fewer than 50 employees. This type of contract differs from the ordinary one by the probationary period being lengthened by a year, to give employers longer to decide which professional to hire on a permanent basis. The whole thing was accompanied by powerful fiscal and contributional easing. The reform of 2011 also touched upon a very delicate subject of the Spanish labor market: subcontracted work â€“ in particular those forms characterised by contractual weaknesses which often make them in effect contract labor. The ley n. 36/2011 introduced a rigid regulation of this employment typology, which on the one hand is self-employment, but on the other hand is covered by a series of protections similar to those which historically belonged to contractual employment. The employment instruments One of the less frequently analysed aspects of the reforms of the market has to do with the measures adopted to assist, promote and regulate entry into the market. In Spain, an attempt was made to meet European directives about job security and the employability of the available workforce. The intention of Spanish legislators was primarily to promote the entry of the unemployed into the labor market, or at least to assist their relocation. To this end the real decreto-ley of 2012 envisages an annual programme of employment policies that would engage administrations at both central and local level. The idea was to tie the funding of businesses to their performance, in terms of the results they achieved. Forms of collaboration between public employment agencies and private structures (which have grown exponentially in number since then) were envisaged. There was much scepticism about the likely results of this policy, both in Spain and in international institutions. In particular the OECD identified the possibly limited availability of labor force and the envisaged funding for centres of public employment, which would therefore have to deal with a great number of
requests without adequate preparation and appropriate instrumentation. To all this we can add that levels of completion for this service vary greatly, depending on the population density and wealth distribution of a locality. In any case, regardless of these weaknesses, particular attention was paid to the relocation of redundant workers: the businesses that might have predicted more than 50 internal dismissals would also have had to draw up a relocation plan of â€˜releasedâ€™ units, inclusive of training costs and the measures necessary to assist their re-entry. Training and youth employment An interesting datum concerns precisely the importance the Spanish reform places on the training of workers as an instrument to assist their entry into the market and, in the long term, also to improve the competitiveness of businesses (above all that of the majority, which are small and medium sized). The great innovation concerns the fact that public training bodies are put into competition with each other with a view to facilitating a better management of the public resources given to them. The results seem to prove the legislators right: as the Spanish Minister for Employment points out, tenders have doubled, quintupling in the case of youth training, while the time cost of their provision fell by 27%. The same positive account is seen in the apprenticeship reform, with a 22% rise in take-up as a result of the zeroing of social contributions in the first year of the application of the legislation, and indeed 64% in the first half of 2013. More muted are the reactions of the OECD, which highlights that the numbers of unemployed with low education remains too high compared to the European mean.
FLEXIBILITY AND INSTRUMENTS FOR EMPLOYMENT. THE SPANISH FORMULA FOR THE CRISIS
With respect to an intervention which, in the first instance at least, turned out to be positive in terms of training, the picture is less encouraging with regard to youth employment. It should however be pointed out that the Spanish government placed great importance on the European programme Youth Guarantee, taking numerous measures on it, of which two stand out for their impact and scope: the reduction by 100% of social contributions for businesses that hire young unemployed people, and a major contribution reduction for young people who decide to be self-employed or to open a business. But even here the OECD has pointed out that the measures might not turn out to be very effective because of low levels of implementation, and the active policy, which accompany them.
Bibliography J. Cruz Villalòn, Mercado de trabajo y reformas de la legislacion laboral en España, 2015. OECD, Economic Surveys. Spain, 2014. Panzeri, A e Di Nardo, F. Nuovi lavori, flexicuruty e rappresentanza politica, Jaca Book, Milano, 2008. V. Gòmez, Spain. Growth with jobs. Studies on growth with equity, 2014. V. Gòmez, El legado de la reforma laboral de 2012. Una perspectiva economica, 2015.
13 Labor legislation in a European perspective by Ilaria Fevola
Università degli Studi di Torino
ABSTRACT This chapter analyzes labor law in its supra-national dimension. More precisely, Italy will be studied as Member State of an international organization that she herself contributed to founding long ago in 1952: the European Union (the ‘EU’). It will try to shed light on how the EU exercises its competences in this particular area of the law, which objectives the EU aims to pursue, and what the instruments it has adopted in order to realize them, at the level of both hard and soft law. At the end of this illustration, the Jobs Act will result as the implementation and execution of many principles and guidelines established at European level as well as one of the many instruments that Member States have adopted to respond to the profound crisis in the labor market.
