Italy: New government focuses debate on Biagi law
The new centre-left government is at present engaged in a debate on the impact of the controversial Biagi law, which introduced a range of flexible employment relationships. Much will depend on the final analysis of the 2003 law's impact - if scant use has been made of some of its provisions, the government may consider reform.
On 17 May 2006, former EU Commission President Romano Prodi officially took office as the new Italian prime minister, replacing Silvio Berlusconi and his centre-right coalition government. Prodi heads a centre-left coalition and has now made all his ministerial appointments. The new minister of labour is Cesare Damiano (Democratic Left party), who has taken the job from Roberto Maroni (Northern League). Damiano has a trade union background, having joined the trade union confederation Cgil in 1970 and worked for almost 30 years for the metalworking union Fiom. In 1991, he was elected deputy general secretary of Fiom and actively participated in several rounds of delicate negotiations for the renewal of key collective agreements. He has led the welfare department of the Democratic Left party since 2001. Trade unions have welcomed Damiano's appointment and employers have also expressed satisfaction with the new labour minister.
Main labour issues in the election campaign
The election campaign was hard fought, with the parties focusing debate mainly on taxation and new measures to promote the development of the Italian economy. Labour issues were largely relegated to second place, although there was some debate on labour market reforms. For example, the electoral platform of the centre-right focused on the so-called Biagi reform (law no.30/2003 - EIRR 350 p.28), characterising it as one of the most important acts of Berlusconi's government during its five-year legislative period. This legislation was named after the labour law academic and government adviser who was assassinated in March 2002. It introduced a range of more flexible employment relationships, including on-call working, job-sharing, staff leasing and an extension of temporary employment. For more details, see the box below.
In terms of future policy in this area, the centre-right's sole platform promise was the creation of a million new jobs, although it did not give any indication of the specific measures that it would put in place to achieve this goal.
The centre-left platform was more specific and focused on two main issues: the revision of the Biagi law; and a reform of the so-called "social shock absorbers", which are measures designed to ensure that there is a social security and protection network for all workers faced with the loss of their job.
On the Biagi law, the centre-left's electoral programme stated: "The normal form of employment should be the open-ended contract, because we think that any person should be able to build their own future on a secure basis. We maintain that fixed-term contracts and other forms of flexible working should always require justification and should not cost less than open-ended employment relationships. In our programme we aim to reduce the incidence of flexible working and abolish more precarious employment relationships such as on-call working, staff leasing and the work entry contract."
The programme also stated the centre-left's intention to increase the social contributions paid by employers for "project contracts" - fixed-term contracts concluded for the purpose of carrying out a specific project - and to modify legislation governing temporary contracts (contratti di lavoro interinale).
On the social shock absorbers, the centre-left proposed a reform based on three main points:
an increase in social welfare payments and their extension to workers who are currently not covered by the social security system, such as workers on discontinuous contracts or self-employed people;
the reorganisation of the social security system for the agriculture sector; and
the creation of a social protection network for all workers, not just those employed in big industries, in the case of an industrial crisis.
The centre-left programme's chapter dedicated to labour issues was the result of difficult negotiations between the parties of this coalition. The left-wing parties (Rifondazione Comunista, Comunisti Italiani and the Green party) wanted to abolish the Biagi law completely, as they considered this to be the main source of the increasingly precarious nature of employment in the Italian labour market. However, although the new labour minister Damiano's background is shaped by the left-wing trade union Cgil, which would welcome the wholesale abolition of the Biagi law, he argued that what was needed was the modification of some parts of the law, rather than its abolition. In one of the first interviews given by Damiano after being nominated labour minister, he stated: "The issues of development and labour represent key elements of the centre-left coalition's programme. It is not necessary to abolish law 30/2003 and to draft another law. However, we do need significant modification of those provisions that have introduced unacceptable forms of precariousness. We also need to introduce incentives to encourage companies to hire workers on open-ended contracts."
Debate on the Biagi law
During the new government's first month in office, the social and labour market policy revolved around the 2003 Biagi law, which has been controversial ever since it came into force. The main area of controversy has been the new types of employment relationship and the modification of some existing types of contract, as part of the aim of increasing labour market flexibility. For details, see the box below.
