Government initiatives spark major confrontation with trade unions

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Between November and December 2001, the Italian government launched three important reform initiatives in the fields of labour market institutions, the pension system and the tax system. The Cgil, Cisl and Uil trade union confederations sharply criticised the government's action, both because of the contents of the bills put before parliament and because of the way in which the government had decided to proceed, without an agreement with the social partners. The Confindustria employers' confederation, on the other hand, expressed approval of the steps taken by the government and urged it to stick to its decisions.

The centre-right government's White Paper on the labour market published in October 2001 (IT0110104F) defined the general directions of government action on the themes of work and employment. It also set out the general framework for a transition from 'concertation' to 'social dialogue', ie to a new relationship with the social partners whereby the government intends to maintain broad autonomy with respect to economic and social policy initiatives, should an encompassing agreement with the trade unions and the employers' associations not be reached on the issue concerned.

After talks with the social partners on the White Paper's contents, in November and December 2001 the government undertook a series of initiatives on crucial issues without having yet reached agreement with the social partners. The first of these initiatives, launched in mid-November 2001, was directly linked with matters addressed by the White Paper and concerned the reform of labour market institutions. The second and third initiatives were launched at the end of December and concerned, respectively, reform of the tax system and reform of the pension system. In all three cases, the reforms are to be introduced by means of a 'proxy law', whereby parliament delegates to the government the power to legislate on a particular issue. In this way, definition of the specific contents of the reforms will be left to the government, which will issue specific legislative decrees, though it will have nevertheless to follow the guidelines approved by the parliament in the 'proxy law'.

The trade union confederations - the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil), the Italian Confederation of Workers' Unions (Confederazione Italiana Sindacati Lavoratori, Cisl) and the Union of Italian Workers (Unione Italiana del Lavoro, Uil) - sharply criticised the government's initiatives, both because of the contents of the bills put before parliament and because of the way in which the government had decided to proceed. The Confindustria employers' confederation, on the other hand, expressed approval of the steps taken by the government and urged it to stick to its decisions.

Reform of the labour market

The labour market reform envisaged by the government will cover the following elements.

1. Definition of a new system of public and private employment services. This new system will be realised by creating greater room for private intermediation services, which are at present subject to extremely tight constraints, and the integration of public and private services into a single national information system. Private operators will receive specific authorisation to supply job placement services. Temporary work agencies will be among the potential providers of private employment services, since the present stringent legislative provision that limits their activity only to the supply of temporary labour will be abolished.

2. The system of employment incentives. The new system will: (a) provide incentives for employment creation, taking account of the subjective features of the persons concerned - such as categories at risk of social exclusion, workers involved in the 'emergence' of formerly irregular economic activities and work (IT9706207F) and residents in areas of high unemployment; (b) encourage the conversion into open-ended employment of part-time jobs or traineeships; (c) promote the creation of part-time voluntary employment, especially for certain categories (young students, parents with small children and older workers) or the use of part-time work in order to prevent a reduction in employment levels; and (d) support continuing training schemes by means of relief on social security contributions.

3. The social shock absorber system. Reform of the 'social shock absorbers' (ammortizzatori sociali, the system which cushions the effects of redundancies and restructuring - IT9802319F), which should come about within one year after the delegation to issue a legislative decree has been granted to the government, will be proactive in its approach, in order not to 'discourage employment and to reduce as far as possible the amount of time spent in unemployment or undeclared work'. The support provided by the social shock absorbers will be conditional on an active search for work by the unemployed person concerned, and on his or her willingness to accept job offers and to take part in training schemes. Training provision will become an important component of the social shock absorber system. Moreover, the coverage of social shock absorbers will be extended to sectors and situations which are at present excluded.

4. Part-time work. In order to promote the use of part-time work, in particular for young people, women and older workers, new rules will be introduced to give greater flexibility to forms of part-time employment. This will come about by facilitating the use of extra hours (ie work exceeding the normal reduced working hours and below the normal working week threshold), the elasticity of contractual working hours, and the flexibility of working schedules, also in the case of fixed-term work contracts.

