New World of Work: Italy’s Renzi seeks to create new middle

Giovanna Zambelli burst into tears of joy when her boss told her she might be transferred from a short-term to a permanent job contract at the aluminium tube factory where she works near Bergamo, in northern Italy.

“I was so happy,” says Ms Zambelli, a 49-year-old divorced mother of two who manages procurement for Alltub, one of the few surviving industrial businesses in a part of Lombardy ravaged by the financial crisis, a prolonged recession and rising global competition.

“Now I can walk alone, I’m more tranquil, more serene,” she says.

Thanks to labour reforms introduced this March, Ms Zambelli’s relief may yet be the face of Italy’s changing labour market. Faced with high unemployment and the long-term duality of its jobs market, Italian prime minister Matteo Renzi is seeking to create a new middle — workers with greater job security than temporary workers but fewer rights than those on traditional contracts.

While many Italian full-time workers benefit from generous open-ended contracts with hefty protections, a growing army of employees such as Ms Zambelli — and especially those younger than her — have been suffering through rolling short-term assignments lasting as little as one week. They mostly work in agriculture, retail, leisure and hospitality.

Twenty years ago, temporary workers accounted for 7.2 per cent of payroll jobs in Italy, but by 2013 that share had nearly doubled to 13.2 per cent, according to data from the OECD. The increase has been steepest among youth aged between 15 and 24, where it jumped from nearly 18 per cent to 52.5 per cent between 1995 and 2013.

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“The situation is dramatic. We are all precarious. I am and all my friends are,” says Alessandro Giuggioli, the 33-year-old maker of On a Bike Without a Saddle, a television series on the plight of youth in the Italian labour market.

The Italian prime minister believes he has found a solution to the problem. In his signature economic reform — known as the “Jobs Act” — Mr Renzi has proposed a permanent contract that he believes will stoke new hiring and reverse the rise in unstable work. The new contracts scrap some safeguards that existed in traditional permanent contracts, such as the right to be rehired if unfairly laid off, and offer a three-year cut in labour taxes for companies that offer these contracts in 2015.

Already in the first half of the year, the number of new open-ended contracts in Italy rose to more than 952,000, a 36 per cent increase on a year earlier, according to INPS, Italy’s pensions agency. The number of transformations of fixed term contracts into permanent contracts was up 30.6 per cent, to 332,000, over the same period. Marco Simoni, one of Mr Renzi’s economic advisers, says: “This confirms the theory behind the lawmaking. It increases the certainty for any investment, including the decision to hire somebody.”

But there is scant evidence that labour reform is having a positive macroeconomic effect. In June, Italy’s unemployment rate actually rose to 12.7 per cent, with youth joblessness hitting its highest level since 1977, at 44.2 per cent.

Pietro Guerra, chief executive of Alltub Italia, says many companies may still be too weak to take such a leap. “There will be a benefit from the Jobs Act — but only for companies that work. For businesses with market share problems and liquidity problems that don’t invest and have ruthless competition from abroad, you can do as many Jobs Acts as you want but they won’t hire people on permanent contracts,” Mr Guerra says, noting that “there are a lot of them around here”.

Michele Tiraboschi, a professor of economics, says the reform is superficial. “Renzi fought this fight to feed the perception of himself as a new man, as a man of change, but on the technical side I am perplexed,” says Mr Tiraboschi.

“The old rules still apply to existing workers and to the public sectors and some companies are still negotiating contracts with the old protections because the unions asked them to do it,’ he adds, referring to recent hiring moves in Italy by Novartis, the drugs company.

Moreover, there is concern that companies may simply be lapping up the tax incentive — which expires at the end of the year — to hire workers they would have anyway, meaning the new law will have little long-term impact. Mr Giuggioli says: “The Jobs Act is producing positive results but to understand if a labour market reform has really worked you have to wait three years.”

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Still supporters of Mr Renzi’s reforms defend the measures, arguing they will help productivity by creating more incentives to train workers. In addition, they could help consumption, since banks typically won’t lend money to Italians with short-term contracts. Mr Simoni says: “The importance of having one’s job stabilised is underestimated. You can’t buy anything in instalments. You can’t even get a kitchen at Ikea.”

At Alltub, Ms Zambelli is one of 12 workers who were shifted on to permanent contracts from temporary ones. She says she now finally has a chance to do what seemed “unthinkable” — ask a bank for credit.