Social dialogue and the public services in the aftermath of the economic crisis: strengthening partnership in an era of austerity in Italy National report Lorenzo Bordogna and Stefano Neri, Dept. of Social and Political Sciences, University of Milan November 2012 European Commission project Coordinated by Professor Stephen Bach, King’s College, London ‘Industrial Relations and Social Dialogue’ VP/2011/001 Table of Contents Summary .................................................................................................................................... 1 1. Introduction ........................................................................................................................... 3 Public sector structure and size............................................................................................... 3 Trade unions ............................................................................................................................ 5 Social dialogue: main features, historic background, recent developments .......................... 8 2. Economic crisis and austerity programs ............................................................................. 13 3. a The austerity measures for local government ................................................................. 15 3. b The case studies ................................................................................................................ 18 The Modena municipality ........................................................................................................ 19 The impact of the austerity measures: critical issues and current adjustments .................. 21 The social dialogue: towards a “dialogue of the deaf” ........................................................ 24 The Sesto San Giovanni municipality ...................................................................................... 26 The impact of the austerity measures: critical issues and current adjustments .................. 27 The social dialogue: from cooperation to instability? .......................................................... 30 Comparison ........................................................................................................................... 32 4. Conclusion ............................................................................................................................ 33 References ............................................................................................................................... 36 List of Tables Table 1: Public service employment in Italy – permanent employees and employees with flexible contracts Table 2: Union membership and union density (all organisations) in Italy, 1996 – 2006 Table 3: Union members and Rsu votes in the Regions and local authorities sector (2012) Table 4: Number and population of Italian municipalities Table 5: Elections for the unitary workplace representation bodies – 2012 and 2007 Table 6: Employment levels in Modena municipality (2002-2012, staff with permanent and temporary employment contract) Table 7. Percentage of personnel expenditure on total current expenditure Table 8: Elections of workplace unitary representation bodies (2012 and 2007) Table 9: Employment levels in Sesto San Giovanni municipality and employees with permanent contract (2002-12; ‘dotazione organica’) Table 10: Ratio between personnel expenditure and current expenditure List of Figures Figure 1. Bargaining units and bargaining agents, at various levels Summary Italy has one of the largest cumulated public debt in the European Union, second only to that of Germany in absolute terms and to that of Greece as percentage of GDP, around 127 percent in the third trimester of 2012, up from 103.1 in 2007; after the country entered the Euro, it was never below 100 percent. As for the budget deficit, from a modest 1.6% of GDP in 2007, it rose to 5.4% in 2009 to decrease to 4.6% in 2010 and below 3% in 2012, one of the lowest in the Euro-zone, with a significant primary surplus. After the measures adopted by the Monti government in December 2011 and in 2012, under the pressures of the EU Commission and the ECB, it is expected to further decrease in 2013, close to balance in structural terms, with a primary surplus around 4 percent. Italy has also a long tradition in public sector social dialogue, however imprecise the analytical meaning of this expression is. When the system of unilateral regulation of terms and conditions of employment prevailed, through the 1950s, the 1960s and partly the 1970s, social dialogue assumed the form of an intense involvement of trade unions in the (co-) management of internal labour market matters – recruitment, internal mobility, careers, disciplinary matters, etc.. When, partly in the 1980s and definitely from the 1993, collective bargaining became the main method to regulate the employment relationship of the large majority of public employees, who at the same time lost their public law statute and the special guarantees attached to it, an intense negotiation activity both at central, national level and at the firm (individual administration) level has been the rule. Since the late 1950s the sector has also always been highly unionized, with currently an overall density rate around 45-48 percent, 15-18 percentage points higher than in the private sector. Since a1997 legislation, legally based workplace representation bodies (rsu) are regularly elected about every three years in each public bureau with more than 15 employees. The last election was held in March 2012. As in many industrialised democracies, public sector is nowadays the stronghold of the Italian trade union movement (Visser, 2006). Membership has however declined by about 5 percent since 2008, something more than the decline in employment levels. When the crisis arrived in late 2007 and then exploded in the following years, Italy was forced to adopt severe programs to control budget deficit and to reduce public debt. This was pursued in successive steps through a varying mix of tax increases and expenditures cuts. Among the latter type of measures, public services and public sector employment at large have been a crucial target of government policies: levels of employment, wage and salary increases, pension systems have all been the object of repeated measures adopted by the government. Another privileged target of government policies have been the expenditures of the regional and local government authorities (Regions, municipalities, provinces). Despite of, or along with, a process of regional decentralization which goes back to the early 1970s and a reorganization of territorial autonomies in the early 1990s, reinforced by a constitutional reform in 2001, since 1998 the budget policies of these decentralized entities are constrained within the tight rules of the so called Internal Stability Pact (ISP), linked to the EU Stability and Growth Pact (see infra, section 6). Within this institutional framework, financial transfers from the center to local authorities have been severely cut in recent years 1 while at the same time local authorities’ expenditures have been subject to notably stricter rules than in the past. This gave often rise to strong tensions between central government and the associations of local authorities - the Conference of the Regions and the national association of municipalities and provinces (ANCI and UPI) - occasionally creating the opportunity for alliances between these organizations and trade unions against central government policies. In effect, also this very important component of government austerity programs has severely affected, along with the provision of local public services, employment levels and working conditions of a significant part of public employees (public employees of local authorities are about 600 thousand, plus the number of employees of the organizations to varying degree controlled and funded by local authorities, but not formally belonging to the public sector in strict terms). Also public sector social dialogue and public sector employment relations, both at national and local level, have been hit by government austerity programs in response to the economic crisis, although with potential differences at the latter level, as it is shown by the case studies in this report. It must be stressed, however, that the economic crisis exploded in 2007-08 has not been in Italy the only reason for reform measures directly targeting public sector employment relations. This reform process had (also) independent reasons that go back to years preceding the economic crisis, rooted in the unexpected and problematic effects of the previous wave of public service employment relations reform, the so called ‘second privatization’ approved in 1997-98 and implemented in the following years. In those years, as we will see later, the shortcomings of the regulatory system introduced in 1997-98 became the object of a wide scientific an political debate. This stressed the necessity of reforming the rules of collective bargaining, especially at decentralized level, as well as of strengthening both managerial authority on employment relations and HRM