Social partners start discussions on reform of the July 1993 agreement

Negotiated wage flexibility within enterprises is the central theme in current discussions over the forthcoming reform of the July 1993 central tripartite agreement, which governs many aspects of industrial relations in Italy.

The issue of wage flexibility as a means of promoting employment growth was initially put forward by the ex-president of Confindustria (the most important Italian employers' association), Luigi Abete, as a problem which had not been adequately dealt with in the 1993 income policy agreement. CISL, one of the three main trade union confederations, later took up the wage flexibility issue and proposed flexibility in starting wages (the so-called "entrance salary") as a means of tackling the extremely serious employment crisis in some southern regions of Italy.

The CISL proposal was not welcomed by the other two union confederations. For the general secretary of CGIL, Sergio Cofferati, this would mean restoring the old "cage wages" system (the wage differentials between North and South of the country which were in force before 1968), while for the general secretary of UIL, Pietro Larizza, the route indicated by CISL would not be suitable as a means of resolving the problem of unemployment, and moreover would have the disadvantage of modifying the "rules of the game" set by the 1993 agreement.

By contrast, the general director of Confindustria, Innocenzo Cipolletta, and Antonio D'Amato, head of the organisation in Southern Italy, both expressed positive opinions on CISL's proposal. Mr D'Amato went on to raise the possibility of suspending for one year the application in the southern regions of salary rises resulting from contract renewals, in order to avoid the collapse of firms that are unable to withstand an increase in labour costs. This proposal met with a complete refusal from all three trade union confederations.

The governor of the Bank of Italy, Antonio Fazio, has entered the argument with considerable authority, by confirming that "the agreement of July 1993 has had great merit in terms of stabilisation of costs and and competitiveness of the economy and has been a key factor in the reduction of inflation, but the incomes policy has been able to do little or nothing for employment growth". As a means of favouring employment growth, the Governor proposes a form of wage flexibility in accordance with the model operated in small enterprises, providing for a tighter link between employees' earnings and the firm's turnover and productivity. In this way, wage flexibility leads to a sort of participation in profits - and, indirectly, in the objectives of the enterprise - by workers.

The governor's proposals have been positively received by trade unions.Sergio Cofferati, the general secretary of CGIL, believes the governor's statements to be well-founded, and regards wage flexibility and its links to productivity as an issue already covered by the July 1993 agreement, which should be reinforced in the review of the 1993 agreement which will take place in autumn 1997.

The vice-president of Confindustria, Carlo Callieri, was interviewed on 18 February on the subject of pay flexibility and productivity, and he underlined that at present productivity-linked pay makes up only 3% of the overall wage in Italy, and therefore has no effect on the level of wage flexibility. Mr Callieri maintained that in view of an inflation rate tending to zero, sectoral collective agreements may no longer play the protective role of maintaining employees' purchasing power, as provided for in the July 1993 agreement. In Mr Callieri's opinion, national sectoral agreements should become normative frameworks orientated towards flexibility, in particular creating connections between the supply and demand of work in the face of high unemployment, as well as being used to legalise the clandestine economy and undeclared work.

A debate will develop on these issues between the social partners, which may, according to some commentators, lead to a highly important innovation in Italian industrial relations: a greater differentiation between bargaining levels and, probably, the decentralisation of pay bargaining, making possible an effective link between wages and productivity and thus increasing the degree of wage flexibility.