Government presents White Paper on labour market

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In October 2001 the Italian government presented a White Paper on the labour market. The document is a programme of the legislative and other measures that the new centre-right government intends to carry out during the next five years. The main objectives of the White Paper are 'to guarantee a substantial increase in the employment rate, to improve the quality of work and to obtain stronger social cohesion'. The measures proposed include new forms of employment contract and a reform of collective bargaining to encourage local-level pay determination. The government will sees agreement with the social partners prior to legislating.

On 3 October 2001, the Minister of Labour, Roberto Maroni, on behalf of the new centre-right government, presented a White Paper on the labour market.

Context

The Italian economy has recovered somewhat during the past few years. GDP grew by three percentage points more during the five-year period 1995-2000, than during the previous five-year period. The employment rate, at 50.6% in 1995, increased to 53.5% in 2000 but remained far below the European Union average (63.3% in 2000). Women's employment rate is particularly low - only 39.6% of the female working age population is employed, compared with 67.5% for men.

Despite the recovery, the Italian economy still has important structural problems. There is a clear distinction between a highly industrialised Centre and North, with high employment rates, and a depressed South. Starting from the northern borders and going southwards towards Rome, we find a highly developed economic fabric, characterised by important industrial areas and by a highly industrialised economy. The basin of the Po river and the North-East are the most developed areas of the country, with the highest concentration of companies found anywhere in Europe. The central part of Italy compensates for the lower presence of industry with a highly developed service sector, linked in particular to the tourism industry.

In the South, the economy is still depressed. The lack of industrial development is deeply rooted. From a historical perspective, the South started to lose ground against the northern regions toward the end of the 19th century when Italy, which had been recently united politically, moved from being an exclusively agricultural economy towards an industrial economy. The process of national industrialisation left behind the southern regions, still committed to a traditional agricultural economy based on large landowners. The gap created at that time is still present, despite the fact that all Italian governments have sought to implement development policies for the South (which never produced the expected results).

The southern regions lack infrastructures, with a mediocre railway and road network which makes it difficult to reach the far South. The so-called Meridione area of southern Italy at present has highest rate of clandestine, underground economic activity (making up about 30% of the total, according to the Association for the Development of Industry in the Mezzogiorno, Svimez) and the influence of organised crime in economic activity is very high. Even if the labour market is going through a period of recovery, there is a very high unemployment rate in the South - 21% in 2000, against 5.7% for the Centre and North.

To these conditions of economic dualism, which make the implementation of development policies very difficult, must be added the widely perceived need to modernise the industrial relations and bargaining system. The Italian system is characterised by strong centralisation, which does not allow to take into account the differences in productivity which characterise the different areas of the country.

At present, it is also seen as necessary to modernise labour market structures. Public employment offices are not adequate to manage the supply and demand of labour: less than 4% of recruitment takes place through these offices. The various forms of employment contract enabling access to the labour market have multiplied, creating confusion and competition among them. Some forms, such as the work/training contract, have been criticised by the European Union.

The White Paper

The White Paper presented in October was developed by a team of experts in industrial relations. The objectives are 'to guarantee a substantial increase in the employment rate, to improve the quality of labour and to obtain stronger social cohesion'. The paper sets out a programme of legislative and other measures that the new centre-right government intends to carry out during the next five years

The document is divided into two parts, the first contains an analysis of the labour market and the second a series of proposals.

The analysis is centred on the performance and on the characteristics of the Italian labour market. It assesses the impact of EU guidelines on existing passive and active labour policies, focusing particular attention on the 'social shock absorbers' which cushion the effects of redundancies and restructuring (IT9802319F), on employment incentives and on the training system.

In the second part of the White Paper, the government sets out the methods available to it and its objectives. The methods are: 'social dialogue' based on the EU model; development of the current 'federalist' decentralisation of labour market regulation to the regions (IT0109101N); the use of 'soft' laws; and legislative interventions. The objectives set out by the government are: employability and labour quality (more and better jobs); flexibility and security; equal opportunities; and social inclusion.

The collective bargaining structure is the last issue dealt with by the paper. The government proposes to the social partners that they should develop a 'participative' system, including the issue of worker' economic participation within companies and the regulation of strikes.

