Italy picks wrong medicine for job market malaise

Politicians in hurry to prove themselves choosing easy route

Italy picks wrong medicine for job market malaise

By Lisa Jucca

 

MILAN (Reuters Breakingviews) — Italy’s government has picked the wrong medicine to address the job market malaise that is afflicting the euro zone’s third-biggest economy.

Rome wants to curb a proliferation of short-term work contracts by diluting past reform. The desire to improve the quality of jobs while cutting unemployment is laudable. But the proposed approach may be counterproductive.

The government late on Monday agreed its first economic draft bill, dubbed the “Dignity Decree”, which aims to clamp down on temporary contracts.

It is the brainchild of anti-establishment 5-Star Movement leader Luigi Di Maio, who is the labour and industry minister, and would make it harder and more expensive for employers to roll over temporary contracts, or fire staff.

Also, companies that shift production offshore would lose state incentives. Such measures might help job security but may make employers think twice about hiring.

Granted, unemployment has fallen to a six-year low of less than 11 per cent, partly helped by the labour market reforms passed after former Prime Minister Matteo Renzi took office in February 2014.

But the jobless rate is twice as high as it was in 2007, youth unemployment is 32 per cent, and a significant proportion of new jobs are temporary ones with few extra benefits. Around half the 212,000 jobs created in the three months to May were on temporary contracts, according to the national statistics office.

The government could do more to address these problems by equipping people, especially youngsters, with better skills.

More than a quarter of workers are under-skilled or under-qualified, especially in maths and science, while 14 per cent leave school early, according to a 2017 OECD report. More than a third work in areas unrelated to their studies, and for the 30 percent who are too qualified for jobs at home the solution is often moving abroad.

5-Star and its coalition partner, the League, had the right idea in their political manifesto, in which they promised to overhaul Italy’s outdated education system to better prepare young people for a more high-tech future.

They could, for example, copy Germany’s vocational training, or Finland’s focus on lifelong learning, which means two-thirds of its adult population are engaged in education or training. Such changes take time to yield benefits.

Politicians who are in a hurry to prove themselves are choosing easier but less appropriate solutions.

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

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