Italy’s technocratic cabinet on Friday decided to forego speedy implementation of labor market reforms in the face of resistance from trade unions and left-wing members of parliament.
The reform measures, which should make it easier for companies to fire workers and lift restrictions on a number of professions, will be submitted as a regular draft bill to parliament which means it could take months to implement. Had the government opted for an emergency decree procedure, it could have made the changes law within sixty days.
The retreat is a setback for Prime Minister Mario Monti who had so far managed to enact austerity and pension reform measures with broad parliamentary consent. The former European commissioner who was tasked to lead Italy in November of last year has run into stronger resistance over labor reforms which opponents say could trigger a wave of layoffs. Read more “Left Wing, Unions Stall Italian Labor Reforms”
In a television interview on Sunday, President Nicolas Sarkozy frankly admitted that his country lagged behind neighboring Germany and urged Frenchmen to accept austerity to revive growth.
The embattled French leader, who is up for reelection in April, pointed out that social taxes on salaries in his country were “double” those across the border; that the Germans had three times as many youngsters in apprenticeships; and that France lost half a million manufacturing jobs in the last decade when German employment grew.
This should come as no surprise to those who understand free-market economics: a CNBC study finds that the 25 “right to work” states in America are also have the top 25 best workforces.
Right-to-work states in the south and west of the country, which tend to be more conservative altogether, do not allow workers to be compelled to join a labor union against their will.
Workers in the remaining, Democratic-leaning states are generally less efficient and less educated.
Indeed, education overall is better in right-to-work states.
The conservative blog RedState argues that “those who receive their educations in forced union states get smart, pack up and leave, leaving the not-so-smart union extremists to invent myths about their own superiority while they pay their forced union dues.”
The reason is simple. While unions improve job security as well as pay and benefits, they undermine competition and make labor more expensive.
Right-to-work states have a more competitive labor market. Workers there have an incentive to work hard and excel. In heavily unionized professions, by contrast, excellence is too often discouraged. In a free market, it pays off.
Throughout Europe people are taking to the streets to protest announced austerity measures. With conservatives in power in most of the eurozone countries, students are organizing demonstrations and unions have launched strikes against plans to cut welfare spending and raise the retirement age.
“Deadly labor wars hinder India’s rise,” wrote The Wall Street Journal last month. In spite of Prime Minister Manmohan Singh’s efforts to reform India along free-market lines, the country’s long history with socialism continues to keep it from truly embracing capitalism.
Battle lines are being drawn in labor actions across India. Factory managers, amid the global economic downturn, want to pare labor costs and remove defiant workers. Unions are attempting to stop them, with slowdowns and strikes that have led at times to bloodshed.
Workers are so passionate because they feel that India’s newfound prosperity has hardly made their lives any better. Companies blame union leaders for enflaming such discontent for political reasons while decade-old labor codes are in desperate need of reform. “We can’t be a capitalist country that has socialist labor laws,” says the president of the Automotive Component Manufacturers Association of India.
India’s economy has experienced a steady 8% growth rate during the past several years. Its middle class had widened and its domestic consumer base, in both cities and the countryside, has grown with it. But the country’s manufacturing sector, after producing an impressive growth rate of 7 percent until last year now feels the effects of the global turndown and must make some unpopular cutbacks. “The unrest serves as a reminder that India has far to go before it stands alongside the world’s other economic powerhouses,” according to the Journal.
Thomas Barnett shares this sentiments and adds that that other rising power, China, has very much the same problem, “for all the same reasons plus the added burden of heavy corruption.” No matter how fast both countries have grown over the last decade, they still have to do away with the remnants of socialism to clear the path to becoming economic giants.