The European Union and the employment legislation: a general framework To define the rights and duties of workers has always been the core of the EU competence since the very beginning. Indeed, it is clear that when States expressed the will to create a single market through the elimination of existing barriers so as to allow goods, capital, services and workers to circulate freely within it, labor law has ever since become one of the fundamental pillars of such a process. The Treaty of Lisbon, the primary law currently into force, in the Preamble of the Treaty on the Functioning of the European Union (‘TFEU’) Member States explicitly declare that they affirm ‘as the essential objective of their efforts the constant improvement of the living and working conditions of their peoples’, the aim of which is to assure the economic and social progress of their States by means of a common action. The free movement of workers has perhaps always been one of the great challenges when compared to other fundamental liberties, in that there was (and in many aspects still is) a profound diversity in the protection of workers among the member States. The challenge then became even greater when, in the ‘90s, the European Union’s membership has enlarged due to the inclusion of that block of States that had been part of the former Soviet Union. The constant effort that the EU continues to make is that of laying down, in the light of such diverse national contexts, common principles that are applied uniformly, but at the same time might raise the level of protection and maintain the competitiveness of the economies of the EU Member States. This objective is defined as ‘harmonization’. The normative base through which the EU exercises its competence in this regard is under Article 153 TFEU, which established that the Union should complement and sustain the action of Member States by exercising a concurrent competence in two particular areas: on the one hand, conditions of work and employment, and on the other hand, information and consultation with workers. The legal instrument that serves this end is the directive, which sets obligations of results upon States, which are legally bound to adopt these minimum standards in their internal legislation, without dictating the means of achieving that result.
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Therefore, Member States are free to establish a higher level of protection than the one set in the EU directive. This pertains to so-called ‘hard law’, implying the recourse to binding legal instruments. In spite of this extremely important competence, as far as labor law is concerned, such instruments have always been considered insufficient for effectively realizing the objectives mentioned above. Indeed, the variety of models at national level has always led the EU not to limit itself to this level alone, but to adopt in addition an ‘integrative’ approach to the problems of the growth and quality of employment. The EU has therefore sought to overcome this intrinsic limit by the directly involving social partners. Conciliation between different, and in a way opposed, objectives takes place at the level of ‘soft law’, understood as a system of guidelines proposed by the European Commission and approved by the Council of the European Union, national action plans and subsequent evaluating reports and recommendations by the Commission. In this regard, the Lisbon Strategy has set out the so-called open method of coordination to the end of guaranteeing ‘flexicurity’, which will be the subject of the next section.
The Lisbon strategy between flexibility and the security of the labor market: the “flexicurity” model The need to reform the labor market certainly did not begin with the 2009 crisis. Indeed, already from the ‘90s, national labor markets underwent a profound crisis as a consequence of important economic, social and financial changes, caused by the globalisation of markets and technological innovation. What the most recent crisis has showed even more evidently was the urgent need to put some reforms in place. At the EU level, from the end of the ‘90s, once the ambitious economic and monetary project was undertaken with the Treaty of Maastricht, it was evident that the strict fiscal system that had been established with the aim of introducing the euro as the single currency, could not be maintained at the cost of the economic growth. In addition, the globalisation that was already pressing at the EU’s doors, pushed the Union to set more ambitious objectives at the social level. It was just in 2000 that it was decided to proceed on the layer of the coordination of the policies of Member States leaving the ‘Lisbon Strategy’ alone.
This strategy was finalised to create the necessary conditions for the European Union to be able to become the most competitive area in the world by 2020. In this context, the objective of sustaining employment, economic reforms and budget rebalancing was born. The method chosen to move to the social dimension was the ‘open method of coordination’. This entails a decision-making process aimed at enhancing cooperation between European countries, whose national policies could be directed towards common objectives. To that end, it starts from the objectives, and, proceeding backwards, problems are identified and possible solutions selected, guaranteeing the participation of all stakeholders. In this regard, the EU facilitates coordination and reciprocal learning between the various Member States, without any formal attempt to control the application by governments of the general principles and objectives commonly defined at the European level. From a practical point of view, the application of the method is realized by three types of actions. The first defines the guidelines at European level with roadmaps capable of defining the timescales available to Member States to reach the objectives; the second defines, in the sphere of the EU, the qualitative and quantitative levels and the benchmarks, calibrated on the best world performances and adapted to the different needs of the member States; finally, playing a key role, is the monitoring and evaluation of national policies with respect to the benchmarks jointly defined, and a comparison of the different national contexts, establishing ‘good practices’, with the obligation upon Member States to send reports to share their own process of implementation. The crucial aspect of the strategy, as far as employment is concerned, is that the objectives of flexibility and security are not considered contradictory, but complementary, and the objective of the States is therefore not to considered the two objectives as a trade-off, but, on the contrary, the flexibility of the job market and the security of workers can be contemporarily. The European Council of Lisbon decided to act on a level of ‘soft law’ as a privileged instrument of the modern ius mercatorum, possessing rules for a universalist vocation but with a high level of speciality. The deadline for reaching this objective was set as 2010.