Analysis of the situation

Among all the difficulties which characterise the Italian labour market, the White Paper highlights the demographic and generational problems: young people find the transition between school and work and training and work very difficult; older people have many problems with updating their vocational skills and with adapting themselves to the new forms of flexible work; while women find it difficult to enter and remain in the labour market.

The mediocre 'quality' of work is reflected in the high rate of 'irregular' work, which makes up around 14.7% of the total (according to 1999 data from the National Institute of Statistics [Istituto Nazionale di Statistica, Istat])

According to the government, Italian social expenditure has an uneven structure. About 80% of it is absorbed by the pensions system and a little space is given to dealing with unemployment and providing incentives for the working population. The system of incentives and 'social shock absorbers' is regarded as inadequate and inefficient, as are the public employment services, which are unable to provide 'workfare' services.

The proposals

The government intends to achieve a higher employment rate by strengthening the 'efficient capacity of functioning of the market'. In order to achieve this result, the labour market must be freed from the economic and regulatory mechanisms which are seen as immobilising it. There should be a shift from a system which guarantees a particular job to a system which guarantees lifelong full employability. Workers will benefit from an 'efficient and fair meeting between labour demand and supply'.

The actions that the government intends to carry out in this area have three directions:

1. the modernisation and the liberalisation of public employment services;

2. the enhancement of public intervention in the school-work-training transition. Continuing training will be supported by stronger public interventions. Apprenticeship will be upgraded as a training tool while the work/training contract will be used to foster the entry of workers into the company; and

3. the reform of the 'social shock absorbers' to make them act as employment incentives. The people who benefit from the social shock absorbers will have to 'look for a job in an active way'. The methods of such a search will have to be agreed upon with the public employment services.

Particular attention will be given to the participation of women in the labour market. All the external factors which prevent women from starting work activity and which make it difficult to reconcile work and family life will have to be removed. All gender discrimination regarding economic and occupational treatment will have to be abolished and incentives will be provided for flexible forms of employment, especially part-time contracts.

The government will also develop a series of policies aimed at regulating migration flows. Employment contracts for non-EU immigrant workers will be strictly dependent upon their holding a residence permit, and entrepreneurial initiatives among migrants will be promoted.

According to the government, the development of the labour market and of work organisation requires a consequent adaptation of the regulation of employment relations. The present regulatory framework 'reflects a work organisation which is now completely outdated'. Workers should no longer have a dependent employment relationship but will have to consider themselves as a 'collaborator who works within a cycle of working activities'. Such a cycle will be composed of periods of dependent work and periods of autonomous work, alternating with periods of training and vocational requalification.

Within such a framework, all the types of employment contracts in force will have to be adapted and flexible contracts will have to be further developed, removing the present regulatory hindrances. Furthermore, the government intends to 'clear' from the labour market the inappropriate use of some measures, providing instead for the creation of new forms of employment contracts. The document proposes two new forms of employment - 'intermittent work' (lavoro intermittente) and 'work on projects' (lavoro a progetto). 'Intermittent work', a type of 'on-call' work, would provide a minimum remuneration for workers to be available to be called on by an employer, with increased remuneration during periods when they were actually called on to work. 'Work on projects' would be be a form of 'semi-subordinate' autonomous employment linked to the realisation of a project.

The government also intends to increase labour flexibility by modifying Article 18 of law 300 (the Workers' Statute) which obliges employers to reinstate workers if their dismissal has been judged by the courts to be invalid (IT0106188N).

Industrial relations

The government intends to modify the present collective bargaining system. The reduction of the employment gap between the North and the South of the country should be achieved through wage policies which are differentiated by area and take into account the economic situation of each area.

In order to achieve such a 'local' wage policy, the government intends to give more space to decentralised bargaining. National sectoral collective agreements should provide guidelines on the various issues while decentralised bargaining should develop them in detail 'taking into account where productivity gains occur and the specific conditions of the local labour market'.

Worker participation practices will be developed in accordance with the rules provided for by various EU Directives in this area.

Recourse to strikes will be further regulated, providing for 'cooling-off' procedures and strengthening the prevention and resolution of collective labour disputes.

