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Italy, Labour market reform, Politics, unemployment

Does Italy really need another labour reform?

No sector in Italy has been more ‘reformed’ than the labour market. Yet there’s talk of the need for reforms every day, as if labour rules had remained unchanged for a century.  Carlo Clericetti on why PM Matteo Renzi should desist from his Jobs Act 

It is repeated in almost every newscast: “structural reforms”, especially of the labour market. It would seem by the insistence on such reforms that they have never been implemented​​.

But in Italy in the last fifteen years or so we have had at least four major reforms, plus a large number of specific interventions, as well as various agreements between government and unions and between unions and national employers.

No sector in Italy has been more “reformed,” than the labour market with the possible exception of the pension system. Yet we continue to hark on about the urgent need for action every day, as if it labour rules had remained unchanged for a century.

In fact, it is justified to justified debate the issue but only because the results of all this intense activity are so bad. Italy’s unemployment rate is among the highest in Europe, the proportion of those actually employed is stuck at ten points below the European average, women’s participation in the labour market is at catastrophic levels, while young people…. well it’s better not talk about that (despite the chorus that accompanies each “reform”: “We must do it for our children”).

What’s more, another of the refrains that accompanies demands for “reforms” is that they are necessary to overcome a ‘dual labour market’, divided between those who apparently have great protection and those who do not.

In fact, today we no longer have a two-tier labour market, because while the number in “guaranteed” work is increasingly shrinking (sign among other things that their job protections are not actually so strong), there are countless workers who share two things: the instability of employment and low – often miserable – wages.

The meaning of ‘overcoming the dualism’ of the labour market then must be understood as “eliminating job guarantees” Unify the labour market, yes, but for the worse. We know longer ever hear about ‘flexicurity’, ie the guarantee of income support in exchange for easing rules on dismissals. It costs too much, so for now let’s do the flexi, as for security, we’ll see. Sooner, or later. Very likely later. Maybe…

Even the desirable policy of the minimum wage is likely to be interpreted in a way that will deepen the deregulation of the labour market.

The cornerstone of this strategy is being articulated by the Deputy Minister of Economy Enrico Morando, long known to embody the neo-liberal wing of the ruling Democratic Party. He stated in an interview with La Repubblica newspaper: “The system we intend to revamp is based on the idea that that to exit the national contract companies should sign company level contracts with the unions, as is happening, for example, with Fiat.”

And so, a statutory minimum wage is launched but at a level that is certainly less than the minimum stipulated in national wage contracts; companies will follow the example of Fiat and exit the national employers association Confindustria meaning they are no longer tied to national contracts, and wages head towards the statutory minimum. They may then also offer some increase, to whom they want and how they want.

Two birds with one stone: they destroy the national contract and make it easy to reduce wages. But the unions must sign an agreement, and some will say they can refuse. Sure, they might: even in Pomigliano they could, and we saw what happened.

In short, what is taking place is the final attack, perhaps the definitive blow, in one way or another, to the last remnants article 18 of the labour code – which protects workers in larger companies from unfair dismissal – reducing the national contract to a simulacrum, leading to the rapid decline towards union irrelevance.

This would be a green light to the strategy of internal devaluation, ie the reduction of wages. If the government continues along this road, as it seems determined to do, it will be placing itself at the extreme end of neo-liberalism even as doubts begin to spread about this recipe, as seen with the position taken by the [neo-liberal] economist Luigi Zingales, who has said that it is wrong to cut wages.

Will companies actually follow this path? They want a free hand and no constraints, yes, but they’ll think hard first before cutting wages, and a few actually do.

This fact results from a World Bank study, published in July last year (but carried out in 2007-2008). It was very extensive research on 15,000 firms from 14 European countries, including some non-EU, entitled Why firms avoid cutting wages: survey evidence from European firms.

Managers were asked if they had reduced the basic salaries over the past five years. Well, only a little over 2% had done so. Among the reasons given, “The most relevant reasons given for avoiding base wage cuts are concerns about worker morale and the danger that the most productive workers would leave,” leading to extra costs in replacing them.

Several cite the role of trade unions in the countries of the EU of 15 countries, where unions have double the importance as in the new east: but in fact, as the figures show, even where the union is more or less non-existent or of very little importance, however, very few companies have reduced wages.

This is the case, says the research, “even in the face of considerable negative economic shocks.” Of course, this crisis is not ” considerably negative” it is devastating, thanks to the policies that have been imposed.

Almost all firms – correctly – perceive wage cuts as something that will not in the end save them any money, but which is likely to impair the efficiency of the company. The technocrats, and some of the politicians and neoliberal economists are positioning themselves to the right of entrepreneurs, who are forced to anchor themselves in reality, even though this contrasts with their ideology. But these are facts which are evidently being ignored.


Translation by Revolting Europe


About revoltingeurope

Writer on Europe's Left, trade union and social movements @tomgilltweets or @revoltingeurope


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