matters and the role of performance management and performance assessment systems (Dell’Aringa and Della Rocca, 2007; Rusciano, 2005 and 2008; Caruso and Zappalà, 2007; Talamo, 2007; Zoppoli, 2008; Bordogna, 2007a and 2009b). The new center-right government that arrived to office in Spring 2008 took on some of the issues raised in this debate, framing them, however, within a tough rhetoric discourse against the inefficiencies of public sector employees and the privileges granted them by overly powerful, intrusive trade unions. Initially, in Summer 2008 and 2009, the reform of public service employment relations appeared to be linked, and to some extent interconnected, with the first austerity measures adopted by the government, in a mutually reinforcing process. But when the economic crisis deepened, the urgent need to protect public finances started to clash with the implementation process of the reform, substantially freezing some of its main features. In the following section an overview of public sector structure and size will be provided, followed by a brief presentation of public sector trade unions and social dialogue institutions. A general overview of the main austerity measures adopted by the government in response to the economic crisis will then precede a deeper analysis of the austerity measures specifically regarding the entire sector of local government in Italy, followed by the presentation of the case studies carried out in two Italian municipalities. The Appendix contains a brief summary of the national workshop held at the University of Milan, Faculty of Political, Economic and Social Sciences, on September 10th, 2012. 2 1. Introduction Public sector structure and size Italy is a unitary state, although the fifteen regions with ordinary statute have since the early 1970s rather strong administrative and regulatory powers, further strengthened by a 2001 constitutional reform. The president of each region and the council members are elected by universal suffrage every four years. These powers are even stronger in the five regions and two provinces (out of 1091) with special autonomy statute. Public functions are carried out and public services are provided at different administrative levels. In particular, at central state level we find ministries, including internal revenue agencies, police, defence forces, fire-workers, the judiciary, compulsory social security and public education of all grades, with the main exception of vocational training which is provided at regional and local government level. Public universities and research institutions enjoy administrative autonomy but are still nowadays mostly funded by central government. Regions have wide responsibilities in the organization, management and provision of health services, although on the base of financial resources transferred by the central government and within a policy coordination at national level by the Ministry of Health. Social services are mostly provided at regional and local government level (109 provinces and more than 8,000 municipalities). At the end of 2010, public administrations, as legally defined according to the legislative decree 29/19932, employed 3,253,097 persons with permanent employment contract, including 183 thousand public school teachers with one-year contract, plus 124 thousand employees with fixed-term, flexible and other forms of temporary contract (Table 1). This amounted to about 14-15% of the Italian total employment in the same period and around 5.5% of total population - a percentage higher than in Germany but significantly lower than in France, Britain, the Netherlands and the Nordic countries. This amount does not include other forms of contingent workers (the so-called co.co.co), utilized by public administrations, especially in local government and the health sector, but whose number is hard to estimate, nor the employees of the firms that provide local public services, partly or fully owned by public local authorities, such as water, energy, garbage collection, transport, etc., which, from a legal point of view, are not public employees, 1 At the end of October 2012 a decree law (n. 188/2012) was approved by the government to significantly cut down the number of provinces. If this decree will be converted into a law, in the regions with ordinary statute they are expected to decrease from 86 to 51 since January 2013, while the 5 regions with special autonomy will have six more months to adapt the number of provinces to the new legislation. This process has however been stopped, at least temporarily, by the crisis of the Monti government in mid December 2012. 2 According to the legislative decree 29/1993, public administrations include public schools and educational institutions of any grade; the autonomous firms of the State (fire-workers and, until 2007, State monopolies like tobacco); regions, provinces and municipalities; public universities; chambers of commerce and their associations; all public hospitals and organizations of the National health service; non economic public bodies at national, regional and local level (mostly social security). The regions are 20 and the provinces 109, including five regions and two provinces with special autonomy statute; municipalities are more than 8 thousand. Data on employment levels at the end of 2011 are not yet available; those provided by the Eurostat Labour Force Survey are not strictly comparable with those presented in Table 1, since the education and health activities include also private sector providers. 3 although these services are mostly financed by local authorities. Finally, also the employees of the state railways and postal service, once included within the boundaries of the public administration, are not considered in Table 1, since these administrations have been privatized and transformed into joint stock companies respectively in mid-1980s and late 1990s, although the state is still the main or sole shareholder. As shown in Table 1, the number of public employees started to decline significantly in the last two years, with some differences across sub-sectors, due to the austerity measures taken by the government since 2008. This trend has continued in 2011 and 2012, although official data are not yet available, and is expected to continue in the near future with an overall decrease of 10 percentage points in 2014 compared with 2008 levels. Table 1: Public service employment in Italy – permanent employees and employees with flexible contracts Service Permanent employees Central government(1) State autonomous firms (firemen and state monopolies) Non-economic public bodies (2) 3 Local government ( ) National health service Public schools (4) Public universities(5) Research institutions Police* Armed forces* Judiciary* Diplomats and Prefects* Prisons’ Personnel* Total Employees with flexible contracts Fixed-term conracts Temporary agency contracts Socially useful work Training-work contracts Telework Total TOTAL 2007 2008 2009 2010 242715 32865 240983 31982 235990 31695 230330 31586 58641 56365 54910 52950 585942 594922 593439 588168 682197 1145841 116578 15848 331614 141001 10280 2480 494 3366496 689863 1138871 119870 17421 325664 146393 10410 2413 473 3375630 693767 1083568 115913 18186 325376 145675 10486 2334 456 3311795 682183 1052495 111011 18148 320031 146882 10195 2312 432 3253097 112745 11421 24962 4111 1232 154471 105183 10922 21961 3174 1087 142327 92569 11708 20238 2198 1167 127880 90592 12573 18604 801 1389 123959 3520967 3517957 3439675 3377056 (1) Three sub-sectors are included: Ministries, Internal revenues agencies, and Prime Minister’s Office. ) Mostly social security organizations. (3) Regions, provinces, municipalities, chambers of commerce. (4) Including teaching personnel with one year contract (183 thousand in 2010, 196 in 2009, 223 thousand in 2008). (5) Both teaching and non-teaching personnel.. * The employment relationship of the employees of these sectors (plus about 55 thousand university teachers) has not been ‘privatized’ and ‘contractualized’ by the 1993 reform; they are not under ARAN jurisdiction. Source: Ministero Economia e Finanze-Ragioneria Generale dello Stato, Conto Annuale, Roma, several years. 