Employment promotion measures set out for 1999-2001

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The pursuit of financial restructuring and employment creation are the economic policy priorities set by the Italian Government for the three-year period 1999-2001, in a document approved in May 1998. The document forms part of the Italian National Action Plan on employment, drawn up in response to the EU Employment Guidelines. The Confindustria employers' confederation has been highly critical of the measures to promote employment.

In mid-May 1998, the Chamber of Deputies and the Senate approved the Economic and Financial Planning Document (Documento di programmazione economica e finanziaria, Dpef) for the three-year period 1999-2001 submitted by the Government on 17 April 1998 (IT9804164N). The Dpef is a document of great importance, since it sets out the economic policies that the Government intends to pursue in the next three years.

The main goals set by the Government are: reducing the public debt; stabilising inflation in compliance with the parameters set by EU Economic and Monetary Union; and creating new jobs. Here we focus on the last of the themes. In this area, the Dpef makes up part of the Italian National Action Plan on employment, in response to the EU Guidelines for Member States' employment policies 1998, which followed the Luxembourg"Employment Summit" in November 1997 (EU9711168F). The Plan is to be submitted to the Cardiff European Council in June 1998.

The Dpef proposals on employment

As regards employment creation, the main instruments proposed in the Dpef are:

• the development of the southern regions, given that unemployment is mainly concentrated in the South of Italy. The aim is to create the conditions to encourage local development based mainly on small and medium-sized firms. For this purpose, a set of measures is envisaged relating to infrastructure (roads, harbours, services to business, telematic networks), training, and the reform of the public administration. Moreover, specific development initiatives will be defined at the local level. These initiatives will be financed out of public funds (albeit to a limited extent), out of the European Union's structural funds, and by means of co-financing with private organisations;

• regularisation of "irregular" work, which estimates show has a notable incidence in the Italian economy, especially in the southern regions (according to the ISTAT statistical office, in 1996 there were around 5 million irregular workers). For this purpose the Government plans to promote the use of "gradual alignment agreements" (IT9706207F), as well as offering a form of tax amnesty;

• the reform of income support schemes to encourage re-entry into employment. The Government is considering the experimental introduction of measures designed to reduce labour costs. For example, it has suggested that unemployment benefit could be used in the form of vouchers or bonuses by firms which decide to hire unemployed workers; and

• training. Besides the extension of compulsory schooling, the Government regards curriculum reform as crucial for the closer integration of school, work, vocational training, and permanent education.

The role of the social partners and their reactions

In drafting the Dpef, the Government consulted the social partners, although there has been no outright negotiation. This is because the Dpef is a planning document which incorporates or proposes matters which have already been discussed by the social partners - for example, reform of income support measures was set out in the agreement on reform of the welfare system signed by the government and the trade unions in November 1997 (IT9711315F) - or are about to be discussed.

There have been contrasting reactions to the Dpef. Some economists and research institutes have expressed doubts concerning the Government's predictions of employment growth. It is believed, in fact, that the forecast of a 1% annual increase in the employment rate, and the achievement by 2002 of an unemployment rate below 10%, are too optimistic.

The social partners as a whole have approved the goals that the Government intends to pursue, and in particular the combination of financial rigour with economic growth.

However, the Confindustria employers' confederation argues that the Government's economic policy should envisage more drastic public spending cuts, reduction of the fiscal burden, and greater commitment to privatisation. The Dpef's job creation measures are a particular target for Confindustria's criticisms. The employers' body maintains, in fact, that both liberalisation of the labour market and reduced labour costs are essential for fostering job creation. Confindustria believes that the Government's priorities in drawing up the Dpef, too, have been conditioned by the need to reach a compromise with the Communist Reconstruction Party (Partito di Rifondazione Comunista, PRC).

The trade unions have reacted positively to the fact that reductions in public spending will not, for the next few years, entail cutbacks in healthcare and pensions, and that one of the goals set by the Government is economic growth. The unions' criticisms centre on specific points in the Dpef. First, as regards the development of the South, they maintain that "territorial pacts" and "area agreements" (IT9704203F) should be accompanied by policies of development and investment in the areas concerned, because otherwise there is a risk that the only outcome of such measures will be wage cuts. As far as the regularisation of illegal work is concerned, the unions fear that if some sort of tax amnesty is introduced, it may have the opposite effect from that desired and give rise to even greater evasion of social security contributions. Finally, the Cgil confederation in particular has criticised the proposal to use unemployment benefit as a bonus for firms hiring new workers, because the minimum income should be a social benefit for labour market "outsiders".

Commentary

Training, entrepreneurship development, and active labour policies are the instruments proposed by the Government's Dpef in order to create employment.

The document's proposals should be supplemented with the measures envisaged by the tripartite Pact for Employment of 1996 and subsequently included in the so-called Treu package (IT9703104N), which has not yet been completely implemented. Indeed, full implementation of both the Treu package and the reforms currently in progress, like that of job placement services (IT9710312F), seems crucial for job creation.

Besides introducing new employment creation measures, the Government should also begin reform of those which have been used to date, given their low effectiveness, as a report by the Ministry of Labour has recently pointed out.

It remains to be seen whether, and to what extent, the reduction of working time to 35 hours a week, due to come into effect in 2001 (IT9803159N), will have effects on employment. (Marco Trentini, Ires Lombardia).