Italy Is Failing Its Next Generation

Italians need to stop blaming outsiders and start owning up to their country’s shortcomings.

View of the Piazza del Duomo in Milan, Italy, November 24, 2009
View of the Piazza del Duomo in Milan, Italy, November 24, 2009 (Bjørn Giesenbauer)

Italy is creating a lost generation.

Consider the following statistics, some taken from the Financial Times:

  • 30 percent of Italians between the ages of 15 and 24 are out of work, more or less the same rate as in Spain but almost double the eurozone average.
  • Of those in work, the majority are on temporary contracts.
  • Nearly eight out of ten young Italians are in part-time work and unable to find full-time employment, the highest rate by far among large European economies. In France and Spain, it’s about 50 percent.
  • Italy spends far less on tertiary education that its neighbors. The result: only 27 percent of Italians in their thirties have a university degree, the second-lowest rate in the EU, where the average is 40 percent. Italy does especially poorly in educating migrants: just 13 percent of its foreign-born population has completed university against 36 percent in the EU as a whole.
  • Average real incomes are roughly at the level they were in 1995. In France, Germany and Spain, they have grown about 25 percent.
  • 3.2 percent of working-age Italians now live elsewhere in the EU, up from 2.4 percent in 2008.

It’s not the EU’s fault

Of the young Italians who stay behind, many blame the EU — for imposing austerity during the economic crisis and for not helping Italy during the migrant crisis. Italy is the only country in Europe where the young are less supportive of the European Union than the old.

But the causes of the problems so many young Italians face are home-grown: slow growth, low productivity, high debts, poor education, high youth unemployment and low foreign investment.

Italy has consistently ignored recommendations from the European Commission to address these issues, such as:

  • Simplify the tax code and shift the tax burden away from capital and labor and toward consumption and property.
  • Use windfalls to reduce the national debt.
  • Invest more in education and step up job training and requalification services.
  • Improve the efficiency of the justice system to tackle corruption and attract foreign investment.

Even the so-called anti-establishment parties that are now in power — the left-wing Five Star Movement and the far-right League — are committed to defending the status quo, according to political scientist Andrea Lorenzo Capussela.

No serious reforms

Italy’s biggest problems, he argues, are low political accountability and a weak rule of law, which manifest themselves in clientelism and illegality.

Tax evasion, for example, is between two and three times higher than in France, Germany and Spain. Corruption is at Balkan levels.

Italy is an open democracy, served by an economy — which has Europe’s second largest manufacturing sector — that reliably produces healthy current account surpluses. But its social order is markedly less efficient and fair than its peers’: to protect the country’s elites, it constrains the opportunities of ordinary citizens and firms, raises inequality and dampens the country’s potential.

Look no further than the current government, which has:

  • Granted a special pension scheme to certain cohorts of workers;
  • Cut taxes for professionals and small entrepreneurs without cutting spending to pay for it;
  • Passed a €20 billion tax-evasion amnesty;
  • Proposed to abolish all limits on the use of cash, which would further ease tax evasion; and
  • Overturned the imperfect labor reforms of the last center-left government (which, at the insistence of trade unions, did not even apply to anyone with a job, but only to new contracts).

No government, whether mainstream right, center-left or populist, has touched licensing requirements and other sacrosanct protections that make it almost impossible for young Italians to start a career as a lawyer, notary, pharmacist or even a taxi driver (except for the ill-regulated Uber).

The result is a two-tiered labor market where young workers can’t find job security and older workers are expensive and impossible to lay off.

Nor has any effort been made to reduce the cost and time it takes to start a business, which benefits incumbents and drives a considerable amount of economic activity to the informal sector.

Scapegoating

Since Silvio Berlusconi, Italian politicians have scapegoated everyone and everything, from communists to immigrants to the EU, but seldom so much as mentioned Italy’s hostility to competition and innovation.

The technocrat Mario Monti and the social democrat Matteo Renzi made some attempts, but the former’s priority was getting Italy’s public finances in order while the latter was too proud to put the good of the country ahead of his own political career.

Even if reforms are passed, they get bogged down in bureaucracy. Once a law is approved by parliament, it needs another approval, or “actuation decree”, from the relevant government ministry. (No other European country has anything like it.) This can take months or years. Even then, civil servants and local officials routinely ignore changes — and they are impossible to fire for any reason.

The solutions are not a mystery. Italy could take the EU’s policy recommendations to heart. Or it could look across the Mediterranean to Spain, which started out much poorer but is now surpassing Italy economically as well as diplomatically.

Either would require a change in mentality: Italians need to stop blaming outsiders and start owning up to their country’s shortcomings.