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However, in the application phase, the Strategy encountered many difficulties: the principles and the objectives turned out to be too general and the means of realising them unsuitable. The ambition had been too great, in particular in the light of the differences between the blocks of countries of the west and those of the east. As early as 2005 therefore it was already necessary to admit the failure. The States arranged for a relaunch containing a new reformulation of the project, in the light of two perspectives: economic growth and employment. More markedly social considerations were taken into consideration, rather than just economic ones, and the procedures set out were more gradual and inclined to a large action at national level rather than at the supra-national level.
The new strategy of “Europe 2020” The conclusive phase of the Lisbon Strategy coincides with the coming into force of the Treaty of Lisbon in 2009 and with the financial crisis. Coordination between national policies at this point became even more necessary, if not indispensable, to address the crisis and to be able to manage the withdrawal of the extraordinary measures in a second phase, without compromising the economic recovery. The basis was therefore laid for constructing a perspective for ‘after Lisbon’, which took the name of ‘Europe 2020’. The crisis had put the spotlight on problems that couldn’t be ignored, first of all the alarming repercussions that low growth had had on conditions for the young in the labor market. With the new strategy major objectives of short- and middle-term to respond to the serious crisis were established, rather than (as had been the case with Lisbon) looking to objectives that were too far ahead, and in many cases excessively abstract. ‘Europe 2020’ in this way takes more into account the principle of differentiation, guaranteeing a major involvement of the Regions, in a context in which every State is called to effect policies and reforms that would mirror its own condition and the relative level of ambition. Growth is its principal pillar under three aspects: smart growth based on knowledge and innovation, sustainable growth from the environmental and energy point of view, and finally, the most relevant of the aims of our treatise, an inclusive growth by the promotion of an economy with an high rate of employment, capable of facilitating social and territorial cohesion.
In order to achieve these objectives concrete indicators were set out establishing national goals that States are called upon to reach on the basis of their starting point: among these, for example, is the important objective that 75% of people between 20 and 64 years old should have a job. It should be underlined that, despite the succession of different strategies, the principle has not been abandoned. The belief that increasing employment flexibility would be the best recipe for improving the performance of the market still remains. In light of this, the series of interventions proposed is much broader in that it involves time tables, salaries, costs of work, the reduction in redundancy costs by deregulation of the labor market, the reinforcement of active labor policies thanks to the transformation of services for employment, the reform of unemployment subsidies and improvement of the skills of people seeking employment. As early as 2010 the Commission reiterated its view that the policies of flexicurity are the best instrument for modernising the labor market; it is certainly necessary to revisit them and adapt them to a post-crisis context and act in a more incisive manner at the level of the reforms, reduce the fragmentation of the market, promote gender equality and make the transition attractive. From this affirmation, it derives the idea, which was pursued by the member States, that to reform the labor markets would be the best response to the crisis.
