Gradual alignment and discount agreements

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During the last few months the attention of Italian industrial relations practitioners has been drawn by two new kinds of agreement - "gradual alignment" agreements and so-called "discount agreements". They are quite different, but both deal in a distinct way with the same problem: wage flexibility. A deeper analysis of their origins and scope is important, as the issue of wage flexibility is one of the most prominent in the debate on the reform of Italian industrial relations, and is put forward with increasing emphasis by employers' organisations, also with reference to the forthcoming revision of the tripartite agreement of July 1993, which is due to start at the end of June 1997.

Two different kinds of agreement

Despite the common contents - both provide for wages lower than those set by industry-wide agreements - the distinction between gradual alignment agreements and discount agreements could not be more pronounced.

Gradual alignment agreements

Gradual alignment agreements (contratti di riallineamento contributivo) were conceived to provide incentives for the emergence into the legitimate economy of activity formerly developed within the "irregular", clandestine sector. The origin of such agreements can be traced back to collective bargaining in the textile and shoe sector in the late 1980s. In 1990, an experiment was carried out in order to promote the gradual alignment of wages and social contributions for workers of small companies in Southern Italy working on behalf of bigger enterprises. The subcontracting firms in question often work in the irregular economy, employing people irregularly, paying no social security contributions and recognising no collective agreement or trade unions. The aim of the agreement was to provide incentives for them to enter the regular economy and recognise unions and the relevant industry-wide agreement. The firms were to gradually bring their wage levels up to the minima set in the industry-wide agreement and, having become "official", they would start paying social contributions. According to trade union estimates, this allowed the "emergence" into the formal economy of some 10,000 workers.

For this reason, when trade unions and employers' organisations signed the renewal of the industry-wide agreement for textiles and shoes in 1995, they again proposed gradual alignment agreements, asking for government intervention in order to make it economically advantageous to abandon the irregular economy - which in some areas of the Mezzogiorno (southern Italy) accounts for about 90% of all workers in textile and shoe production (according to the Filta-Cisl trade union) - and enter the regular one. Following such requests, which were also expressed during negotiations over the October 1996 tripartite Pact for Employment (IT9702201F), law 608 of 28 November 1996 introduced the possibility for companies working in any sectors in Southern Italy to bring wages gradually into line with those set by industry-wide agreements over a period of 36 months, granting at the same time reductions in social security contributions, together with other contribution and economic incentives.

Gradual alignment agreements are signed at province level between territorial trade unions and employers' organisations, and companies can then join them by signing a company-level agreement for the acceptance of the relevant provincial gradual alignment agreement. There is a deadline for this process: province- and company-level agreements must be signed within 12 months of the date when the law came into force.

Gradual alignment agreements grant reductions in the minimum wage set in the industry-wide agreement, usually starting at around 30% and falling progressively to zero over a 36-month period. This experience has been positive: up to May 1997, in the textile sector trade unions signed 30 provincial agreements with the three separate employers' organisations - Federtessile, the textile industry federation affiliated to Confindustria, Uniontessile, affiliated to Confapi, the confederation of small businesses, and Associazioni Artigiane, the artisan associations. As a result, 501 company-level agreements have been signed "joining up" to the provincial agreements, covering a total of some 15,000 workers (according to Filta-Cisl). Besides, an increase in the number of company-level agreements is expected after the approval in mid-June 1997 of the so-called "Treu decree" for the implementation of the Pact for Employment, which contains some modifications of law 608/96.

Discount agreements

The so-called "discount agreements" (contratti al ribasso) refer to the acceptance by individual companies of an industry-wide agreement signed by minor interest organisations. The only agreement so far of this type covers the sector of small businesses working in textile production on behalf of bigger companies, and sets wage rates significantly lower - on average by 30% - than those included in the agreement signed by confederal unions.

The agreement in question was signed in August 1996 by an autonomous trade union which is mainly active in the public sector (Confederazione italiana sindacati autonomi lavoratori,Cisal) and by various employers' organisations affiliated to Cnai (Coordinamento nazionale associazioni imprenditori). The actual representativeness of these organisations is questioned by many industrial relations practitioners and in some cases is even considered to be zero. Nevertheless, the conclusion of this agreement and reports about some small businesses in the North of Italy that have decided to join the agreement caused some turmoil in the sector and even led the Green Party to present a draft bill in Parliament aimed at preventing the acceptance of this agreement by companies.

So far, companies that have confirmed their intention to join the agreement are very few (one in Veneto and perhaps two in Abruzzi), but this was enough to put the issue on the agenda of the sector's trade unions and employers' organisations. Furthermore, the acceptance of the agreement by a small company in Rovigo (Veneto) led to a dispute before that city's Pretore for labour disputes (the judge which rules on such disputes), which could eventually decide the legitimacy of such an agreement. If it were ruled legitimate, a significant increase in the number of companies asking for enforcement of the Cisal-Cnai agreement would be expected.

From their point of view, the organisations that signed this agreement state that it is not a "discount agreement", but a new agreement, designed for a specific sector which was formerly not covered by an agreement - small businesses working in the textile industry on behalf of bigger companies. In their opinion, the accord was conceived to fit the needs of these companies, in order to avoid their bankruptcy and closure and to promote their exit from the irregular economy.

Commentary

The main issue raised by the two different kinds of agreement, though in deeply contrasting ways, is that of wage flexibility to protect the competitiveness of particular sectors or areas. This is an important issue within the debate on the possible reform of Italian bargaining structure, with the Confindustria employers' confederation supporting the introduction of wage differentials between Northern and Southern Italy. Both gradual alignment agreements and "discount" agreements propose some solutions to the problem, but they also raise some doubts.

Gradual alignment agreements represent a valid and important contribution to the attempt to provide incentives for the emergence of small businesses from a situation of widespread uncertainty and irregularity. On the other hand, the time limit which applies to the benefits that are granted to the companies involved (36 months) does not seem to provide a structural solution to the competitive needs of all those businesses which often find the justification for their existence in the "wild flexibility" provided by the irregular economy.

The risk which is implicit in "discount" agreements is almost the opposite: they might tend to legitimise such a "wild flexibility". The Cisal-Cnai agreement may be appealing to some employers not only for its economic contents, but also in terms organisational and work flexibility, for example on working hours. For this reason, a possible increase in the number of companies joining the Cisal-Cnai agreement might call into question the opposition of the major union confederations to wage differentiation, and encourage the opening of a discussion between Cgil, Cisl and Uil and Confindustria on the issue of wage flexibility, in particular for Southern Italy. (Roberto Pedersini, Fondazione Regionale Pietro Seveso)

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