It has essentially taken the whole of the first half of this year, but finally it appears that the Italian parliament will pass much-needed labour reforms into law sometime today.
For the embattled Italian Prime Minister, who has been roundly chastised internationally for his stalled reform agenda, passage of these critical changes to labour legislation will offer him some much-needed respite ahead of tomorrow’s EU Summit in Brussels. Although the current legislation has been watered down from the original version, it still provides employers with greater freedom to lay off workers for economic reasons. In recent decades it was Article 18 of the Workers Charter that made it heinously expensive for employers to sack workers, which rendered Italian labour increasingly uncompetitive and inefficient. At the same time, the new laws introduce a potentially costly comprehensive jobless benefit scheme, although employers have been stung with higher payroll taxes to partly fund this unemployment-insurance plan. Mario Monti’s other major reform success has been in pensions, where benefits have been reduced for retirees and the retirement age has been lifted to 68 years.
These new labour laws may not be the revolution that the Italian labour market requires, but are an important first step. The process of realigning Italy’s high labour costs with international norms is, at the very least, underway.