4 Trade unions In Italy there are no legal restrictions on trade union organization for most public employees, with few qualifications regarding mainly armed forces and, to a lesser degree, police corps. Since the end of the World-War-II, trade unions have always had sound roots in the Italian public sector. After a partial decline in the 1950s, aligned with a general decreasing trend, the membership of public sector unions affiliated to the three main confederations (CGIL, CISL, UIL)3 started to rise almost constantly since the early 1960s through the early 1980s, especially in the school sector, health sector, local government and municipalities. Also railways and the postal service recorded a large increase, before their privatization in the late 1980s and mid-1990s. The proportion of public sector union members on total membership (pensioners excluded) of the three largest confederations rose from about 10% in early 1950s to over 26% in mid 1980s, and is still around 25% in 2012, despite the privatization processes of previous decades. The density rate in the same period has always been higher than in the entire economy, arriving at over 50% in mid 1980s only for the three largest confederations. While union density sharply declined afterwards in the manufacturing and private sector, in the public sector remained around 50%, including also the members of the ‘independent’ unions, that is those not affiliated to the largest confederations, that are very numerous in the public sector. These unions are particularly strong in the school sector, central government and other minor subsectors, and among medical doctors and managerial staff in general. To schematize, three distinctive features characterize public sector unionism compared with the private sector. First, as just noticed, a significantly higher union density over the entire post-World-War-II period, which is not only an Italian prerogative nor a recent one (Clegg, 1976; Visser, 2006). In mid-2000s both union membership and density ratio were on the whole significantly higher than a decade earlier (Table 2). In particular, union density was in 2006 around 50 percent among non-managerial staff, some 15 or more percentage points higher than in the entire economy, and around 65 percent among managerial staff (Bordogna and Neri 2011)4. Unionization has however decreased in the following years more than the decrease in employment, with a density rate around 45%, or a little more, in 2012. Also the participation rate to the 2012 rsu elections, around 74%, has been lower than in previous elections. Second, a much greater organizational fragmentation, well beyond the traditional divisions along political and ideological lines between the three main Italian trade-union 3 Over the entire post World-War-II period CGIL, CISL and UIL have been the three largest trade union confederations, traditionally linked, respectively, to the Communist and Socialist party, to the Christian Democratic party and to other parties on the center-left wing of the political spectrum (socialist, socialdemocrat and repubblican parties). Since mid-sixties, these linkages with political parties have weakened, while the unity of action among the confederations themselves has generally increased, although with periods of harsh contrasts. 4 These data refer to public employees with a ‘contractualised’ employment relationship, that is those whose terms and conditions of employment are determined through collective agreements between representative trade unions and ARAN, the public Agency that since 1993 legally represents all Italian public administrations in national level negotiations (with the exceptions of the five regions and two provinces with special autonomy; see infra). 5 confederations (CGIL, CISL and UIL). Such a fragmentation is due to the presence of many ‘independent’ craft and occupational unions, both among managerial and non-managerial staff, rooted in the typical professional segmentations of public sector labour market. These types of organizations often adopt a ‘special interest’ logic of representation (Olson, 1965), in contrast with the general and encompassing logic of representation that characterizes the unions affiliated to three largest confederation. Inter-union rivalries and the typical difficulties of multi-union representation, connected with this fragmentation, have been dealt with through precise quantitative criteria to select the bargaining agents admitted to the negotiations and to reach agreements with general validity. These criteria, introduced by a 1997 legislation, are based on union membership and the election results of legally-based workplace representation bodies. Third, an almost universal diffusion of workplace personnel representation bodies, which, according to the same 1997 legislation, are elected, every three years according to the law, in each public administration site with more than 15 employees, basically on a similar model to that introduced in the private sector by a tripartite agreement in July 1993. These workplace representation bodies have collective bargaining rights at decentralized level, and a pervasive voice in the management of the internal labour market. Since 1997, elections with universal suffrage and secret ballots have been held approximately every three-four years, with a very high participation rate (usually around 75% or higher, partly decreasing in 2012 elections). Important union prerogatives are linked to the results of these elections, among which the (generous) amount of working time off and paid leaves for union activity. In the last election, held in March 2012, CGIL obtained something more than 30% of the votes, CISL about 26-27%, UIL about 17-8%, and the numerous independent unions about 24% overall, but a notably higher percentage in some subsector/bargaining unit (provisional data). CGIL, that strongly opposed the 2008-2011 center-right government policies on public service employment relations, slightly improved its previous results, while CISL, which had a more conciliatory attitude, worsened its position by about 2 percentage points; but the changes compared to the previous 2007 elections (2006 for the school sector) are overall limited. Table 2: Union membership and union density (all organisations) in Italy, 1996 – 2006 Sector Central government Members (a) Employees 1996 2006 113,106 113,243 Total Managers 1996 2006 2,634 2,509 Union density (%) 1996 115,740 2006 115,615 Total Employees 1996 2006 39.5 47.8 Managers 1996 2006 45.8 45.6 1996 39.6 2006 47.8 State autonomous firms 25,414 - 205 - 25,619 - 58.4 - 83.7 - 58.5 - Non-economic public bodies 39,781 37,438 3,974 3,661 43,755 41,099 61.1 68.2 99.9 99.9 63.3 70.2 6 Local government (regions, provinces, municipalities) 316,714 242,258 7,704 4,948 86 247,206 48.6 47.9 60.4 49.8 48.8 47.9 National health service 267,201 287,345 86,720 91,821 353,921 379,166 47.9 52.7 68.2 66.8 51.7 55.6 Public schools 378,669 536,113 - 7,013 378,669 543,126 36.7 47.5 - 68.6 36.7 47.7 University 22,436 25,593 55 70 22,491 25,663 38.2 45.5 47.4 18.4 38.2 45.3 Research institutions 5,797 10,029 2,735 115 8,532 10,144 47.6 63.9 50.1 75.2 48.4 64 1,169,118 1,252,019 104,027 110,137 1,273,145 1,362,156 43.2 49.5 66.9 65.9 44.5 49.7 Total (a): Figures refer to deleghe, that is written notifications to the relevant employer undersigned by employees to check off union dues from their monthly pay. The validity of this subscription lasts until the employee formally revokes it. Source: For 1996: Bordogna et al. 1999; for 2006, ARAN and Bordogna and Neri 2011. Table 3 summarizes the strength of trade unions in the Regions and local authorities subsector in 2012, both with regard to membership (number of subscriptions of union dues) and votes in the election of the legally based workplace employee representation bodies (rsu). It shows that only 4 trade unions, out of 132 organizations, have a representativeness higher than 5%, and are therefore admitted to negotiations at national level, while well 128 organizations are below this threshold. The three strongest unions are affiliated to the largest Italian trade union confederations, with a prominent role of FP-CGIL; the fourth one is an independent union. The overall union density rate in the sector is around 34%; the participation rate to the 2012 rsu election has been around 71%, lower than in previous elections. Table 3. Union members and Rsu votes in the Regions and local authorities sector (2012) a Membership % b Rsu votes % Representativeness (a+b average) FP-CGIL 73,758 36.53 150,537 37.84 37.19 FP-CISL 57,297 28.38 114,717 28.84 28.61 FP-UIL 32,801 16.25 68,860 17.31 16,78 CSA-CISAL 12,367 6.13 20,946 5.26 5.70 Others 25,678 12,71 42,776 10.75 (128 organizations) Total 201,901 100 397,836 100 Membership: number of deleghe (see note to Table 2). Rsu: legally based workplace employee representation bodies elected in each public administration with more than 15 employees every 3 years. Representativeness: average between percentage of members on total membership and percentage of votes on total votes cast. Organizations with a representativeness of less than 5% are not admitted to national level negotiations. Source: our elaborations on Aran data 7 Social dialogue: main features, historic background, recent developments The institutions of public sector social dialogue, still operating nowadays, are the result of three waves of public sector employment relations reforms going back to 1992-93, 1997-98 and 2009. First reform wave (1992-93). According to the major 1993 reform (legislative decree no. 29/1993), also labelled as “the first privatisation”5, the employment relationship of the large majority of public employees has been privatized, their public law statute has been removed, the special prerogatives attached to this status have been reduced, and their controversies are not any longer subject to administrative law and administrative courts, but to the civil code and ordinary tribunals. Since then, their terms and conditions of employment are mostly determined through collective agreements negotiated between the representative trade unions and ARAN, the public Agency purposely created in 1993, partially