Social partners' reactions

The Confindustria employers' confederation was not completely satisfied with the government's White Paper. It considered the document 'timid and uncertain' compared with expectations, especially as regards dismissals.

The General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil) expressed a negative opinion on the document. According to Giuseppe Casadio, Cgil's confederal secretary, the document describes a system of industrial relations whereby the exercise of the collective representation of workers is completely denied. The main objective of the paper 'is to reinvent the whole of Italian labour law around the individual dimension of the employment relationship'.

The other two main union confederations - the Italian Confederation of Workers' Unions (Confederazione Italiana Sindacati Lavoratori, Cisl) and the Union of Italian Workers (Unione Italiana del Lavoro, Uil) - seem more open towards the White Paper. Savino Pezzota, the general secretary of Cisl, believes that the document 'describes a contractual model which leaves rooms for discussion and interventions in terms of employability'.

Commentary

Three aspects of the government's initiative have a particular political relevance: the method used; the proposed move from 'concertation' to 'social dialogue'; and the characteristics of the government action proposed

The method used by the White Paper is without any doubt a new practice in Italy and comes certainly from the wider European tradition. The objective of the government is to allow a broad debate, to gather the results of this debate which indicate the existence of common understanding, and to use these results as the basis for subsequent legislative initiatives. This is the first time that an Italian government has believed that such a dialogue could be a useful method. This is thanks to the existence, for the first time since the Second World War, of a government with a solid parliamentary majority, and also thanks to a political perspective which covers the entire field of legislation.

The passage from 'concertation' to 'social dialogue' is a novelty which has an important political scope. The government intends to mark a turning point with the approaches adopted by previous centre-left governments. So far, concertation has meant negotiation between the social partners and the government on a series of general issues (IT0102277F). These negotiations could go beyond the direct responsibility of the social partners and usually ended with a unanimous agreement. The present government intends to limit the field of discussion with the social partners. It wants to avoid transforming the discussions into genuine negotiations and in any case intends to take its decisions with full autonomy. There may be two explanations for this position.

The first reason could be political/institutional. According to many observers, in the past the process of concertation over-ruled parliament's prerogatives and parliament was de facto deprived of the possibility of expressing its authority on issues of a general character, because the government and the social partners had already agreed on them. A symbolic example, mentioned by many observers, was the negotiations on tax policy, whereby the personal income tax rate was set through negotiation with the trade unions.

The second reason is purely political . The government wants to avoid giving trade unions, and in particular Cgil - the union seen as least prone to accept the challenge of modernisation of the labour market – a sort of power of veto on the government's action of the government. The government believes agreement with the social partners is a desirable situation, but that it should not be binding on the government's power of initiative.

In order to put its plans into action, the government intends to adopt a practice of 'open coordination', consistent with the logic of the 'subsidiarity principle' underlying the federalist changes to the Constitution approved by a referendum on 7 October 2001. The amended Constitution entrusts the regions with greater responsibilities in the definition and implementation of labour policies. The government wants to define the general objectives, to monitor the results and to promote the dissemination of the good practices - but it wants to leave to the regional authorities the task of innovating and adapting labour regulations.

The government intents to close the debate on its White Paper before 15 November 2001. Such a fast conclusion does not seem realistic, and neither does any general agreement on the White Paper with the three main trade union confederations. The most realistic hypothesis seems to be a partial agreement among the employers' organisations, Cisl and Uil on some issues concerning employability. At that point the government will translate into legislative terms the main points of such an agreement. For the other issues, is not possible to imagine any legislative initiative without the agreement of the social partners.

It is very likely that after a first 'trial of strength', involving the translation into law of the results achieved during the first phase of the dialogue, the government will reopen bargaining with the social partners. The government may be influenced to avoid a clash by a number of factors - such as the difficult international economic situation, the problems caused by the current renewal of the collective agreements for the public sector (with a general strike to protest against the government policy in prospect - IT0111101N), a strike in the schools sector (IT0110103N) and protests by metalworkers represented by Cgil (IT0107193F). The risk for the government is of fostering indirectly the most conflictual trade union positions rather than more favourable dialogue-oriented positions which could foster the modernisation of the labour market. (Domenico Paparella, Cesos).