Unemployment is the greatest emergency facing Italy. But new jobs cannot be achieved simply by tax reductions or incentives to companies to hire. You need a plan that will radically change the allocation of resources to the different parts of the economy, says Luciano Gallino
Italy’s new government has said it is 100% committed to create jobs. In pursuit of this purpose it will have to make different choices, some of which are known because they have for some time been part of the discussion on this issue, others are virtually ignored, but not for this less important. The problem is two-fold: to avoid making the wrong choices between those measures that are already under discussion, but also identify original decisions, pertaining to situations where both the government and commentators who urge it to take action to create jobs seem to ignore.
Before touching on the latter, it important to highlight a decision that would be wrong, but has already been creeping into some speeches of prime minister Enrico Letta. This would be to dust down the idea that employment flexibility – translated: greater ease of firing, or hiring through short-term contracts – will serve to create a greater number of jobs.
Flexibility is a common refrain first circulated by the OECD twenty years ago. The higher the degree of legal protections for labour in a country, according to OECD reports in the mid-nineties, the higher the rate of unemployment. About ten years ago this was challenged. Another OECD report said that the empirical studies of this relationship led to conflicting results, and most importantly there were doubts about how robust they were.
Other reports appearing more recently have concluded that the relationship between the rigidity of employment protection and the unemployment rate is very ambiguous. In spite of its inconsistency, the chorus in favour of flexibility of employment has taken hold in many OECD countries and led to results. There’s the Virville report in France, the Hartz laws in Germany, the Italian labour market reforms of 1997, 2003 and 2012, which were all conducted to create more ‘flexibility’; these have either created millions of temporary workers, or brought no improvement for those who were already in precarious working situations. It would seem, therefore, time to bid farewell to the idea of flexibility.
Technology kills jobs
Today we need to make new choices in terms of employment and economic policies by facing up to the fact of the replacement of human labor with electronic technologies. It’s been going on for decades, but in recent times it has seen an extraordinary acceleration in professional and business sectors that previously seemed to be immune.
The argument against this is that technology creates as many jobs as it destroys. I expressed doubts about this some fifteen years ago. What’s going on now shows that it no longer holds. Recent US studies (eg Ford, 2009, MacAfee and others 2011) come to the same conclusion: technology continues to create jobs, but it destroys many more. What’s made the difference are ever more powerful and tiny microprocessors, and programmes (or software) that are increasingly complex and intelligent. So human labour continues to be ejected from the factories because the cars, washing machines and televisions that they used to make are now produced by robots controlled by computers built by other computers. But what’s new is that mid-level clerical activities, both high-end and professional, are being replaced by machines.
It’s not just the check-in at the airport, tickets at the station, the cashier at the supermarket, where the customer is allowed (or forced) to serve himself, using a machine, or the bookseller or shopkeeper, supplanted by the sale on the Internet. Also disappearing is the practitioner with an undergraduate or masters degree who works in a law firm, because now there is software that in just a few seconds can find any article of any law; the young architect who used to transform the sketch of the teacher into a detailed technical drawing, because a computer does it better than him; the mathematician who devised complicated algorithms for computerized stock exchange transactions, because now his bank has purchased a new programme, and they need just two mathematicians instead of ten; and the school teacher who loses his job along with half of his work colleagues, because his students now learn with an e-learning system that even marks their work and provides tips for better study. Result: without making original decisions, an unemployment rate of around or below 5% – the least you could ask for in a decent society, instead of the outrageous 12% today – will not be seen in Italy even in the next thirty years.
These advances in technology have not announced the end of the work, as Jeremy Rifkin predicted ten years ago. We are confronted with the need to conceive, in a radically different way, job creation and the allocation of work in different productive sectors. The primary objective should be to create jobs in labour-intensive sectors. It is only a matter of choosing where.
New labour-intensive jobs
There are the aqueducts that, from the source to the tap, lose half the water they transport, and our cultural heritage that is falling apart. There are millions of homes still constructed to consume five or ten times more energy than that required, to ensure the same level of comfort, and schools to be repaired in order to stop the roofs falling onto the heads of students. There are thousands of miles of streams and rivers, and tens of thousands of square miles of forests and land to be attended to, in order that every time it rains lives are not lost, nor houses and factories destroyed. There is at least half of all Italy’s hospitals to be renovated because today treatments and hospitalization are organized in a different way than when they were built half a century ago. And perhaps half of the existing buildings, in perhaps half the Italian territory, should be protected against seismic risk using the techniques available today.
All this means millions of labour-intensive jobs, with professional qualifications ranging from labourer, to the skilled worker to the engineer, that are waiting to be created to benefit the entire country. You could involve thousands of small businesses, cooperatives, artisans, perhaps coordinated by public or larger private undertakings.
And this is the second original decision that the government should take. It is unimaginable that such activity can be started with a tax reduction or incentives for companies to hire, and similar measures. You need a plan. A plan that aims to connect the rapid creation of employment with the need for a transition for masses of workers to sectors other than the traditional ones where jobs will continue to be lost – and why not, connecting this plan to tackle Italy’s unemployment crisis with a rather more ambitious idea of the kind country where we want to live.
Micromega May 10, 2013
Translation/edit by Revolting Europe