Parliament approves tripartite agreement on welfare, labour market and pensions

At the end of November 2007, the Italian parliament approved a bill transposing the tripartite agreement signed on 23 July by the government, employer organisation Confindustria and trade unions. The agreement concerns six principle areas: pensions, social ‘shock absorbers’, the labour market, competitiveness, young people and women. Moreover, it lays the foundations for an Italian system of ‘flexicurity’, combining flexibility and employment security.

After a period of lengthy negotiations, the government, the Confederation of Italian Industry (Confederazione Generale dell’Industria Italiana, Confindustria) and the trade unions signed an important agreement regarding welfare, the labour market and pensions on 23 July 2007 (IT0710029I). The three trade union confederations – the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil), the Italian Confederation of Workers’ Trade Unions (Confederazione Italiana Sindacati Lavoratori, Cisl) and the Union of Italian Workers (Unione Italiana del Lavoro, Uil) – held a referendum on the issue in October. The majority of workers voted in favour of the agreement.

Following the referendum, the government approved a draft bill on 12 October to be presented to parliament with the budget law. The agreement was approved by the Italian parliament at the end of November 2007.

Content of agreement

The agreement is divided into six parts, concerning pension reform, social ‘shock absorbers’, the labour market, competitiveness, young workers and women.

Pension reform

The agreement envisages:

  • a re-evaluation of and increase in the lowest pension levels;
  • rationalisation of the social security and insurance institutions through a merger, together with a plan to reduce management costs in the social security system;
  • a commission of experts which, by 31 December 2008, must propose a list of modifications to be made to change existing ‘transformation coefficients’ for pensions;
  • measures to guarantee pensions for precarious workers;
  • a government commitment to address the issue of social security for third-country nationals, that is, immigrants from outside the EU.

Some modifications aim to resolve the question of the so-called ‘scalone’ (‘jump’) included in the Maroni law (IT0303305F). Originally, this law stipulated that there would be an immediate increase of the retirement age from 57 to 60 years from 1 January 2008 for those having already paid at least 35 years of social security contributions. The new agreement, on the other hand, refers to a gradual increment, which will increase from the age of 58 years on 1 January 2008 to 61 years on 1 January 2013. The retirement age will depend on the worker’s age and the number of years of social security contributions.

This mechanism does not concern workers doing arduous physical and psychological work. Such workers will have the right to retire when they have paid 35 years of social security contributions, before the age limit fixed for other workers. However, a quota was proposed in relation to this right, up to a maximum of 5,000 workers a year. This category of arduous work has been extended to include the following workers: night-shift workers, production-line workers who work in series or at a certain rate, and public transport drivers.

In order to consolidate future pensions for young people involved in precarious or discontinuous work, the most important interventions include the following:

  • the free payment of contributions in periods where workers are out of work;
  • the accumulation of paid contributions in any obligatory pension fund in order to obtain a single pension;
  • tax relief for the study period required in order to obtain a university degree. The measures envisage longer instalments than the previous system. This means that the number of years officially required to complete a degree will be considered as standard years of social contribution payments.

Social shock absorbers

The agreement aims to strengthen the social ‘shock absorbers’ (ammortizzatori sociali) for workers who remain out of work involuntarily and extend them to those categories of workers who previously had no right to these benefits. Italy’s system of social shock absorbers comprises measures designed to help cushion the effects of job losses and restructuring (IT9802319F, IT0205204F).

The details of the reform will be finalised through concertation between the social partners. In the near future, the agreement expects an additional €700 million to be invested in the unemployment benefit system.

Labour market

The modifications anticipated in the labour market include the:

  • improvement of administrative procedures through the development of an efficient computerised information system;
  • setting up of new priorities for employment incentives;
  • development of collective bargaining for the definition of the national standards for professional profiles and of national quality standards for vocational training for apprentices;
  • reform of the regulation for fixed-term, part-time and certain forms of employment contracts introduced in Law No. 30/2003 – the so-called ‘Biagi Law’ (IT0303103N);
  • standardisation of part-time work regulations for the public and private sector.

