Italy’s Renzi Wins Senate’s Backing for Labor Reforms

The reformist premier clears one parliamentary hurdle but must make haste to liberalize his nation’s job market.

Italian prime minister Matteo Renzi meets with representatives of trade unions in Rome, October 7
Italian prime minister Matteo Renzi meets with representatives of trade unions in Rome, October 7 (Palazzo Chigi)

Italy’s prime minister, Matteo Renzi, won his Senate’s backing for labor reforms early on Thursday, clearing the first parliamentary hurdle in a months long process to liberalize the country’s morose jobs market.

After a marathon Senate session in Rome, even all of Renzi’s own Democratic Party lawmakers voted in favor of pursuing reforms although close to three dozen had said they were principally opposed to any changes. “We were not elected to erode [workers’] rights,” said one, Walter Tocci.

Renzi had called the vote in order to cut shot the debate over reforms his labor minister, Giuliano Poletti, said would “reduce precariousness for workers and give certainty to business” by abolishing strict labor laws as well as temporary work contracts that the left-wing government believes are often abused.

At the heart of the debate is a stipulation in the Italian labor code that allows judges to reinstate workers who have been “unfairly” dismissed from companies with fifteen or more employees. The law does not define what constitutes a “fair” dismissal, however, leading judges to typically find in favor of employees.

For trade unions and many on the left, the law is an “untouchable symbol of worker rights,” wrote La Repubblica‘s Kay Wallace last month. But employers see it as a serious impediment to business expansion and investment. Giorgio Squinzi, head of Italy’s business federation, says it leads to the perception that “in Italy when you hire someone it is for life.”

Renzi has yet to make clear how far he will go in his reforms and the lower chamber of parliament is still due to vote in favor his program. But there is little time to waste. Unemployment in what is the eurozone’s third largest economy is running above 12 percent and nearly one in two Italians under the age of 25 is out of work. Older Italians tend to have secure contracts that are almost impossible to break while many young Italians can only get temporary jobs that offer no employment rights or protection.

Many professions, such as lawyers, notaries, pharmacists and taxi drivers, are also notoriously difficult for newcomers to enter, making it even harder for youngsters to start a career.

At €27 per hour, Italy’s labor costs are not far above the European average and below France’s and Germany’s. But social contributions and other nonwage costs make up nearly 28 percent of the average salary, compared to 22 percent in Germany. Italy is also among few countries where labor costs continued to rise during the European sovereign debt crisis and it costs more than the average annual income to start a business in the country.

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