After the centre-left's victory, the
centre-right strongly defended the Biagi reforms,
stating that several international organisations, such as the International
Monetary Fund, had often stressed the need to reform labour legislation in
Italy to attract more foreign investment. Former minister Roberto Maroni also
noted that one of the main goals of the Biagi law was
to increase the employment rate in
Several centre-left representatives, such as former labour minister Tiziano Treu (centrist party la Margherita) and other centrist representatives, have reportedly stated that they agree with the Biagi law's aim of increasing the employment rate, and that they are also in favour of some of the provisions that have introduced flexibility into the Italian labour market. However, they have criticised a number of the flexible contracts, such as on-call working and staff leasing, believing that these have not had any significant impact on the labour market.
Assessment of the impact of the Biagi law
The real impact of the Biagi law is a fundamental aspect of the labour market debate at present and its outcome will determine whether or not there is a need to reform this law. According to research carried out by the employers' organisation Confindustria in 2005, Italian companies have not been making a great deal of use of the new contracts introduced by the Biagi law. The research covers 2,000 companies and around 600,000 workers and gives an interesting insight into how employers have reacted to the law. According to the research, only 2.1% of companies were very interested in using staff leasing or on-call contracts. For further details, see the box below. Confidustria's researchers highlight that this low percentage is mainly due to a lack of information about the new types of contracts, although it should be stressed that these are not official figures. However, according to several commentators, the majority of the new flexible contracts have failed because they are of no intrinsic use. Many observers believe that the centre-left will not face any criticism from employers if it decides to proceed with the abolition of these contracts.
Promise of cuts in labour taxes
It is thought that labour minister Damiano is probably aware that a slight modification of the Biagi law would not result in any clashes with employer bodies, especially if the government decides to keep its electoral promise to cut labour taxes, a measure that will benefit companies. Prime Minister Prodi confirmed the government's promise to make a five percentage point cut, but at present the government, employers and trade unions are engaged in a debate on whether this reduction in the tax burden should apply to all or only some companies. Confindustria vice president, Alberto Bombassei, stressed that the cuts should cover all companies, while Damiano has proposed that the tax reduction should only apply to companies that hire workers on open-ended employment relationships.
All the trade unions have welcomed Damiano's proposal, but the final decision is still a long way off, because, according to a range of experts, such a tax cut would have a negative effect on Italian public accounts. The new economics minister, Tommaso Padoa-Schioppa, has gone as far as to state that the negative effect would be "even worse than in 1992, which was the worst year for Italian public finances".
Thus it would seem that it will be some time before decisive action on labour market reform is finalised. Much will depend on the outcome of the debate on the impact of the controversial Biagi legislation. If it turns out that, as many people suspect, employers are making little use of some of the new, flexible contracts, there is a real likelihood of reform or abolition of these contracts. In any case, it would appear that the government is unlikely to abolish the Biagi law completely, but it may well reform a number of its provisions.
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The Biagi law (law no.30/2003) introduced a range of flexible employment relationships and contracts and modified some existing provisions, particularly in the area of part-time work and temporary work. The aim of the law was to increase flexibility in the Italian labour market and so increase employment levels. The main types of employment relationship introduced by the law are as follows: work on-call (lavoro intermittente), which was previously scarcely used in
jobsharing (contratto di lavoro condiviso), under which two workers are allowed to share a full-time employment contract. Social security contributions, hours of work and duties connected with the employment contract are shared equally between the two employees;
a "staff leasing contract" (contratto di somministrazione di lavoro), under which employers can hire staff from specialised temporary agencies, on a fixed-term or open-ended basis. Employers must justify staff used in this way, citing technical and organisational reasons or reasons related to production as set out in the law or by collective agreement. These workers are employees of the agency, not the user company. The aim of this provision is to offer companies an extra way of hiring staff through agencies. The main difference between this provision and the Regulations governing temporary work (see below) is that employees can be hired out in this way for longer periods of time;
a work entry contract (contratto di inserimento), under which unemployed workers under 30 can be hired on reduced pay for a fixed term of between nine and 18 months. The contract must include an element of training; an extension of temporary employment placement (collocamento) to private placement agencies, labour consultants and universities. The rationale behind universities making placements is the fact that they are logical intermediaries between students and/or graduates and companies by dint of the fact that students are with them for four years and, within that time, universities will organise a range of placements with companies for their students; and
more flexibility around the organisation of part-time working. For example, a previous provision under which any additional hours worked by a part-timer may not exceed monthly agreed limits by more than 10% was eliminated. Further, the new law allowed employers, for the first time, to modify on a unilateral basis part-timers' working time in the case of specific company needs.
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