Reform of 'social shock absorbers' may help relaunch government-union dialogue

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After the general strike of 16 April 2002, there had been no resumption of talks between the Italian social partners and government on reform of the labour market by mid-May. In order to break this apparent stalemate, the trade union confederations Cgil, Cisl and Uil have called forcefully for dialogue to resume shortly with the government and have drawn up some proposals to help talks, focusing, in particular, on a substantial reform of the so-called 'social shock absorbers' (the measures which help cushion the effects of job losses and restructuring).

Since the general strike of 16 April 2002, which according to the trade unions involved 13 million workers (IT0205101N), there has been no resumption of talks between the social partners and the centre-right government on the latter's plans for reform of the labour market (IT0201277F) (at the time of writing in mid-May 2002). The demand by the unions that the government's proposed amendments to Article 18 of the Workers' Statute- which provides for reinstatement of workers dismissed without 'just cause ' or 'justifiable reason'- should be ruled out of discussion is still being resisted by the government, which says that it is not willing to withdraw completely the changes to the rules on individual dismissals.

The only meeting of any significance between unions and government was held at the beginning of May, when the issue on the agenda was the 'proxy law' on tax reform proposed by the government and currently under discussion in parliament (a 'proxy laws' involves parliament delegating to the government the power to legislate on a particular issue). Although the Italian Confederation of Workers' Unions (Confederazione Italiana Sindacati Lavoratori, Cisl) and the Union of Italian Workers (Unione Italiana del Lavoro, Uil) judged the meeting to be a positive step forward, the General Confederation of Italian Workers (Confederazione Generale Italian del Lavoro, Cgil) criticised the government on the grounds that convening a meeting to discuss a measure already before parliament constitutes a further sign of hostility towards the unions. Cgil's criticism, stated its general secretary, Sergio Cofferati, is not directed against the legitimate role of parliament, but against a government which is proving unwilling to engage in a constructive dialogue with the unions.

The unions' proposals

In order to break this apparent stalemate, Cgil, Cisl and Uil have moved on two fronts. First, they called forcefully for dialogue to resume between the unions and government before the municipal, provincial and regional elections of 24 May, when around 10 million voters will go to the polls. For example, the Cisl general secretary, Savino Pezzotta, maintained that the government should convene a meeting with the unions and make a concrete proposal to resolve the stand-off between them before the elections, because, he said, the dispute is about 'social dynamics and has nothing to do with the run-up to the election'. However, if the government does not convene such a meeting shortly, the unions have threatened to take further industrial action.

The unions' second strategy is to draw up proposals with a view to create space for dialogue to resume on concrete matters, shifting the focus of debate from Article 18 of the Workers' Statute to other labour market reform issues, in order to reach overall agreement. Specifically, the unions have put forward proposals for substantial changes to be made to the system of so-called 'social shock absorbers'- the schemes which cushion the effects of redundancies and restructuring in some sectors (IT9802319F) - so that adequate coverage is provided against the risk of unemployment and forms of income support for workers who have lost their jobs are linked with active labour market policies, the aim being to support work entry and guarantee the continuing training and education of the active population.

Reform of the social shock absorbers

The main points in the unions' proposals for reform of the social shock absorbers are the following:

• increased coverage and benefits. The current system of social shock absorbers is applicable to only part of the labour force, which the unions estimate at around one-third of the total. To give two examples, this happens because the Wages Guarantee Fund (Cassa integrazione Guadagni) can be used only by firms with more than 15 employees and in certain sectors, mainly manufacturing, and because entitlement for 'ordinary' unemployment benefit is based on relatively strict eligibility criteria (applying only to dismissed workers with at least two years of insurance against involuntary unemployment and who have paid contributions for at least 52 weeks in the previous two years). The unions are asking for the existing shock absorbers, and in particular the wages guarantee fund and the 'mobility allowance', to be extended progressively to all workers, without distinctions being made as to sector and size of firm. They are also proposing that the criteria on eligibility for ordinary unemployment benefit should be relaxed, and that the benefit should be increased in both amount (from the present 40% to 60% of the worker's last pay ) and duration (from six months to one year); and

• close linkage between social shock absorbers and active labour market policies. The unions are asking that the income support provided by the social shock absorbers (ie the wages guarantee fund, mobility allowance and unemployment benefit) should be closely connected with schemes to foster work entry and the skilling of the labour force, via reformed employment services focusing, above all, on continuing training and education. According to the unions, an essentially 'compensatory' system should make way for one geared to worker re-employment.

As regards the organisation and financing of the social shock absorbers (according to Cisl, the proposed reform would cost around EUR 500 million to EUR 800 million a year), Cisl has in mind a system which is partly compulsory and partly financed by collectively agreed sectoral funds, managed by joint bodies. For Cgil, instead, the system, which would be insurance-based and mutual in nature and therefore supported by contributions made by the parties, should be financed out of compulsory contributions.

