Like many European countries the labor movement in
Italy has resulted in very strong,
very stringent and very complicated laws governing termination of
employment. Essentially they make it
almost impossible for a firm that is experience a reduction in demand for its
products or services to terminate employees it no longer needs.
Part of this policy is to protect worker rights, but a large part of it is to force employers to retain employees that are no longer needed. There are two awful results of this policy. The first is that a firm is stuck paying older, entrenched workers for services or production the firm cannot sell at a profit. The second is that the policy results in massive unemployment for young people.
|Nadia Shira Cohen for The Wall Street Journal|
Italian Labor Minister Elsa Fornero says
'we're trying to protect individuals,
not jobs' under the new law.
One of the key tenets of the new law is that employers will be able to lay off individual workers for economic reasons. Until now, companies have had to jump through long and expensive hoops to lay off employees in order to downsize during slumps—a practice many economists say is the key reason for
's low level of foreign direct
investment and stagnant productivity. Italy
The idea that a company can lay off workers for economic reasons seem basic, but that was not the situation in
Italy. Now it will be.
To offset the economic consequences to workers
improving its unemployment benefits.
At the same time, the new law brings
closer in line with most
advanced economies in offering a universal jobless-benefit program. Currently,
this is available only to workers with lifetime contracts, and not to millions
of others, especially younger Italians working on fixed-term, often low-salary,
The trade-off of looser employment protection compensated by broader welfare provisions replaces an entrenched and litigious system that has left
Italy with the euro zone's second-lowest
employment rate, after . Malta
Protecting employees and granting employee rights is a good thing. But too much of a good thing is a bad thing. In the
U. S. the nation is still moving
towards giving employees, particularly women and minorities the protections
they need. In Europe
the movement is towards giving employers the flexibility to adjust their work
forces to changing economic conditions.
Those in Italy
who are fighting this trend are going to be amazed at how much a good reform of
the labor market will do for the Italian economy.
In fact, a little more labor reform and a lot less austerity and the horrible disaster that is the European economy may turn into just a normal disaster. A normal disaster, yep, that would be an improvement.