5. Changes in the field of 'atypical' work. The main innovation envisaged by the draft proxy law is the introduction of a new kind of employment relationship known as the 'job on call' (IT0007159F), whereby the worker is entitled to an 'availability allowance' in exchange for a commitment to work on a discontinuous or intermittent basis. The specific forms of the 'job on call' will be defined by collective agreements concluded by employers' and workers' representatives at national or territorial level.

6. Temporary and experimental changes to the rules on individual dismissals without 'just cause ' or 'justifiable reason ' set out in the Workers' Statute, replacing reinstatement with financial compensation, with a view to fostering the creation of open-ended regular employment. This issue relates to Article 18 of the Workers' Statute, which provides for the reinstatement of workers dismissed unlawfully. The experiment will last for four years and will concern workers hired: (a) as part of the processes that lead to the 'emergence' of irregular work; (b) through conversion of fixed-term jobs into open-ended employment; and (c) in small firms, if in consequence of such recruitment the size of the firm exceeds the 15-employee threshold for application of the provisions of the Workers' Statute.

7. Amended rules on arbitration in labour disputes, even in the case of individual dismissals, in order to give greater effectiveness and efficiency to the administration of justice in labour matters. Arbitration will have to be conducted 'in accordance with fairness' and in respect of the general principles of the legal order.

Other measures foreseen by the government concern: transposition of EU Directive (93/104/EC) on certain aspects of the organisation of working time, on the basis of a joint statement signed by the social partners in November 1997 (IT9711140N); a number of changes to the regulations on work contracts with training content (training/work contract s, apprenticeships and internships); the certification of work relationships by joint committees; and reform of some agencies of the Ministry of Labour.

Pension system reform

The main components of the reform of the pension system that the government intends to introduce are the following.

1. The introduction of incentives to continue in work. Workers entitled to a seniority pension - ie a pension based on the number of years worked and not on age - will obtain a specific certification of this entitlement and will have the possibility to exercise their acquired right to a pension at any time after they have fulfilled the seniority requirements. Those entitled to a seniority pension may continue to work while paying the usual social security contributions; alternatively, they may join a concessionary tax and contributions system whereby worker and employer will be exempt from social security contributions and at least 50% of this cut in contributions will be allocated to the worker. In order to join this concessionary scheme, the worker will have to undertake to postpone his or her retirement by at least two years and will have to sign a fixed-term employment contract for a period of not less than the duration of the postponement, on at least equivalent financial conditions. After the first two years, the option can be renewed for shorter periods.

2. The liberalisation of the retirement age. By agreement with the employer, a worker may continue to work beyond the age established for the old-age pension (65 for men and 60 for women) and may have access to the same concessionary system as that available to workers entitled to a seniority pension (point 1 above).

3. Anincreased possibility to combine a seniority pension with income from work.

4. The development of supplementary pension schemes. To this end, the government intends to introduce the compulsory allocation of accruing end-of-service allowance s (Trattamento di fine rapporto, Tfr, - a portion of a worker's pay set aside by the employer and then paid as a lump sum at the end of the employment relationship) to supplementary pension funds, as well as tacit forms of allocation to pension funds introduced by collective bargaining. In order to offset the loss of the liquidity for firms currently derived from the setting aside of the Tfr, the government foresees compensation in the form of access to credit and reduced labour costs.

5. Areduction of between 3% and 5% in the social security contributions paid for workers newly hired on open-ended contracts and belonging to specific categories. This reduction in social security contributions will not affect calculation of the workers' pension.

Tax reform

The tax reform proposed by the government is very broad in its scope and substantially simplifies the system by basing it on only five taxes. The main innovations as regard income tax are the following.

1. Only two tax rates: 23% on annual earnings up to EUR 100,000 and 33% on earnings above that ceiling.

2. A minimum tax-exempt income calculated with reference to the poverty threshold.

3. The gradual replacement of tax deductions (ie deductions from the amount of tax to be paid) with deductions from taxable income (ie deductions from the income on which tax rates are applied).

4. Concentration of deductions from taxable income on medium and low incomes.

5. The introduction of a safeguard clause so that, situations being equal, the new tax regime must be at least equivalent to or more favourable than the previous one for taxpayers.