As far as fixed-term employment contracts are concerned, the document proposed that, after 36 months, each successive contract signed by the employer and worker regarding equivalent work must be stipulated at the Provincial Labour Office (Direzione Provinciale del Lavoro) with the assistance of the trade unions. Should this procedure be violated, the contract would automatically become an open-ended employment contract.

The modifications in the labour market also include amendments to certain aspects of the law concerning work for disabled persons and the regulation of unemployment benefit in the agricultural sector. Particular attention will be paid to irregular work in contract employment and in the construction sector.

Competitiveness

The agreement intends to promote competitiveness in enterprises through the development of ‘productivity agreements’ at company level. In order to facilitate agreements regarding growth in productivity and an equal division between the workers and the company of the consequent benefits, the agreement proposes tax relief for the contributions paid on the part of the salary correlated with the growth in productivity, known as ‘company production premiums’. To finance this tax relief, a three-year fund will be set up which will contain all of the state resources dedicated to this allowance. An observatory, in which the social partners will participate, will be established to monitor the application of this measure.

Young workers

A fund will make it possible for workers – particularly young workers – who have discontinuous careers or periods of unemployment to obtain tax-free credit or credit at a very low rate to help them through periods of unemployment or low income. The credit available will reach a maximum of €600 per month for 12 months to be paid back after 24 or 36 months.

The agreement recommends financial support for new activities undertaken by young people or women. Another fund will provide economic support to help parents to transfer their business activity to their children or to help young people in the setting up of new business activities in the artisan industry, in commerce, tourism, agriculture and in cooperatives.

Women

The agreement aims to favour the participation of women in the labour market, particularly in the south of Italy, where a lower proportion of women are economically active. To this end, the government will reduce the social security contributions to be paid by companies located in the south of Italy which hire women on open-ended employment contracts.

In order to reconcile private and professional life, the government and social partners will define a new tax relief system aiming to encourage flexible working hours. EU funds will support vocational training activities, as well as targeting women entering the labour market. A system to collect and assess data will be adopted which will provide evidence of and measure discrimination against women.

Reactions from social partners

According to the Confederal Secretary of Cisl, Giorgio Santini, ‘an important result has been reached which conciliates financial compatibility and the promotion of social equity between generations.’ While Cisl and Uil rapidly undersigned the agreement, within Cgil considerable discussion took place. Reservations were expressed concerning labour market issues; the trade union confederation primarily criticised the abolition of the social security increase for overtime, failure to cancel staff leasing and excessively weak measures against the reiteration of fixed-term employment contracts. Nevertheless, Cgil undersigned the agreement in August 2007. However, on 11 September 2007, the Central Committee of the Federation of White-collar and Blue-collar Metalworkers (Federazione Impiegati Operai Metallurgici, Fiom), affiliated to Cgil, approved a document proposed by its General Secretary, Gianni Rinaldini, which refuses to accept the agreement of 23 July.

Confindustria approved the protocol, but expressed doubts concerning the social security proposal which, according to the employers, foresees actions which are not ‘necessary’.

Divisions in government

The more extreme left-wing parties in the government coalition underlined their disapproval of the agreement, arguing that the modifications to Law No. 30/2003 were insufficient. In an attempt to resolve matters, changes were made to the original draft agreement. The modifications concern the:

  • fixed-term employment contracts, which have been limited to one renewal only after the first 36 months;
  • removal of the quota limit regarding the number of workers carrying out physically and mentally demanding work who have the right to retire after 35 years of social security contributions;
  • definition of the four ‘windows’ for retirement – that is, the four dates within a calendar year when it will be possible to retire – in each annual budget law for workers with 40 years of contributions; in the previous version, this question was put back to a future law.

Commentary

The protocol of 23 July 2007 represents a ‘social pact’ which will influence the choices of the social actors. This agreement lays the foundations for an Italian system of flexicurity, combining a blend of flexibility and employment security as it intervenes in matters concerning the future pensions of workers who are hired on atypical employment contracts. The agreement guarantees that all workers who carry out discontinuous work and are included within the obligatory social security pension system will have, at the time of retirement, a pension equivalent to 60% of their final salary.

Vilma Rinolfi and Domenico Paparella, Cesos

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