amended in 1997 and 2009, to legally represent all Italian public administrations in national level negotiations (with the exceptions of the five regions and two provinces with special autonomy statute)6. At the end of 2010 the number of contractualised public employees, managerial staff included, under the ARAN jurisdiction were something less than 2.7 million. The main groups excluded from privatization were (and still are), police corps and armed forces (about 470 thousand employees), university teachers (about 55 thousand), magistrates (10 thousand), diplomats and prefects (a little more than 2 thousand), prisons personnel. Also top level state managers were excluded form privatization and contractualisation in 1993, but then included since 1998. Police corps and, to a lesser extent, armed forces, although not privatized, have forms of social dialogue and joint regulation, separate from those of all the other public employees. This has not always been the case. As above anticipated, during the first two decades after WWII, public employees enjoyed a public law statute, did not have collective bargaining rights and their employment relationship was unilaterally determined through legislation and administrative acts; possible controversies were regulated by administrative tribunals. As in many continental European countries, special prerogatives were attached to this public law statute, to begin with employment security and other internal labour market guarantees (Kickert, 2007; Keller, 1999, 2011; Bordogna and Neri, 2011). However, although without collective bargaining rights, also in those decades trade unions had intense informal relations with managers, and de facto used to play a pervasive role in the regulation of 5 This reform, within a larger program to renew the Italian public administration as a whole, was to some extent inspired by the New Public Management approach (Bordogna, Dell’Aringa and Della Rocca 1999; Ongaro 2009; Bordogna and Neri 2011). 6 The creation of ARAN in 1993 was intended to insulate collective negotiations from party politics, remedying the traditional invasion of political parties into the public sector industrial relations arena. However, this insulation is obviously limited, since ARAN’s president, after the 2009 reform (rules were previously slightly different), is nominated by a decree of the President of the Republic, on proposal of the Minister of Public Function, and the other four members of the Steering Committee are designated two by the government, one by the associations of municipalities and of provinces, and one by the Conference of the Regions and of the two autonomous provinces; moreover, the resources for collective negotiations are decided by the government and approved by the parliament in the budget law of the state. The 2009 reform established an incompatibility of the ARAN president and of members of the Steering Committee with responsibilities in political parties or in elected political bodies, and with responsibilities held in trade union organizations during the preceding five years. 8 several internal labour market issues (recruitment, careers, mobility, disciplinary matters, etc.). Abandoned the unilateralism of previous decades7, and legally recognized collective bargaining as the main method of regulation of terms and conditions of employment for the large majority of public employees (around 80 percent), a two-tier bargaining system was introduced in 1993, close to the private sector model (Figure 1). The main pillar consisted of national level negotiations, sector by sector (central government, national health service, local government, public schools, public universities, etc.), between the representative trade unions and ARAN. The second pillar regarded decentralized, company level negotiations between single employers and the workplace personnel representation bodies, on matters and within constraints and financial limits precisely determined by the higher, national level negotiations – according to a model of “centralized decentralization” adopted in those years in several European countries (Traxler, 1995; Bordogna and Winchester, 2001). This two-tier model has not substantially changed since then, although significant changes in the relationship between the two levels have been introduced in 1997-98, with marked empowerment of the lower level, significantly reversed in 2009. All in all, after the 1993 reform, public sector employment relationship and labour relations were opened to a private-sector style approach, embedded (at least in theory) within a more ‘voluntarist’ context than in the 1980s, subject to budget constraints and exposed to some market-type mechanisms of regulation (Bordogna and Neri 2011; Bordogna 2013). Managerial prerogatives and responsibilities were strengthened, also on personnel and employment relations matters, with, intendedly, increased autonomy from politicians and trade unions, subject to stricter financial controls and tighter performance assessment systems. Automatic wage increases and career promotions linked to seniority were substituted with more discretionary, selective, performance-related mechanisms. This reform was approved with the substantial endorsement of the main trade union confederations (Russo, 2007). Second reform wave (1997-99). The 1997-99 measures, often labelled as “the second privatization”, markedly strengthened several features of the 1992-93 reform, even more in line with the NPM approach. In particular, they further emphasized the regulatory role of collective bargaining, making it resemble more closely the private sector model. The bargaining structure was further decentralized, allowing individual administrations greater autonomy in local level wage negotiations, even beyond, under certain (loose) conditions, the financial limits set by higher level agreements. The scope of collective negotiations, especially at decentralized level, was enlarged, to cover organizational and HRM matters previously left to managerial responsibility. Stricter (in theory) performance assessment procedures were introduced, both for managerial and non managerial staff. The centralized controls by the state Court of Auditors on collective agreements, both at national and decentralized level, were significantly eased and softened. Finally, also the employment relationship of top state managers, previously excluded, was ‘privatised’ and ‘contractualised’, and the determination of their remuneration, previously unilaterally set by legislation or administrative acts, was transferred both to collective negotiations and to 7 Actually, a first change already occurred in 1983, but with many regulatory shortcomings and perverse effects (Giugni 1992; Bordogna, Dell’Aringa and Della Rocca 1999; Bordogna and Neri 2011). 9 individual agreements with the relevant political authorities. More precisely: the basic salary was to be determined through national level collective negotiations between ARAN and the representative trade unions of managers, while the variable component, linked to the type of assignment and to individual performance, was to be set through individual negotiations between managers and the same political authorities appointing them in their position and in charge of evaluating their performance. Some of these measures, however, generated difficulties and unexpected results, partly due to their incomplete or inappropriate implementation, and partly due to weaknesses in their original design (Bordogna 2013). These difficulties derived in particular: first, from the conractualisation of top state managers, that implied a weakening of their autonomy vis-àvis both political authorities and trade unions (Rusciano, 2005 and 2008; Zoppoli, 2008; Bordogna, 2009a); second, and more pertinent with our topic, from the enhanced role and larger scope attributed to collective negotiations, especially at decentralized level, and the easing of controls over their procedures and outcomes; and, third, from the weaknesses or inappropriate implementation of the performance assessment systems (Zoppoli, 2008; Caruso and Zappalà, 2007; Talamo, 2007). A number of problems resulted, including the ‘invasion’ by trade unions and workplace employee representation bodies of managerial prerogatives on work organization and personnel management matters. Partly connected with this, a wage dynamic derived in the 200-2007 period about 10-15 percentage points higher than that in the private sector – a difference almost entirely due to the outcomes of negotiations at decentralized level (ARAN, 2009, 2010 and 2011; Dell’Aringa, 2007; Vignocchi, 2007). This, according to many observers, revealed serious weaknesses in the functioning of the institutions of public sector social dialogue, especially at decentralized level. The devolution of larger negotiating autonomy at decentralized level was not accompanied by the institutional mechanisms necessary to strengthen actors’ responsibility. Third reform wave (2008-09). The third wave of reforms, under the center-right government arrived to office in Spring 2008, were meant to respond to some of the weaknesses of the regulatory framework of the 1990s (especially of 1997-98), although