Populists Overturn Labor Reforms in Italy

The Five Star Movement and League limit the use of temporary work contracts.

Italian labor minister and Five Star Movement leader Luigi Di Maio eyes Prime Minister Giuseppe Conte during a news conference in Rome, July 3
Italian labor minister and Five Star Movement leader Luigi Di Maio eyes Prime Minister Giuseppe Conte during a news conference in Rome, July 3 (Governo Italiano)

Italy’s ruling populists claim to have made good on their campaign promise to overturn the previous government’s labor reforms.

A decree:

  • Reduces the maximum length of temporary work contracts from 36 to 24 months;
  • Reduces the times such contracts can be renewed from five to four; and
  • Introduces a requirement for employers to prove a temporary contract is still warranted after one year.

Italy’s National Institute for Social Security estimates that 8,000 temp workers could lose their jobs as a result of the changes, but the Five Star Movement and League have dismissed these figures as “unscientific” and “disputable”.

In the last year, Italy has added close to 460,000 jobs, 95 percent of which are on temporary contracts.

What were the previous reforms?

Labor reforms were the biggest legislative achievement of Prime Minister Matteo Renzo, a social democrat. They made it easier for companies to hire and fire workers and introduced a new type of permanent contract which helped reduce short-term forms of employment with little or no social benefits.

The law had two major caveats, however:

  1. At the insistence of Renzi’s trade union allies, it did not apply to anyone already in work.
  2. Tax breaks to incentivize hiring under the new contract were phased out after one year.

The reforms did nothing to lift licensing requirements and other types of restrictions that make it difficult for young Italians to start a career as a lawyer, notary, pharmacist or taxi driver.

As a result, Italy’s labor divide — between older workers on secure contracts who are almost impossible to fire and youngsters who can only find temp jobs — will likely persist for many years.

A decree is all it takes?

Yes. As I reported here in 2015, when Renzi was pushing his reforms through parliament, laws, once enacted, need to clear another hurdle, known as “actuation decrees”, which are issued by government ministries. It is a process that can take months or even years, which is why Italy is so slow to reform.