The positions of the unions

Cgil, Cisl and Uil have been fiercely critical of the government's initiatives ever since its first request to issue a proxy law on labour market reform in November 2001, on which occasion they called a two-hour strike at the beginning of December 2001 (IT0112127N). Since then, the unions' hostility has increased as a result of the government's further proposals for reform of the tax and pension systems.

The unions' opposition centres on both the government's new stance in its dealings with the social partners, as summed up by the shift from 'concertation' to 'social dialogue', and the content of the various reforms. As regards the former aspect - criticism of the new form taken by dialogue between government and the social partners - the unions believe that social dialogue, as it is being interpreted by the government, is being reduced to communication of decisions already taken. In short, according to the unions, relations in recent months have not represented a 'genuine' social dialogue, and the government is in fact significantly reducing the role of the social partners. Moreover, the unions disagree with the extensive use of proxy laws by the government in order to undertake such socially important reforms, because this restricts public debate on the measures proposed. Furthermore, in certain cases the guidelines for reform, which the unions regard as too generic, would in their view give broad margins of discretion to the government, thereby unjustifiably curtailing the prerogatives of parliament.

As regards the contents of the reforms proposed by the government, the unions have been especially critical of the following aspects:

• reform of the labour market. The unions do not accept any changes to the rules on individual dismissal without just cause or justifiable reason, since they believe them to enshrine a fundamental workers' right. They also want the proposed new rules on arbitration to be revoked, on the ground that arbitration decisions should be based on legislative provisions and on collective agreements, not on a generic reference to 'fairness';

• reform of the pension system. Cgil, Cisl and Uil acknowledge that the bill does not introduce constraints on seniority pensions, thereby meeting some of their demands. However, the unions believe that the government's initiative weakens the public pension system, and they particularly oppose some features of the reform, including: (a) the procedure whereby the conclusion of a new fixed-term employment contract determines whether a worker can prolong his or her working life after entitlement to a seniority pension and gain access to the relevant incentives. In this way, the unions believe that the worker's right to continue in work turns into a discretionary choice by the employer, which may decide not to conclude a new contract with the worker; (b) the obligatory payment of future Tfr payments into supplementary pension funds, since, according to the unions, this restricts the worker's freedom of choice, does not favour supplementary pension schemes based on collective bargaining, and undermines the public pension system; (c) the reduction in social security contributions for newly-hired workers, as the unions consider that it may cause severe imbalances in the public pension system which will inevitably result in lower pensions; and

• tax reform. According to Cgil, Cisl and Uil, the taxation system foreseen by the government's reform law would greatly curtail progressive taxation, to the detriment of social cohesion and justice, while also being contrary to incomes policy by privileging the well-off. The unions therefore want the benefits accruing from tax cuts to be fairly distributed among all taxpayers, and demand that the specific tax deductions granted to dependent workers and pensioners should be maintained.

More generally, the unions are critical of the government's proposed reforms because they consider that in many respects they reflect Confindustria's positions.

In order to support their demands, at the end of December 2001 Cgil, Cisl and Uil called a four-hour regionally coordinated strike which was held in January 2002 (IT0201108N). Of the numerous and diverse issues at dispute, the workers' mobilisation against the government's proposals centred on two in particular: opposition to any changes to the rules on individual dismissals; and rejection of the reduction in social security contributions for newly-hired workers. According to union sources, there was a high level of participation in the strikes, of the order of 80%-85% - and in some cases even 100% - of workers, The unions had also planned an eight-hour national strike by public sector workers and school personnel for 15 February 2002, the purpose of which was to demand greater resources for collective agreement renewals in the sector than those made available by the government. However, on 4 February agreement was reached between unions and government on the renewals, and the strike was called off.

A further and in many respects unprecedented initiative by Cgil, Cisl and Uil was their request at the beginning of January 2002 for a meeting with the President of the Republic, Carlo Azeglio Ciampi, so that they could explain the reasons for their protest and the state of relations between the government and the unions. President Ciampi agreed to the request but wanted also to meet Confindustria and the ministers involved in the reforms. The meetings were held in mid-January 2002. Mr Ciampi emphasised his absolute neutrality with regard to the conflict and made it clear that his sole intention was to listen to all the actors involved. Mr Ciampi, who had been Prime Minister when the tripartite national agreement of 23 July 1993 on incomes policy and the bargaining system was signed, has always publicly asserted the usefulness and importance of dialogue between the government and the social partners.