without removing its basic principles8. As a matter of fact, the privatization and contractualization of the employment relationship of the large majority of public employees were not abolished, but the role of collective bargaining was on the whole reduced and embedded within a stricter web of rules and constraints. Employment relations and HRM practices were partially rejuridified, to the detriment not only of the autonomy of collective negotiations but, for some respects, also of managerial prerogatives. A number of legal, highly prescriptive rules in relation to organizational/HRM matters have been introduced, to some extent contradicting the emphasis on managerial discretion. The two-level bargaining system was preserved, but a more hierarchical relationship between the two levels was re-established, partly downplaying the autonomy and scope of the lower, decentralized level. The number of negotiable matters was reduced, especially at decentralized level, with the explicit exclusion of those related to the organization of work and HRM issues; on these matters, the only possibility left to the local employers was, if expressly allowed by national level agreements, to provide 8 Law no.15/2009 and legislative decree no.150/2009, the so-called Brunetta reform, from the name of the minister of Public Function (see also Bordogna 2013 for a summary of the main features of this reform). 10 information to workplace employee representation bodies, without opening negotiations. Wage increases and career promotions were made conditional on selective procedures and stricter performance assessment systems, with the aim to overcome the practices of generalized wage increases and career promotions widely utilized in the previous period; individual administrations and managers subscribing agreements or adopting policies in violation of these principles could now be held legally liable and prosecuted by the state Court of Auditors. A new central authority was created to promote performance management and performance assessment systems within each individual administration, and to monitor their implementation and operation. Tighter and pervasive centralized controls by the government and the Court of Auditors on bargaining procedures and outcomes, both at national and decentralized level, were re-established to monitor not only the economic compatibilities of the agreements with the public budget constraints but also their conformity to the basic principles of the reform (meritocracy, selectivity, transparency, etc.). In case of stalemate in negotiations and prolonged difficulties in reaching agreements, public employers, both at national and decentralized level, were given the possibility of adopting unilateral decisions on the issues under negotiation, at least temporarily. Finally, principles of transparency and accountability were introduced concerning the costs of agreements at decentralized level and their consequences on service provision, in order to activate forms of voice and social control by consumers, local communities and citizens at large. Other measures regarded a firmer contrast against absenteeism, that was (and partly still is) notably higher than in the private sector, and a significant cut in the amount of working time off and paid leaves for union activities to which all representative trade unions were (and are) eligible9. However, no change was introduced in the rules regulating the representativeness of trade union, nor in the system disciplining workplace representation bodies, although their role in public sector social dialogue has been reduced as a consequence of the greater constraints on negotiable matters. Brief, the role of collective bargaining in the regulation of the employment relationship of public employees was maintained, but is scope and autonomy was reduced, subject to stricter legal rules and controls, and more exposed both to market-type constraints and voice mechanisms. The purpose was to restore public employer’s responsibility in collective negotiations and HRM matters, and to partially redraw the boundaries between unilateralism and forms of joint regulation of employment relations, in favour of unilateral regulation. A purpose that was connected with a more confrontational attitude towards trade union than in the past, and often framed within a vociferous rhetoric campaign against the alleged unbearable privileges of public employees and their persistent inefficiency, if not parasitism, even after privatisation, overtly and unconditionally protected by the paralysing action of trade unions. 9 According to estimates by the Department of Public Function, about 3 thousand public employees were on paid leave for union activities in 2006, about 1 out of 1100 employees, for a total annual cost in 2006 of about 121 million euro (Il Sole-24 ore, 27 June 2008). To these, paid time off for several hundred thousand of working hours should be added. Government measures adopted in October 2008 and February 2009 envisaged a 15% cut of paid leaves and time off in 2009, and additional cuts in 2010 and 2011, to be defined. For example, in the school sector, representing about 30% of total public employment, the positions on paid leave for all representative trade unions were expected to decrease from 1,023 in 2009 to 528 in 2011. Only in 2009, CGIL and CISL, the two largest organizations in the sector, were expected to lose respectively 49 and 48 union officials on paid leave out of 327 and 321. 11 In some case, at decentralized level, this spirit of the reform was interpreted in the sense to close or freeze any form of social dialogue, perhaps beyond the intentions of the reform itself. The case studies in this report will provide some evidence about these developments. To conclude, Figure 1 summarizes the bargaining unit/level at which negotiations are practiced (national inter-industry level; national industry level; decentralized firm level), the type of agreements that can be reached at the various levels, and the relevant bargaining agents on the employer’s and employees’ side. The relevant bargaining levels for the purposes of this research are the national industry (or sectoral) level and the firm/individual administration level. In the first case, national collective agreements are reached that cover all public employees of a certain sector nationwide; wage increases negotiated at this level have the purpose to protect the purchasing power of wage and salaries nation-wide. At the lower, company/single employer level, the parties can negotiate, within certain limits, additional employer-specific wage increases linked to productivity and, partly, to performance. A similar bargaining structure applies to managerial staff, but negotiations and agreements are separate from those of non-managerial staff. This two-tier bargaining structure has not basically changed since 1993, except for the number of the national, industry-wide bargaining units and, as we have seen, the autonomy and scope of the firm level negotiations. In the first bargaining round after the 1993 reform, all the about 2.7-2.8 million Italian ‘contractualized’ public employees were subdivided into eight bargaining units at national level: central government; local government (regions, provinces and municipalities, with the exception of regions and provinces with autonomous statute); public schools; public hospitals and structures of the National health service; the non teaching staff of public universities; all compulsory social security organizations, etc. (see Table 1 and Table 2). After the 1997-98 second privatization, the number of nationwide bargaining units progressively increased up to 12, through the subdivision of previous sectors into narrower bargaining units (for example, Central government split into three subsectors: Ministries; Prime Minister’s office; Internal revenue agencies), and the autonomy and scope of collective negotiations, especially at the decentralised firm/individual administration level, were strengthened. The 2009 reform legally cut down the number of industry-wide bargaining units to a maximum of four, and significantly reduced the autonomy and scope of collective negotiations especially at decentralised level. The representative unions admitted to national, industry level negotiations in the regions and local authorities sector are the three unions affiliated to the three largest confederations (Cgil, Cisl, Uil), that together have a representativeness (average of percentage of members on total membership in the sector and percentage of votes in the rsu elections) of about 82%, plus an independent union with a little less than 6% of representativeness. In addition to these, there are in the sector 127 trade unions, each collecting extremely small percentages of members or of votes, that are therefore not representative and are excluded from the national level bargaining table. Figure 1. Bargaining units and bargaining agents, at various levels a Bargaining unit/level and type of agreement Employers’ representatives 12 Employees’ representatives 1. National inter-industry level: - national framework agreements to define bargaining sectors or areas (comparti) - national framework agreements