Employment-related provisions of budget law for 2000

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Italy's budget law for 2000 was approved in December 1999. The government's aim in the budget is to foster the growth of the Italian economy and to continue with the policy of redeeming the public debt. The law's provisions include a reduction of the tax burden and of labour costs, an expansion of temporary agency work, and an increase in social security contributions for freelance workers.

On 23 December 1999, the Italian parliament approved the budget law for 2000, at a time of particular political and economic significance. The annual budget law is one of the most important of Italy's economic policy measures.

The 2000 law's approval by parliament preceded a political crisis caused by conflict among the parties making up the centre-left government coalition. The crisis was rapidly resolved by the formation of another centre-left government, again headed by Prime Minister Massimo D'Alema, which has a smaller parliamentary majority than its predecessor because of the abstention of some small parties.

The performance of the Italian economy showed a slight improvement in 1999, compared with 1998, in terms of: the growth of GDP (up 1.2% in the first nine months of 1999, according to ISTAT); employment (the unemployment rate stood at 11.1% in October 1999, according to ISTAT); and public finances (according to the Ministry of the Treasury, the deficit amounted to 2% of GDP in 1999). Inflation, however, showed a tendency to increase (2.1%, according to ISTAT). Nevertheless, the growth rate has been relatively modest compared with the other countries of the EU, and the unemployment rate is also still rather high. The endeavour to restore the public finances to health can be regarded as anything but complete, given the continuing high level of the public debt (115% of GDP).

Bearing in mind the general macroeconomic situation, the objectives pursued by the government through the 2000 budget law are to foster the growth of the economy, with resulting positive effects on employment, and further to reduce the public debt in line with the parameters set by EU Economic and Monetary Union.

Employment-related issues

The budget law for 2000 has been described as taking a "light" approach by several commentators, given that the spending cuts amount to ITL 15,000 billion, a figure lower than that of other budget laws during the 1990s, which reached a maximum of ITL 90,000 billion in 1993. The law also introduces a number of important new provisions with relevance to employment-related issues.

An aspect welcomed by the social partners is the fact that the budget does not increase the tax burden. As laid down in the "social pact" signed in December 1998 (IT9901335F), it reduces by 1% the tax rate levied on incomes between ITL 15 million and ITL 30 million (from 27% to 26%), which is the tax bracket that comprises the majority of Italian pensioners and workers. Further benefits for families are provided in the form of increased tax deductions. Businesses should see a 0.8% reduction in their labour costs because employers' contributions for maternity leave will be reduced and in part (0.2%) taken over by the state.

Since the budget law does not provide for any cuts in social spending, the instruments intended to reduce the public debt are the rationalisation of public spending (ITL 11,000 billion) and the sale of state property (ITL 4,000 billion).

Another important novelty concerns temporary agency work. The budget law implements the agreement signed by the Confinterim employers' associations and the trade union federations in November 1999 (IT9912135N), which extended the use of low-skilled temporary labour to white-collar workers in agriculture and construction, categories which were previously excluded. The role of collective bargaining is also enhanced, as the law stipulates that collective bargaining should establish the job tasks for which temporary agency workers may not be used. The training fund for the temporary agency work sector financed out of firms' contributions will be managed jointly by the trade unions and the employers' association. By means of these measures, the government intends to encourage the spread of temporary agency work both in order to improve labour market entry and to combat irregular work.

The budget law also fixes the budget for the incentives provided for "gradual alignment agreements" - special collective agreements designed to regularise clandestine, irregular employment (IT9903244F) - though postponing them until the end of 2000, as well as for the redundancy fund and mobility scheme for redundant workers, while awaiting the reform of the whole system of "social shock absorbers" (IT9802319F) in the event of job losses, which should be concluded by the end of 2000.

For freelance workers "coordinated" by an employer (IT9709310F), the law provides for a 1% increase in social security contributions, paid in part by the worker and in part by the employer. At present, these contributions amount to 12% of taxable income and should rise to 19.5% by 2014. In this way the government intends to increase the social security protection of workers on freelance contracts. An illness allowance (in case of hospitalisation) has also been introduced for these workers.

The budget law also fixes the financial parameters for the renewal of collective agreements in the public sector, confirming the government's policy of wage restraint. Pay increases negotiated at sector level may not exceed the planned inflation rate for 2000. In company-level bargaining, any further pay increases will depend on the financing available to individual public sector units. The law confirms the objective of reducing the number of public sector employees by at least 1%. Furthermore, the use of part-time work and other forms of "atypical" work should be increased in the public sector.

Commentary

The budget law for 2000 confirms that the period of severe difficulties for the Italian economy, due in large part to imbalances in public finances, has drawn to a close. It is of significance that the total amount of the income and expenditure measures is less than in previous years, that cuts in social spending are not envisaged, and that the tax burden has not been increased. Overall, the budget law meets the demands of both the trade unions and the employers' associations, although both sides have pointed out its deficiencies - the Cisl union confederation has been particularly critical of the government's allegedly insufficient action as regards employment (IT9912137F), and is organising demonstrations in February 2000.

According to some commentators, although the 2000 budget law introduces novelties with respect to those of previous years, it does not address a number of important issues in Italy (reform of the pensions system, for instance) with sufficient incisiveness. In some cases, action has been postponed. This issue is a matter of substantial conflict among the social partners, not only between unions and employers' associations but also among the former. It should be added that the government's action has been further weakened by the general political situation, and in particular by divergences among the parties making up the government coalition.

Finally, as regards temporary agency work and atypical workers, the budget law confirms the policy of regulated liberalisation of the labour market. (Marco Trentini, Ires Lombardia)