Implementation in the different member states: a look at the different national contexts Before analysing our national context in the light of the principles and mechanisms so far considered, it is necessary to briefly touch upon how the different member States have understood, adopted and implemented these principles and the supra-national guidelines. The first consideration is that the improvement in the labor market has turned out to be very patchy at European level. Some States have succeeded, in spite of the crisis, in returning to previous levels of employment: this is true as for Germany, Sweden, and the United Kingdom. Others have undertaken profound structural reforms of their labor markets, but continue to face
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higher long-term unemployment. This is true for southern Europe in particular for Italy, Spain, Portugal, and Greece. The rest of the member States find themselves in an intermediate position between the two extremes. It should be underlined that, when the crisis broke out, it became evident that two problems were shared by all member States: youth unemployment and an increase in long-term unemployment. In southern Europe the crisis resulted in an explosion of atypical contractual arrangements. In Italy, this came about through resorting to working arrangements of a type called â€˜quasi-employmentâ€™ (with the aim of disguising working relationships which in fact were not at all stable), and part-time working arrangements. The reforms implemented in Europe were effected on three principal domains: that of active labor policies, the powerful protection of workers at judicial level, and measures addressing unemployment. The trend that can be seen tends toward a reduction in expected guarantees in terms of contracts, in particular concerning measures against redundancy. Many States, like Spain, Italy and the United Kingdom, reformed the redundancy framework (whether individual or collective), limiting the right to re-employment in case of unfair dismissal and reformulating the compensation framework. A strong incentive furthermore was given to resorting to extra-judicial means of resolving controversies over employment legislation. At the level of measures dealing with unemployment, all the States implemented measures giving employers incentives to take on permanent employees, to discourage unfair recourse to atypical contractual frameworks, like mini jobs in Germany and zero-hour contracts in the UK. Portugal and Ireland have, for instance, introduced or reformed the minimum salary framework; others intervened at the level of fiscal incentives granted to employers who hire on permanent contracts or allow the transition of workers from an atypical contractual framework to a permanent one, as in Italy, Sweden and Spain.
The Jobs Act in a European perspective In Italy the implementation of the flexicurity model took the form of interventions against unemployment and increased elements of security, like social protection. The Jobs Act is a clear expression of the will to eliminate the variety of flexible contractual forms that caused insecurity, through the introduction of the single contract with increased job security; but at the same time they reduced workersâ€™ security. The Renzi government called the reform one of the pillars of its action against the crisis. It is forecast that in the first three years there might be a suspension of the employment relationship, with a type of security different from the existing legal framework. At the contributory level, in the first three years the single contract offers contributions and rights inferior to those of the permanent contract. In the light of these considerations, the Jobs Act can certainly be seen as the first concrete attempt to implement at a national level the European model of flexicurity after a long discussion that began in the â€˜90s. The incoming employment flexibility seems to be the pillar of this recent legislative intervention. Indeed, the current one it was already one of the pillar of the 2012 reform. Nevertheless, it should be highlighted that Italy departed from other European countries which, it is true, did act on the level of the incoming and outgoing flexibility, but which offset this more powerfully through the other key objective of the model, the security of the workers. Many countries that implemented reforms on the model of flexicurity, like for example Denmark and Sweden, did at the same time devoted significant resources in social spending for employment and for employment policies. In Italy, this phenomenon has only partially taken place so far. In addition, today Italy is both one of the countries in which employment is mostly flexible, and one of those in which the level of unemployment remains particularly alarming, above all with regard to youth unemployment. Our country has an extremely low level of policies, active or passive. There is no need to underline what effect this has, as much on levels of employment as on the level of consumption, in a country that continues to have alarming levels of injustice in the distribution of wealth.
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The European semester 2016: the commission’s recommendations to Italy In this last section, the analysis turns again to the supra-national context. In particular, the European Union established an annual cycle of coordination of the economic policies of the Member States called the ‘European semester’. This hinges on the strategy of Europe 2020 in that the European Commission seeks to participate in and to contribute to the pursuit of the Strategy’s objectives. The European semester generates a series of recommendations that have to do with both the Eurozone in general and individual member States; these last are based on reports that the national governments send to the Commission, regarding the structural reforms put into effect and the plans for the budget. The recommendations seek to influence the development of national policies for the next 12-18 months and in addition highlight best practices. In the national report for the year 2016 sent by the government to the Commission, it transpired that the implementation of the Jobs Act had produced considerable positive results at the level of unemployment. Once the implementation of the reform finished with the last decree entering into force, the government declared that it would soon proceed with the reform of the Active Employment Policies and the Employment Inspectorate, which will conduct the necessary checks foreseen by the employment legislation. Appropriate policies will be put in place for the young through the so-called ‘super bonus’, a special incentive to employers to hire young people involved in extracurricular internships, at the end of their internship contract. Minister Padoan, the signatory of the report, concludes the analysis dedicated to the employment market by saying that the next reforms will concentrate on corporate contracts with the aim of making their implementation more effective. In the light of this report sent by the government, on 18 May 2016 the European Commission published the recommendations of the Council of the European Union for the national reform programme of 2016. In 2015, Italy was granted a measure of temporary deviation from the path towards the required midterm budget objective to take into account significant structural reforms with positive repercussions on the long-term sustainability of public finances. In 2016 Italy advanced the usual request
