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29 janvier 2018

Italy: assessment of the labour market reform

In the course of the double-dip recession, Italy undertook a major reform of its labour market in 2014-2015 (with the so-called ‘Jobs Act’). Trade unions had serious reservations as the Renzi-government introduced the reform plan. An assessment sheds a light on the effects and looks at the labour market development, whilst observers pinpoint persistent generational and regional differences.

The official aim of the ‘Jobs Act’ was to initiate a more dynamic labour market. The European Commission commissioned a group of experts to assess the implementation of the Act. The authors of this assessment report, published in December 2017, conclude that the Jobs Act has contributed to bringing the labour market institutions more closely into line with international benchmarks and with the principles of flexicurity. Employment protection legislation for permanent contracts has been brought into line with that of major European partners, although it remains more restrictive than the OECD average. The use of ‘atypical’ contracts, which are characterised by very weak employment protection and very low social benefits, is restricted. These measures are expected to reduce segmentation and its alleged negative impact on the economy. The focus of passive labour market policies has shifted from job to worker protection, which should facilitate the reallocation of workers to more productive occupations. Interestingly, the authors recommend to consider the strengthening of the collective bargaining framework as a follow-up to the reform.

Trade unions have never been very positive about the reforms introduced through the Jobs Act. The joint unions (CISL, UIL, CGIL) welcomed the active labour market policy as an important supportive instrument for youngsters on the market, but criticised the policy of savings and stressed the need to invest. In January 2017, trade union confederation (CGIL), tried to block the reforms before the Constitutional Court. However, the CGIL’s proposal for a popular referendum to repeal the controversial provisions of the reform was rejected.

However, Italy’s labour market performance is still characterised by substantial differences across age groups and regions; youngsters are facing high unemployment and low participation rates, while the regional disparities are shown by a more dynamic north and a stagnant south.

Research reveals that the country’s labour market suffered a sizable negative shock from the double-dip recession and has since experienced a moderate recovery beginning in 2014. Several experts recommend the country’s policymakers to promote youth employment activation policies and invest more in research and innovation programs across the country. Moreover, in the south inefficiencies and corruption have to be tackled. With the current economic trends, the regions of the Centre-South will recover their pre-crisis levels only in 2028, that is 10 years after the rest of the country. The labour market is characterised by an explosion of part-time work, above all that which can be defined as ‘involuntary’, people accepting part-time work due to the lack of full-time work. 

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