Italy's system of social shock absorbers examined
Owing to the use of "social shock absorbers" to ease the blow of redundancies, the restructuring of Italian industry - especially in the 1980s - has proceeded without excessive social costs, though with substantial economic costs to the state. A reform of these measures is envisaged as part of the current reform of the welfare state and broader redefinition of employment policies. Moreover, a still unresolved issue is the definition of new measures to deal with the employment crisis in the service sector.
The Italian labour market is highly regulated compared with those of the other industrialised countries. This is especially true of termination of employment contracts, an area in which the state has introduced a series of rules and measures which provide substantial protection for workers in employment. Also important has been action taken by the trade unions, which have always pursued a strategy of protecting employed workers. Especially in the first half of the 1970s, when union power was strengthened by economic growth and the mass mobilisation of the previous decade, the unions managed to obtain legislation which set restraints on terminations of contract by large firms in the industrial sector. In the 1980s, the use of so-called "social shock absorbers" (ammortizzatori sociali) meant that the jobs crisis provoked by industrial restructuring could be handled with relative ease.
Although the deregulation of the labour market which began in the second half of the 1980s mainly concerned recruitment, at the beginning of the 1990s reform began of the "social shock absorbers" (laws 223/91, 236/93, 451/94). As well as the introduction of new measures to deal with the jobs crisis ("mobility"), the procedures for use of the other shock absorbers were simplified and, in the case of the wages guarantee fund (cassa integrazione guadagni), the categories of employee covered were increased.
The social shock absorbers
The instrument traditionally used in Italy to manage jobs crises is the wages guarantee fund. This fund guarantees an income - though one lower than the normal wage - for workers in firms undergoing severe difficulties. There are two types:
- the ordinary fund introduced in 1945, which may be used in situations of temporary crisis caused by the economic climate; and
- the extraordinary fund, introduced in 1968, which can be used by firms or entire sectors undertaking restructuring as a result of severe structural difficulties.
In both cases the benefit paid to workers is 80% of the normal wage. This sum is paid out of a fund financed by the state and by firms and managed by the state via the National Institute of Social Insurance (Istituto Nazionale per la Previdenza Sociale, INPS).
Originally, the wages guarantee fund could be used only for industrial blue-collar workers in larger firms. It was then extended to some other sectors - for example, the building industry in 1963, agriculture in 1972 and publishing in 1981 - to small firms, and to industrial white-collar workers (1991). The maximum duration of the ordinary wages guarantee fund is three consecutive months, and it cannot be utilised for more than 12 (non-consecutive) months in a two-year period. The maximum duration of the extraordinary wages guarantee fund is 12 months, and it can be renewed twice, again for a 12-month duration.
Another instrument in this area is the job-security agreement (contratto di solidarietà), a form of work-sharing introduced in 1984. These contracts, which provide for reduced working hours with a corresponding reduction in pay, can be used by firms in crisis in order to avoid dismissals. In this case, the Ministry of Labour provides a wage supplement for a maximum period of 24 months, which can be extended for another 24. This supplement amounts to 50% of the pay cut for workers in northern Italy and 60% for those in southern Italy (between 1993 and 1995 the supplementary benefit was raised to 75%).
A further instrument widely used to handle the jobs crisis is early retirement, or at least it was so prior to the reforms of the pensions system introduced by the Dini government in 1995 and by the Prodi Government in 1997 (IT9711315F), which applied more stringent rules.
Some changes were made to the shock absorber system in 1991, when the government implemented the 1975 European Community Directive on collective dismissals. A new system to handle redundant personnel was introduced, namely "mobility procedures" (mobilità), the aim of which is to facilitate re-entry into work. Workers "in mobility" receive supplementary benefit and are enrolled on a regional "mobility list" (lista di mobilità). Firms which hire personnel from the mobility list are granted tax concessions. Moreover, workers in mobility take precedence if the firm that has dismissed them decides to take on labour. A worker may be enrolled on the mobility list for a maximum period of one year. This period, however, may be renewed for a further year in the case of workers aged between 40 and 50, and for a further two years in the case of workers aged over 50.
Reference is made to reform of the social shock absorbers in the agreement on welfare reform signed by the Government and the trade union confederations in November 1997 (IT9711315F), which states that discussions should begin between the social partners on:
- rationalising the shock absorbers as part of broader redefinition of active employment policy measures; and
- extending the shock absorbers to categories of employee currently not eligible for them. In particular, the agreement notes, measures in favour of unemployed people who have lost their job should be harmonised with those in favour of all individuals excluded from the labour market.
One of the most innovative aspects of the reform of the social shock absorbers envisaged by the Government and the social partners is the changed conception of these instruments as active rather than passive employment policy measures. Reform of the shock absorbers should therefore be part of more wide-ranging reform of job placement services (IT9801317F) which will make the placement of personnel more efficient.
In a period when corporate crisis is increasingly affecting firms in the tertiary services sector, a still unresolved issue is the extension of the shock absorbers to include firms in other sectors. The issue recently came to the fore in the state railways and the banking sector, where ongoing restructuring is predicted to give rise to large numbers of redundant personnel. As regards the state railways (FS), an agreement was signed at the beginning of December 1997 which envisages early retirement as the principal solution to the problem of redundancies (IT9712316F). In the case of the banking sector, negotiations between the employers' associations and the unions are still in progress (IT9704304F), but the proposal under discussion is the creation of a national fund, financed by the banks, to support the mobility of surplus personnel and early retirement by employees closest to retirement age. (Marco Trentini, Ires Lombardia)