with the aim of taking into account other structural reforms. The Council recognises that, if implemented, these reforms will have a positive impact on the sustainability of public finances. However, in the light of the Commissionâ€™s Spring forecasts, the Council holds that the risk that Italy would not comply with the provisions of the Pact on Stability and Growth is very high. Indeed, the Council underlines that, although there might be initiatives in progress to reform the budgetary framework, up to now only limited interventions have been made to assure that the review exercise for public spending would contribute to rehabilitating the budget. With regard to the Jobs Act, one should look at the text of the recommendation itself: In 2015 Italy profoundly reformed the institutions of the labor market with the so-called â€˜Jobs Actâ€™. To activate the people most distant from the labor market, in particular the long-term unemployed and the young, it is fundamental to implement the reform of the active policies of the labor market. At present Italy finds itself facing a series of challenges of administration, policy and related to resources, to overcome which it will be necessary, in particular, to strengthen public services for employment and carefully monitor the supply of services. The system of apprenticeship contracts has been reformed to extend it to adults who have been made redundant, but the implementation is still in progress. In Italy the second level of negotiation has not been sufficiently developed: therefore the implementation at the business level is hindered, of innovative solutions capable of increasing productivity and better relate remuneration to the situation of the labor market. In this sector interventions must be effected in consultation with the social partners with respect to national procedure. The social partners have not yet found an agreement on the reform of collective contractualisation. According to the national reform programme, this reform is expected by the end of 2016. The participation rate of women in the atypical and insecure labor market is among the lowest in the EU. The feminine presence in atypical and insecure jobs is predominant; women constitute the majority of atypical workers and are particularly concerned in the informal economy. The combined effect of tax system and the welfare system discourages from work the people who constitute the second source of earnings, a problem that the new law on employment (Jobs Act) does not deal with effectively. Even the scarcity of welfare services at affordable prices hinders the participation in the labor market of women who care for chil-
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dren or elderly relatives. Levels of poverty are elevated (more than a quarter of Italians are at risk of poverty or social exclusion) and the performance of social assistance remains weak and fragmentary. The adoption and implementation of the national strategy of the fight against poverty and a rationalisation of social expenditure could signal the first steps towards the progressive introduction of a system of minimum wage at national level that doesn’t produce significant effects on the budget. With regard to the reform of education progress has been considerable: the school reform was adopted in July 2015, while the implementation decrees should be adopted by January 2017. In the light of these reforms, Italy was recommended to proceed toward the reform of active policies for the employment market, in particular reinforcing the effectiveness of employment services and putting in place measures for the fight against poverty, strongly connected to the labor market. In addition, Italy is invited to proceed rapidly to the adoption of new competition legislation and to intervene in a more targeted manner in regulated professions with the aim of making them more competitive. In conclusion, we can say that the Jobs Act certainly represented a considerable and decisive step towards the European model of flexicurity, but should nevertheless be considered as a first step, since the flexibility of the employment market needs to be accompanied by pursuing the security of workers themselves, an objective that Italy has not yet completely achieved.
Bibliography A. Moreira, A. Dominiquez, C. Antunes, M. Karamessini,M. Raitano, M. Glatzer. Conseil d’Orientation pour l’Emploi, “Labor Markets Reforms in Europe, Executive Summary”, 5th November 2015.
Commissione europea COM (2016)332 final del 18.05.2016, Raccomandazione del Consiglio sul programma di riforma 2016 dell’Italia. Commissione europea, “Crescita ed Occupazione: Lavorare Insieme per il Futuro dell’Europa. Il Rilancio della Strategia di Lisbona” (2005). Commissione Europea (2010) An Agenda for new skills and jobs. European Commission, “Labor Market and Wage Developments in Europe”, (ISSN 2443-6771), 2015 E. Pedersini, “Flessibilità e Politiche del Lavoro in Europa fra Mercato e Regolazione Congiunta”, Dipartimento di Studi Sociali e Politici, Università degli Studi di Milano, Working paper 06/09, (2009) G. Allulli, “Dalla Strategia di Lisbona a Europa 2020, CNOSFAB e Ministero del Lavoro e delle Politiche Sociali, (2015). M. Fana, D. Guarascio, V. Cirillo, “Labor Markets Reforms in Italy: Evaluating the Effects of the Jobs Act”, 5/2015 Dicembre Working Paper (2015). M. Decaro, “Dalla Strategia di Lisbona a Europa 2020”, Fondazione Adriano Olivetti (2011). Ministero dell’Economia e delle Finanze, Economic and Financial Document 2016. P. Tridico, “Riforme del Lavoro, Occupazione e Produttività: un Confronto tra l’Italia e l’Europa”, Sindacalismo 28, ottobre-dicembre (2014). S. Clauwaert and I. Schomann, “The Crisis and National Labor Law Reforms”, ETUI News and Background, 19 (1), (2013). W. Eichhorst, P. Marx, C. Wehner, “Labor Market Reforms in Europe: Towards More Flexicure Labor Markets?”, IZA DP No. 9863 (2016).