on issues common to two or more sectors or areas 2. National industry level (or comparto): - sectoral agreements at national level (or CCNL), every three years after the 2009 reform. Bargaining units for managers and non managerial staff are separated. One of these industry level bargaining units is that of the Regions and local authorities 3. Decentralized, company level bargaining: ‘integrative’ agreements at single administration unit (each municipality, each province, each region; each hospital; etc.). Aran ‘Representative’ trade union confederationsb Aran Trade union organizations (sindacati di categoria) which are ‘representative’ within the sector or bargaining unit c. Confederations to which representative trade union organizations within the sector or bargaining unit are affiliated. Aran The three unions affiliated to CGIL, CISL, UIL + the independent union CSA-CISAL Head of the administrative unit (or its representatives), with possibility of Aran assistance Unitary workplace personnel representation bodies. Other representatives, according to the provisions of national collective agreements (possibly, representatives of each territorial structure of union organizations that has signed the national collective agreement or comparto). Notes a According to the provisions of the d.lgs. 369/97 b Those trade union confederations to which union organizations are affiliated that have a 5% representativeness in at least two sectors or bargaining areas. c Trade union organizations with a representativeness in their sector or bargaining area of not less than 5%, as an average between associative (percentage of members on total membership) and electoral (percentage of RSU votes on total votes cast) criteria. Note that, before signing national level collective agreements, Aran must verify that the trade unions with which the agreement has been reached together have a representativeness of at least 51% in the relevant sector or bargaining area, as an average of the associative and electoral criteria, or else at least 60% of the electoral criteria. 2. Economic crisis and austerity programs As anticipated, when the economic crisis arrived in 2007 with the Lehman Brothers crack and then exploded in 2008, Italy was quite timely in adopting austerity measures, many of them affecting public sector expenditures and public sector employment relations (Bordogna 2013). The first of these austerity packages, presented in June 2008 (decree law no 112/2008) and definitely approved in early August of the same year, contained measures to severely cut down the replacement ratio of both public sector managerial and non managerial staff, to set constraints and tighter controls on collective negotiations at 13 decentralized level, with reduced resources, and to contrast the absenteeism of public employees. Following this first austerity package, public sector employment has been repeatedly a crucial target of government measures, in May 2010, July 2011, August 2011 and December 2011, and finally in Summer 2012. Without going into technical details, three main types of measures were adopted: provisions aimed at cutting down the number of public employees; reform of the pension system; provisions targeted to wages and salaries of public employees, that also implied a freeze of the 2010-2012 bargaining round at national industry level, later extended to 2014, and, de facto, also a freeze of decentralised, company level wage negotiations. According to the first austerity package (d.l. 112/2008), staff turnover, both at managerial and non-managerial level, was cut down to 10% in 2009 (precisely: new entrants were allowed only for an expenditure equivalent to 10% of the labour cost of retired employees in the previous year), 20% in 2010 and 2011, and 50% in 2012. Special measures of rationalization regarded the personnel of the school sector, both teaching and non-teaching staff, as well as the expenditures for personnel with flexible employment contracts. The overall effects on the employment levels were already visible in 2010 (Table 1): at the end of that year the total number of public employees was 4% lower than in 2008, with a decrease both in the number of permanent employees (3.6%) and, even more, in the number of employees with flexible contracts (almost 13%). Further measures, strengthening and prolonging the turnover freeze, were adopted in 2010 (decree law no. 78/2010) and 2011 (decree laws no. 98, in July, and no. 138 in August), with expected cuts in the overall employment level of about 10% in 2014 compared with 2008. These measures were confirmed and strengthened by the Monti government in Summer 2012 (the so-called legislation on the ‘spending review’, decree law no. 95/2012, art. 3). The second set of measures, adopted first in 2008 and then strengthened in 2010-11, regarded the dynamic of wages and salaries of public employees. After a national level bargaining round in 2008-09 with very moderate wage increases, close to half of the increases agreed upon in 2004-05 and 2006-07 (ARAN 2011), for the 2010-2012 wage round collective negotiations at national level, both for managerial and non-managerial staff, were simply cancelled by the decree law no. 78/2010, with no possibility of recovery in the following rounds. Later measures further extended this freeze of national level collective bargaining to 2013 and then to 2014. Collective negotiations at decentralized level were not frozen, but subject to strict financial constraints, including the ban of exceeding on the whole the ceiling of resources utilized in 2010; the only possibility left to the parties at local level was to utilize a limited proportion of the so-called ‘efficiency gains’ realized in the individual bureaus, after certification at central level. Wages and salaries of individual employees were forbidden to exceed in 2011-13 the level of 2010, freezing also the economic effects of career promotions, with the partial exception of the variable component linked to merit or performance pay. A provision introduced in 2011 allows the government to extend these freezes and constraints to the end of 2014 by simple administrative act, without further legislation. Similar rules were adopted also for the non-contractualized personnel (diplomats, prefects, university professors, police and armed forces, partly judges), freezing any salary increase due to seniority or career promotion for three-four 14 years, without possibility to recover these losses at the end of the period and with effects also on future pension payments. Further measures regarded higher level salaries, with cuts by 5% for those with a gross salary between 90 and 150 thousand euro a year, and by 10% for the part exceeding 150 thousand euro10. Brief, wage and salary dynamics were significantly slowed down in 2008-09 in comparison with the 2000-07 period, and substantially frozen since 2010 through the end of 2013 or, possibly, 2014. The wide gap with the private sector wage and salary increases over the 2000-07 period has been first significantly reduced, and then reversed in the most recent years (ARAN, 2011, Table 3). A number of other expenditures were also cut down to a certain percentage of the 2009 level, among which the expenditures for personnel training activities (no more than 50% of the 2009 amount). Detailed spending review procedures have finally been revived and are currently (Fall, 2012) under way. Together with the wage and salary freeze and the generalized turnover freeze, the aim is to stop the increase of, and then reduce, the wage bill and total expenditures of public administrations. Finally, the pension system was reformed both for private and public sector employees, with some specificities for the latter ones. The standard retirement age for old age pension for female public employees was raised, since 2012, from 61 to 66, in line with that of their male colleagues, obeying to a 2008 sentence of the European Court of Justice and to a recommendation of the EU Commission; the standard pensionable age for all employees (public and private, males and females) has been linked to changes in life expectancies with a first adjustment in 2013 in order to reach at least 67 by January 2021; the value of pension treatments was reduced by lowering the protection from inflation, and shifting all the employees (private and public) from an earnings-related to a contributions-related system, including the cohorts of elder workers previously excluded (Jessoula-Pavolini, 2012); also the end of service allowance for public employees was significantly cut. Most of the preceding measures have been unilaterally adopted by the government, without previous negotiations with trade unions and without searching union consent; in some cases, explicitly against trade union protests. Along with employment conditions, also traditional social dialogue institutions and practices have been significantly affected first by the Brunetta reform, and later by the austerity packages adopted to respond to the economic crisis11. In both cases, however, there can be variations at local level, as the case studies will try to show. 3. a The austerity measures for local government As anticipated above, the austerity measures on local government trace their origins back to the adoption of the Internal Stability Pact (ISP) in 1998 (law no. 488/1998), following the introduction of the EU Stability and Growth Pact (SGP). The ISP requires the 20 Italian 10 The latter measures cutting yearly gross salaries above 90 and 150 thousand have however been repealed by a sentence of the Constitutional Court in November 2012, because of problems of legitimacy. 