Other proposals on social shock absorbers

The issue of the social shock absorbers, together with the need to devise ways to finance new measures, has been addressed by a proposal put forward by the economist and Minister of Production Activities, Antonio Marzano. The minister's proposal, made at the beginning of April 2002, is that coverage could be provided against unemployment by means of private insurance policies. The National Association of Insurance Companies (Associazione nazionale fra le imprese assicuratrici, Ania), has expressed interest in the scheme and confirmed that it is being studied by a special committee which has been set up to evaluate the possible contribution of private insurance companies to labour protection schemes. At the same time, however, Ania has made clear that the risk of unemployment cannot be assumed by private insurance companies alone. Instead, some sort of cooperation would be necessary between the state and the insurance industry, where the former would assume the role of 'insurer of last instance' and the latter would undertake to cover risk up to a certain level.

All three main union confederations, Cgil, Cisl and Uil, have been severely critical of Mr Marzano's proposal because they believe that protection against unemployment cannot be entrusted to private insurance policies. According to the unions, it might be possible to find solutions which supplement public insurance, but they should be mutual in form.

Parliament discusses labour market reform law

Signals that resumption of dialogue between government and unions may start from reform of the social shock absorbers system have come from the Senate's Labour Commission, which is currently discussing the proxy law on reform of the labour market. A vote taken by the commission on 8 May 2002 postponed examination of the articles on employment incentives and reform of the social shock absorbers (Articles 2 and 3) to the end of the discussion, together with Article 10, which deals with derogations from Article 18 of the Workers' Statute on individual dismissals. The under-secretary at the Ministry of Labour, Maurizio Sacconi, has explained that this postponement is justified by the fact that the three articles are 'part of a coherent package and all are intended to achieve the same balance'.

Moreover, the government has relaxed its position that reform of the social shock absorbers should come about without further costs, as envisaged by the draft proxy law originally approved by the government. Mr Sacconi had previously declared that the government intended to set up three distinct but parallel negotiations on tax reform, labour market reform, and measures to support the Mezzogiorno (South of Italy), because these were 'segments of a single ideal negotiation intended also to enable exchanges among the interests represented and achievement of an overall equilibrium and balance'.

Commentary

The proposals for reform of the social shock absorbers and the importance that they are assuming in public debate arise from the need felt by both the government and the social partners to find a way out of the impasse provoked by the proposed amendments to Article 18 of the Workers' Statute, on which dialogue seems still paralysed between irreconcilable positions. However, although extending the topics of discussion may create room for compromise and trade-offs among the various themes subject to negotiation, the individual components cannot be evaded. From this point of view, the question of exceptions to the rules on the reinstatement of workers dismissed without just cause or justified reason, as proposed by the government and rejected by the unions, will have to find a solution, even within discussions expediently extended to other issues, like the social shock absorbers. However, it is unlikely that the government will make a definitive pronouncement on the amendments to Article 18 of the Workers' Statute before the administrative elections at the end of May, in order to avoid the damaging effects of reigniting the conflict (if it decides to keep the amendments as they are) or of a 'surrender' (if it decides to forgo them).

Whatever the case may be, it should be pointed out that the reform of the social shock absorbers has been on the agenda of the government and the social partners at least since the end of 1998. Indeed, a proxy law to implement such reform was linked with the budget law for 1999, and reference was also made to it by the tripartite 'pact for employment and growth' of 22 December 1998 (IT9901335F) signed by the centre-left government headed by Massimo D'Alema. Since then, however, the reform has not been undertaken, as pointed out by the National Action Plan for employment presented by the centre-left government just before the elections of May 2001 (IT0106369F).

The new proxy law on labour market reform requested from parliament by the centre-right government sets out principles which come close to the social shock absorber proposals put forward by the unions: changing the thresholds that give entitlement to unemployment benefit; proactively structuring protective measures so that incentives to work are provided; extending protective measures to sectors and situations at present not covered by them; and linking the measures with training initiatives. Of crucial importance if dialogue is to be effectively relaunched, therefore, is not so much the content of changes to the system of social shock absorbers (at least as far as one can tell from the general principles set out in the proxy law) as the financial commitment that the government is willing to make to the reform. It is this that will show the extent of the government's determination to undertake substantial reform of the social shock absorbers.

It is clear that the provision of the proxy law that the reform should come about 'without additional costs to the state budget' would impose stringent constraints on any intervention, and it would encounter the opposition of the unions. In this regard, the under-secretary at the Ministry of Labour, Maurizio Sacconi, has pointed out, while addressing the Senate Labour Commission, that the proxy law does not envisage further costs because 'it does no more than undertake a preliminary reorganisation of the system of social shock absorbers prior to further and more thoroughgoing reform interventions.' For this reason, it seems likely that the government will make new financial resources available.

More specific information on these matters (and others of equal importance for the social partners, like tax reform), as well as on the question of the resources available, will probably be forthcoming from discussions between the government and the social partners on the government's main economic policy documents - the Economic and Financial Planning Document, which must be presented by June, and the budget law, which will be presented by September. Scheduled in preparation for these two appointments, moreover, are the joint meetings between the government and social partners on incomes policy established by the tripartite national agreement of 23 July 1993. This is therefore a twofold test for relations between government and the social partners, from which signals are awaited as regards both resolution of the stand-off between government and unions on reform of the labour market, the pension system and the tax system, as well as the prospects for incomes policy and, in general, social dialogue. (Roberto Pedersini, Fondazione Regionale Pietro Seveso)