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Francesco Beraldi Economics student at the University of Turin and Allievo at Collegio Carlo Alberto. During the last semester of his Bachelor’s degree he was a visiting student at the Lisbon School of Economics and Management, at the London School of Economics and a research intern at CEMFI in Madrid. Author at Neos Magazine and member of the Board of Directors of CEST – Centro per l’Eccellenza e gli Studi Transdisciplinari, he also collaborates with the magazine Quadrante Futuro.
Ivan Lagrosa Economics and Social Sciences student at Bocconi University and visiting student at Innocenzo Gasparini Institute for Economic Research (IGIER, Bocconi), he graduated cum laude at the University of Turin and with distinction at the Collegio Carlo Alberto (Allievi Honors Program). He collaborated with La Stampa daily journal and currently collaborates with the magazine Quadrante Futuro, where he deepens his interests linked to the labor market. Moreover, he is a member of the Board of Directors of CEST – Centro per l’Eccellenza e gli Studi Transdisciplinari.
Mariachiara Bo Mathematics for Finance and Insurance student at the University of Turin, she is an Allievo at the Collegio Carlo Alberto. In 2014 whe was a member of the Student European Parliament of Turin. She combines a passion for art and literature, developed during her classical high school studies, with an interest for economics and finance. In 2013 and 2014 she partecipated in internships in physics and neuroscience, respectively at INFN and NICO, and she gave a science talk during the last edition of the Alfaclass project of 2016.
Federico Boscaino Economics student at the University of Turin, since 2016 he is an Allievo at Collegio Carlo Alberto. Passioned about economics and politics, he deepens these themes by participating in projects and summer schools and by reading books and newspapers. He hopes to keep nurturing his interests continuing his studies with a doctorate in political economics and working in research.
Damiano Campini Mathematics for Finance and Insurance student at the University of Turin, he is an Allievo at the Collegio Carlo Alberto. His interests span beyond the financial and mathematical fields, reaching socio-economic themes, strengthened by an experience in th Students European Parliament. He was recently elected representative for the Mathematics Department and he is author for Neos Magazine.
Ornella Darova Graduated cum laude in Economics and Statistics at the University of Turin and in Economics at the Collegio Carlo Alberto, her thesis was awarder by the Consorzio Asti Studi Superiori and by the Jo Cox Prize for European Studies. In the summer after her graduation, she was a market analyst at Western Union and she was selected by the program Mentors4U. She is now enrolled in the MSc in Economics and Social Sciences at Bocconi University. She was a research assistant at LUISS Guido Carli and she was selected by the german-italian Research Centre Villa Vigoni to draft the Rome Manifesto. She continued her research activities at Istituto Bruno Leoni. She is among the co-founders of Neos, part of the Bocconi Economic Society and she was selected by the Milan hub of the Global SHapers of the World Economic Forum.
Ilaria Fevola She graduated in Law at the University of Turin in September with a thesis on international and EU law. She was a legal interna t WAN_IFRA (World Association of Newspapers and News Publishers), working on the protection of personal data, copyright, competition law and state aid.
Giuseppe Grossi He is a student in Philosophy at the University of Turin, passionate about global geopolitical and economic macro-frameworks. He has been Local Coordinator of the Turin area for the non-profit organization Students for Liberty, a great outlet for his sensibility towards the battles for freedom. He hopes to remain in the academic world, for this reason, after his graduation, he intend to pursue a doctorate in philosophy of mind, a field in which he is specializing.
Cedomir Malgieri Economics student at the University of Turin and Allievo at Collegio Carlo Alberto. His studies, together with a working experience in the consulting sector and in the world of university representation, allowed him to develop a good capacity to critical analyze real world issues.