11 To some extent, the Brunetta reform itself was a victim of the economic crisis, its implementation process having been frozen in May 2010 (decree law 78/2010), when the crisis deepened, and again in Summer 2011 (decree law 98/2011 and legislative decree 141/2011). 15 regions and the local government institutions (mainly the 8092 municipalities and 109 provinces) to contribute to pursue the public finance targets aimed at respecting the financial SGP criteria. In the annual Stability Act (that is, the budget law of the State) and in other acts, the national legislation defines the whole financial targets for local government institutions which focus on the public debt containment. In order to pursue the targets, the legislation includes a set of legal constraints on local government expenditures, including personnel expenditure. In this sense, public employees of regional and local authorities are affected twice by government austerity measures: first, by the legislation directly targeting public sector employment levels, pension system and salaries; and, indirectly, by the measures deriving form the internal stability pact and the connected legal constraints on local government expenditures. In the case of breach of the ISP financial targets, sanctions on municipalities and provinces include a decrease in financial transfer from central government as well as a cap on current expenditures and investments. Moreover, any hiring of permanent or temporary staff, for any reason, is forbidden (decree law 112/2008, art. 76, co. 3; decree law no. 78/2010, art. 14, co. 3, converted in law no. 122/2010; legislative decree no. 149/2011, art. 7, co. 2; law no. 183/2011, art. 8, co. 4). Since 1998, financial targets and constraints have swung between strict rules and limitations and more relaxed regulation. Many of the current austerity measures had already been experimented in recent past, but since 2008, and especially in the last two years, they have been progressively made more severe and intense, at unprecedented level. Financial targets for local government have become more and more ambitious and hard to reach, while regulations have been progressively intensified. Moreover, since summer 2011 the regulation has changed at an extraordinary pace, with the approval of new measures aimed at reassuring the financial markets and keeping the interest rates of the Italian public debt at sustainable levels. This caused a high degree of uncertainty for local government institutions, exposed to continuous, and at times inconsistent, changes in the legislation. Summing up, the main current austerity measures on municipalities, part of which regarding the entire public sector (see previous section), are as follows: -a general statutory obligation to progressively reduce personnel expenditure, containing salaries and staff numbers, introduced by the budget law for 2007 (law no. 296/2006, art. 1, co. 557). At the same time, the legislation promoted the ‘stabilisation’ of temporary employees for the years 2007-08, in case they were utilised for “permanent needs” of the administration (law no. 296/2006, art. 1, co. 519; law no. 244/2007, art. 3, co. 94). While stabilisation processes were abandoned in the following years, the obligation to reduce employment levels and personnel expenditure was reasserted in 2008 and 2010 (decree law 112/2008, art. 76, co. 5; decree law no. 78/2010, art. 14, co. 7); - a freeze of national level negotiations for the 2010-2012 bargaining round (then extended to 2014) and a pay freeze until the end of 2014, prohibiting any wage increase which would bring the salary of all public employees, including local government employees, over the 2010 level (decree law no. 78/2010, art. 9, co. 1, 4, 17; decree law no. 98/2011 art. 16, co. 1, converted in law no. 111/2011). The pay freeze until the end of 2014 is confirmed by the Stability Law for the year 2013 which is currently under Parliamentary scrutiny. These measures affected also the viability and scope of decentralized, single employer level 16 negotiations, with a consequent freeze or denial of any economic advance for public employees (including the employees of municipalities); - a cut in training expenditures which, since 2011, cannot exceed 50% of the 2009 level (decree law 78/2010, art. 6, co. 13); - a ban on any new temporary and permanent hiring, including stabilisation of temporary workers, where the ratio between personnel expenditure and total current expenditure of a municipality exceeds 50%. This upper limit in the ratio was originally introduced in June 2008 (decree law 112/2008, art. 76, co. 7), was lowered to 40% in May 2010 (decree law no. 78/2010, art. 14, co. 9) and raised again to the current level of 50% in December 2011 (decree law no. 201/2011, art. 28, co.11-quater). Personnel expenditures include those concerning any form of temporary employment. Until 2008 expenditure for temporary workers was not explicitly included within the municipal personnel expenditure calculated for the ratio (decree law 112/2008, art. 76, co. 1; decree law 78/2010, art. 14, co. 7); - a restriction in the staff turn-over both for permanent and temporary employees. With regard to permanent employees, a 2008 legislation limited the possibility to hire new employees to an expenditure not exceeding 20% of the of the labour cost of retired employees of the previous year. This cap was raised to 40% in April 2012 under the pressure of the municipalities (respectively decree law 112/2008, art. 66 c.7; decree law 78/2010, converted in law 122/2010, art. 9, c. 5; law 183/2011, art. 4, co. 103; law no. 44/2012, art. 4-ter, co. 10). As for recruitments of temporary employees, with any kind of fixed-term contract, the limit was set at expenditure not exceeding 50% of that of 2009 (decree law no. 78/2010, art. 9, co. 28, converted in law no. 122/2010; law 183/2011, art. 4, co. 102). In April 2012 this cap was partially relaxed for temporary staff that will be hired, starting January 2013, to provide social and education services as well as local police service (law no. 44/2012, art. 4-ter, co. 10, co. 12). There has been some interpretative uncertainty whether the regulation described above should cover only the municipalities in strict sense or also the various kinds of semiautonomous organizations which are partially or entirely controlled and funded by the municipalities, such as “joint-stock companies”, “special firms”, “foundations” or “institutions”. During the last decade and until 2008, the creation of the latter type of semiautonomous organizations abounded, as Regions and municipal authorities tended to exclude them from the scope of ISP and connected constraints. But since 2008 the courts and the legislation reacted against these elusive practices, which especially concerned the joint-stock companies. The result is that currently also the joint-stock companies entirely or partially controlled by local government institutions or Regions are included within the scope of the ISP regulation, which comprises the rules and constraints on personnel expenditure as well as the restrictions on staff turn-over and new recruitments (decree law no. 112/2008, art. 76, co. 7, modified by decree law no. 98/2011, art. 20, co. 9; decree law no. 112/2008, art. 18). Special firms and institutions will be included within the scope of application of ISP regulation starting from 2013, except for those providing cultural, social and education services or managing pharmacies (law no. 44/2012. art. 4-ter, co. 10). Foundations are still excluded from any constraint connected to the ISP. As we will see, these exclusions have relevant consequences on the ways in which the municipalities are dealing with the consequences of the austerity measures. Moreover, foundations and special firms have a private legal status, which means that the terms and 17 conditions of employment of their employees are regulated by private sector collective agreements rather than by the Regions and local government agreements negotiated with Aran. All the above described measures concern not only the municipalities but also the 109 provinces in Italy. The provinces represent the second level of local government, with the municipalities as the first level closer to citizens, and they mainly have territorial planning functions. The provinces were historically very important in the Italian public administration, but after the creation of the Regions in 1970 they have lost most of their powers and many consider them useless and costly local authorities. As noticed above, following a legislation introduced in 2011-12 (decree law no. 201/11, art. 23, co. 18 and 19; decree law no. 95/2012, art. 17, converted in law no. 135/2012), provinces are currently subject to a program of complete re-organisation, aimed at cutting down their number and expenditures through mergers, transfer of many of their competences to the municipalities, and the creation of ‘metropolitan cities’ in substitution of the largest provinces (decree law no. 188/2012). But this process has been halted, at least temporarily, by the crisis of the Monti government in December 2012. 