The positions of Confindustria

Confindustria has welcomed the government's initiatives, though it has criticised some aspects of the proposed reforms on the ground that that they do not go far enough: for example, the changes to Article 18 of the Workers' Statute, which it deems to be too limited. According to the largest Italian employers' association, the three proxy laws on the labour market, the pension system and taxation act in the direction of improving the competitiveness of the productive system, increasing the country's capacity to attract investments, and fostering employment and economic growth.

As far as the more controversial issues are concerned, Confindustria considers the reduction of social security contributions for newly-hired workers to be a positive step and emphasises that 'it does not lead to any decrease in pension rights for young people as it will be combined with a real development of supplementary pension schemes.' Moreover, Stefano Parisi, general director of Confindustria, maintains (in an interview published in the Corriere della Sera newspaper on 1 February 2002) that the modifications to the rules on individual dismissals, the main focus of the unions' mobilisation, would not affect workers' rights. In fact, according to Mr Parisi, the provisions on Article 18 would apply, on an experimental basis, only in three cases and to workers that at present do not enjoy the right to reinstatement, while it would not change in any respect the situation of workers who are already employed.

In practice, according to Confindustria, the modifications proposed by the government could help increase employment, by reducing the scope for irregular work and, as a consequence, they would enable an increase in workers' rights and protection, rather than a reduction. Besides, the four-year experimental phase could allow a careful and thoughtful evaluation of the effectiveness of the proposed measure.

More recently, the president of Confindustria, Antonio D'Amato, after a special meeting of the executive board of Confindustria held in Brussels on 19 February 2002, expressed his appreciation of the government's actions, as the government has committed itself to transpose joint statements that may be reached by the social partners, thereby confirming recognition of the role and autonomy of the social partners. At the same time, he urged the government to stick to its initiatives should an agreement with the social partners prove impossible in a reasonable span of time. He added that the decision to modify Article 18 of the Workers' Statute is an important step in a wider effort aimed at increasing labour market flexibility, with a view to reducing unemployment as much as possible, by providing concrete opportunities to young people and women who are unemployed.

Confindustria has been critical of the stance taken by the unions, which it regards as misplaced and based on essentially political objectives. In particular, it believes that Cgil's position is motivated by political opposition to the government in office, and that this will hamper any negotiation and agreement with Cgil on the reforms.

The government's reaction

The government has defended its initiatives against the strong criticisms of the unions, and has rejected the accusation that it has largely excluded the social partners from the process of defining the measures proposed. As regards reform of the labour market and the pension system, the Minister of Labour and Social Policies, Roberto Maroni, has stated that 'the government has defined these measures after more than three months of consultation with the social partners consisting of meetings and sometimes lively discussions, within the framework of social dialogue pursued to define fair and agreed-to provisions.' Moreover, the government has always declared that it is willing to talk to the unions, provided that this is based 'on the actual contents of the provisions and without ideological prejudices'. However, the government has stressed that it is not prepared to withdraw all changes to Article 18 and the cuts to social security contributions, as demanded by Cgil, Cisl and Uil.

Members of the government and the majority centre-right alliance have criticised the attitude of the unions, Cgil especially, and the recourse to strike action, regarding this as being prompted by essentially political motives. These criticisms were reiterated by members of the government on the occasion of the recent Cgil congress, when its general secretary, Sergio Cofferati, emphasised the necessity to call a strike against the government's proposals, while the general secretary of Cisl, Savino Pezzotta, and the general secretary of Uil, Luigi Angeletti, in open disagreement with the Cgil general secretary, ruled out this eventuality, at least for the time being (IT0202302F).

Commentary

In the past few months, relations between the social partners, at least since publication of the White Paper on the labour market, have appeared particularly complex. However, recent events surrounding the government's reform initiatives prompt a number of considerations.