Davide Maramotti International Sciences student at the University of Turin, he attended a scientific high school and obtained as well a specialization as a marketing technician. He is a member of the international network Students for Liberty since the very first day of University and he is a member of the European Marketing Team. Since the beginning of 2017 he also writes for the libertarian inspirited online magazine â€œThe Fielderâ€?. In the future, he would like to specialize in international trade.
Alessio Mitra After a Technological Scientific high school, he graduates in Economics at the University of Turin with a thesis on the role of the public intervention between Welfare Economics, Public Choice Theory and Behavioural Economics. During his studies he co-founded Neos and became Vice-President at the cultural association Ideificio Torinese. After his graduation he moves to England, where he volunteered at Oxfam. He is now attending a MSc in Applied Economics with Public Policy at the University of Bath.
Francesco Mosetto After a classical high school, he is currently studying Law at the University of Turin. In 2011 he was awarded by the European Commission as better Italian translator and in 2015 he received a mention as better delegate at the EU Council in the EU-Model at the University of Turin. He participated as a panelist in international conferences, such as the Demokratiekongress 2017 in Berlin.
Filippo Palomba After a scientific high school, he graduated in Economics and Management at the University of Padova in 2016. He currently attends the MSc in Economic and Social Sciences at Bocconi University in Milan, visiting student at Innocenzo Gasparini Institute for Economic Research (IGIER) and author at Neos Magazine. He is passionate about politics, macroeconomics and statistics.
Tommaso Portaluri Statistics student at the Polytechnic of Zurich (ETH Zurich). He graduated in Economics and Statistics at the University of Turin and at Collegio Carlo Alberto. In recent years, he has worked on several european projects for research funding at ONGs and research centres (at CERN, in Switzerland, and at CNR, in Italy). In 2011 he was appointed as an Alfiere della Repubblica; since 2013 he is President of CEST – Centro per l’Eccellenza e gli Studi Transdisciplinari
Adele Ravagnani Physics student at the University of Turin and Allieva at Collegio Carlo Alberto. She had her first work experience when she was eighteen, as a Costumer Service Assistant for two months in the UK, at Moto Hospitality – Burger King. She was a member of the youth Judo national team and bronze medal at European championship. Literature is her passion since her childhood, journalism since her teenage.
Umberto Rogna Maggi After a scientific high school, he studied Economics at the University of Turin, where he graduated in March 2017. Passionate about political and economic issues, during his university studies he has collaborated with several cultural associations, founding the online Magazine Neos. He is currently studying at LUISS University.
Raffaele Tranchitella Graduated cum laude in Finance at the University of Pisa with a thesis on financial econometrics entitled â€œCredit Default Swap: characteristics of the derivative contract on creditâ€?. After several experiences in Italy and abroad, he specialized with a M.Phil. in Quantitative Finance at Collegio Carlo Alberto. He is mainly interested in political economics and finance. He currently work as a certified accountant (Dottore Commercialista e Revisore Legale).
Two years have passed from the introduction of the Jobs Act, a period of time that is suﬀicient to reﬂect on and analyse what has happened in Italy following the introduction of the reform. With this aim, Neos proposes a report on the labor market, with the objective of explaining Renzi’s government reform and its economic and social implications. Also thanks to a series of focuses on diﬀerent European countries, such as France, Germany and Spain, Italian peculiarities are treated and inserted in the European and international context. Together with the texts of students coming from diﬀerent Italian universities, the report hosts several interventions of important academics on the key themes of the labor market. Texts by: Francesco Beraldi Mariachiara Bo Federico Boscaino Damiano Campini Ornella Darova Ilaria Fevola Giuseppe Grossi Ivan Lagrosa Cedomir Malgieri Davide Maramotti Alessio Mitra Francesco Mosetto Filippo Palomba Tommaso Portaluri Adele Ravagnani Umberto Rogna Maggi Raﬀaele Tranchitella
Neos is a think-magazine created and managed by university students from around Italy, born with the objective of covering current economic and political events through analyses with an academic print, but a didactic profile. Thanks to Neos, many students have the opportunity to enhance and grow the competences acquired with their studies, by deepening themes of their interest and building a link between a youth public and specialized magazines.
Published on Nov 13, 2017
Two years have passed from the introduction of the Jobs Act, a period of time that is sufficient to reflect on and analyse what has happened...