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7 September 2018

Italy: labour reform reversed by a so-called ‘dignity decree’

Italy’s new government has reversed an important part of the so-called Jobs Act introduced in 2015. The reversal was presented as ‘the Waterloo of precarious jobs’. Employers reacted negatively, whilst the trade unions welcomed the initiative.

Early in August 2018, the incoming government received a majority in the senate for a reform of the Act (introduced as the ‘dignity decree’) that reverses important parts of the 2015 Jobs Act, such as the use of short-term labour contracts and the redundancy system. The law has already passed the lower house and entered into force on 14 July 2018. The reform reduces the maximum length of short-term labour contracts from three to a maximum of two years, and decreases the number of times employers can renew such contracts. It also increases by 0.5 percent the social security payments that employers must pay each time they renew contracts. Recourse to compensation for unfair dismissal has been strengthened. The reaction of the central organisation of employers Confindustria was very negative. The trade unions welcomed the decree and said that, whilst employment has increased, it is of lesser quality and also lesser quantity in terms of hours worked. The labour minister has promised other reforms in the near future, such as the cut of so-called ‘golden pensions’ and a reduction of labour costs for firms.

As the current government came in, it announced the reversal of the labour reform introduced by the previous administration. The reformed legislation, introduced in 2015, made it easier for companies to fire people and offered fiscal incentives for companies that hired permanent workers on less-protected terms. The so-called Jobs Act in 2015 was controversial from the start, with trade unions opposing the reform because it made dismissals easier and could undermine workers’ rights. Employers welcomed the tax incentives and the easing of redundancy procedures.

The previous government expected that the Act would create jobs and end a situation where the vast majority of young people were employed via insecure short-term contracts. By reducing the scope for atypical contracts and increasing exit flexibility of permanent contracts, the reform tried to reduce segmentation by intervening at both ends of the country’s two-tier labour market system. According to a Discussion paper published by the European Commission in December 2017, the Jobs Act contributed to bring the labour market institutions more closely into line with international benchmarks and with the principles of flexicurity. Although the period after the implementation was too short to assess the structural results, observers noted quite soon after the introduction that most newly created jobs were of a temporary nature; exactly the type of work the Jobs Act was supposed to deter. In recent months, this observation has been confirmed by several studies.

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