First, the action of the centre-right government led by Silvio Berlusconi seems to be closer to a neo-liberal approach in economic and social policies than could be expected. The government's initial attitude of cautious openness to the unions' positions, as well as the different views within the parliamentary majority on these questions, had suggested that more restrained action might have been taken on labour issues. The government's approach to relations with the social partners also seems to be innovative: 'social dialogue' might be limited to a discussion of the government's proposals and does not necessarily involve agreement with the social partners. From this point of view, the government's aim of acquiring greater autonomy with regard to economic and social policies, in order to avoid the delays and uncertainties of a social concertation system aimed at achieving encompassing agreements, seems to have been pursued with determination. However, the result of this approach has been a curtailing of the representation organisations' role in the definition of economic and social policies and, as a corollary, the government's substantial resignation from a function of mediation between the various positions of the social partners, in particular of the unions and the employers.

The commitment to implementing its reform programme of a neo-liberal character, without significant compromise, may bring the government to implement measures which are closer to the views expressed by Confindustria and more distant from the interests represented by the unions. This may give rise to more or less constant conflict with the unions, and it is unclear whether the government is willing to accept a situation of this kind. The repeated statements by the Minister of Labour, Roberto Maroni, and other government members, endorsing dialogue and discussion with the unions on the concrete contents of the reforms, suggest that it is not. Moreover, the positive outcome of the dispute over renewal of collective agreements in the public sector, also made possible by the mediation undertaken by Gianfranco Fini, Deputy Prime Minister and secretary of the National Alliance (Alleanza Nazionale) party, enabled the unions to obtain many of their demands. This seems to confirm that the government wants to seek agreement with the unions.

The second consideration concerns relationships among the unions and the unity of their action. Differences of opinion were apparent on several occasions during 2001 between Cgil on the one hand, and Cisl and Uil on the other, on several important matters: for example, the social partners' joint statement on fixed-term employment (IT0105282F) and renewal of the economic part of the metalworking sectoral collective agreement (IT0107193F). Their shared opposition to the government's initiatives in the last part of 2001 enabled the three trade union confederations to settle their differences and initiate a phase of unitary action. The challenge that they now face is maintaining a united front during the subsequent stages of the negotiations and with respect to the outcome that they intend to pursue.

A first signal that splits may again open up among the unions is their differing attitudes to the possibility of calling a general strike. Whilst Cgil seems convinced that this extreme form of conflict is necessary, Cisl and Uil are highly sceptical and want to explore other avenues before resorting to it. If these signs of division among the unions are considered in connection with the attempt by the government (and Confindustria) to differentiate its assessments of the positions taken up by Cgil on the one hand, and Cisl and Uil on the other, there are indications that a significant breakdown in trade union unity may be at hand. A split in the union front on such crucial issues as those now under discussion may have disruptive effects on the Italian industrial relations system. If the practice of 'partial' agreements becomes the norm, with the exclusion of significant workers' representative organisations, the unions will probably emerge weakened, and the cooperation between the social partners distinctive of Italian industrial relations in recent years will be undermined. In any case, the report accompanying the government's request to issue a proxy law on the reform of labour market institutions explicitly asserts the validity of so-called 'separate agreements', that is 'agreements that may be signed, not by all the associations on one or the other side, definable as 'comparatively representative'[...], but by only some of them.'

This latter aspect links with a further question: although the large number of issues currently under discussion may mean that agreement can be more easily reached, because trade-offs and compromises can be reached across the various points at issue, there is also a greater likelihood of division among the unions, given their different positions on individual aspects of the reforms. For this reason, the decision to concentrate mobilisation and claims on two matters of such great importance to the unions as the changes to Article 18 and the reduction of social security contributions (but especially the former) has thus far proved to be particularly effective. Now, however, in the face of the government's refusal to concede on precisely these two elements of its broad-ranging reform programme, the problem arises of finding a way to avoid a possible stalemate. The response must obviously be constructed by the actors through their own initiatives. Cgil proposes using a general strike to force the government's position. However, it seems at first sight that what is mostly lacking is willingness by all the parties involved to seek a compromise. Perhaps this is also because they are all playing for very high stakes. (Roberto Pedersini, Fondazione Regionale Pietro Seveso)