3. b The case studies Table 4 shows the distribution of the 8,092 Italian municipalities by size in terms of resident population. The large majority (about 70%) of Italian municipalities are very small, with a population of less than 5,000 inhabitants, and almost the totality (more than 90%) have less than 20,000 inhabitants. The distribution of the population is however more balanced, although about 1 out of 6 Italian citizens live in municipalities with fewer than 5,000 inhabitants. Table 4: Number and population of Italian municipalities Demographic Municipalities Population (31/12/2010) classes No. % No. % Up to 4,999 5,683 70.2% 10,358,869 17.1% 5,000-19,999 1,893 23.4% 18,130,337 29.9% 20,000-59,999 412 5.1% 13,564,660 22.4% 60,000-249,999 92 1.1% 9,455,827 15.6% > = 250,000 12 0.2% 9,116,749 15.0% 8,092 100.0% 60,626,442 100.0% Total Source: Anci (www.anci.it) 18 Small and medium-size Italian municipalities (fewer than 100,000 inhabitants12) can create “Associations of municipalities” or other kinds of arrangements to provide services in a more efficient way. Since 2010 the smallest municipalities (fewer than 5,000 inhabitants) are legally obliged to create associations or sign agreements in order to jointly provide their “fundamental functions”, which include general administration, accounting and control, local police, early education (0-6 year old), local transport, environmental and territorial planning, social services (decree law 78/2010, art. 14, co. 28). For municipalities with at least 5,000 inhabitants, the Regions have to ensure the joint provision of the “fundamental functions” through associations of municipalities or other arrangements. At the end of 2010 there were 313 associations of municipalities, involving 19% of the Italian municipalities. Almost half of the associations were situated in the north of Italy, where they included 16% of all the municipalities; however the highest percentage of municipalities involved in an association was in the islands of Sardinia and Sicily, where 49% of all the municipalities are already associated (Cittalia, 2010). The number of associated municipalities and of other forms of agreements among small municipalities are considered inadequate and insufficient. Therefore, the above mentioned “Spending review act” (decree law no. 95/2012, art. 19) forces the municipalities with fewer than 5,000 inhabitants to create associations of municipalities or other arrangements by 2013-2014. Small and medium-small municipalities have very peculiar characteristics both in terms of administrative problems and employment relations, with strong territorial differences which make them difficult to compare. Although we are aware that the large majority of Italian municipalities, and a very significant proportion of Italian citizens belong to these groups, we decided to exclude them from the current analysis, and to take two medium size municipalities (60,000-249,000 inhabitants), Modena, near Bologna, and Sesto San Giovanni (near Milano) as case studies. Modena is also the administrative seat of the province with the same name, while Sesto is part of the province of Milan and, in terms of population, is closer to the third group of municipalities in Table 4. The Modena municipality The Modena municipality is located in the Emilia-Romagna Region, in the Centre-North of Italy, with a population of over 180,000 inhabitants, slowly increasing over recent years. The municipality has always been ruled by left-wing parties (mainly the Communist Party and the Socialist Party) and currently by a coalition of centre-left parties led by the Democratic Party (PD). Like other municipalities of the Region, it has a strong tradition in providing good quality services, especially welfare services such as childcare and early education (0-6 year old) services and social services. However, in the 1990s and 2000s a great part of the social services were contracted out and are now largely provided by third sector organizations on behalf of the municipality. No outsourcing process interested, on the contrary, the childcare sector, but in the last decade the service coverage was extended mainly through private providers which are funded and regulated by the municipality. Direct provision by the municipality, whose high quality is nationally and internationally recognized, represents over 12 The joint provision of services among municipalities is allowed also for the municipalities with more than 100,000 inhabitants. 19 50% of the total provision of services for 0 to 3 year old children (mainly crèches or nurseries) and about 40% of services for 3 to 6 year old ones (kindergartens)13. At the end of 2011 the staff of the Modena municipality consisted of 2,039 employees, including 37 managers. The largest municipal departments were those of Education (about 28% of employees), Social Services (about 15%) and the Local Police in charge of traffic and city regulations (12%). According to the results of the elections of the workplace employee representation bodies (Table 5), by large the strongest organization, with 64% of the votes and 17 out of 27 seats, is the FP (Funzione Pubblica)-CGIL, the public service union affiliated to the largest Italian trade union confederation, followed at great distance by FPS-CISL, affiliated to the second largest Italian confederation; FP-UIL, affiliated to the third largest Italian confederation, has only a minor presence, with 1 seat. However, two independent unions have a significant presence in two sectors: CSA (Coordinamento Sindacale Autonomo)-FIADEL (Federazione Italiana Autonoma degli Enti Locali) among child carers and kindergarten teachers, and SULPM (Sindacato Unitario Lavoratori Polizia Municipale)-DiCCAP (Dipartimento Autonomie locali e Polizie Locali), a professional union well rooted among local police workers, respectively with about 10 and 9 percent of votes and 3 and 2 seats. Compared with the 2007 election, and contrary to the national trend in the Regions and local authorities subsector, the participation rate increased in 2012, up to 76 percent from 71 percent in 2007; however the distribution of votes and seats among the unions is quite stable, apart from the increase of the CSA at the expense of the other independent union SULPM-DICCAP. Compared with the picture of trade union presence in the Regions and local authorities sector at national level (Table 3 above), CGIL has in the municipality under exam a much greater strength than the other organizations. Table 5: Elections for the unitary workplace representation bodies – 2012 and 2007 No. votes and % Seats No. votes and % 2012 Seats 2007 Diff. % Diff. 2012-07 in seats FP-CGIL 866 (64.3%) 17 806 (64.9%) 17 -0.6% 0 FPS-CISL 191 (14.2%) 4 184 (14.8%) 4 -0.6% 0 FPL-UIL 40 (3.0%) 1 35 (2.8%) 1 +0.2% 0 FIADEL-CSA 132 (9.8%) 3 108 (8.7%) 2 SULPM –DICCAP 118 (8.7%) 2 109 (8.8%) 3 -0.1% -1 1,347 (100.0%) 27 1,242 (100.0%) 27 = = Total +1.2% +1 Source: Modena municipality 13 In Italy social services are historically run by municipalities and private providers (for-profit and non-profit organisations), and partly by the NHS in case of organisations providing both social and health care services. In the childcare and education sector, the great majority of schools (serving children from 6 year old) are managed by the central government through the Ministry of Education; private schools are a minority. Childcare services for 0-3 year-old children are provided by the municipalities and private organisations (mainly non-profit). Childcare services for 3-5 year-old children are provided by the municipality, the central government and private organisations (mainly non-profit). 20 In May-June 2012 the Modena area was hit by a series of earthquakes (5-6 degrees on the Richter scale), which caused 16 deaths as well as very serious and extended damages to residential, historical and especially industrial buildings. Although the town of Modena was only partially affected by the earthquakes, in the near future the municipality will have extraordinary expenses for the refurbishment of several historical and public buildings (such as schools), only partially supported by regional, national and EU funds. Moreover, municipal revenues from local taxes are expected to decrease because, general economic crisis apart, the economy of the area will be negatively affected by the quite relevant reduction of the productive capacity caused by the earthquake. The impact of the austerity measures: critical issues and current adjustments The main consequence of the austerity measures on the Modena municipality has been the reduction in the size of municipal staff. During the 2000s the number of employees, including permanent and temporary staff, has been substantially stable, swinging between 2,050 and 2,100 employees. As shown in Table 6, from 2002 to 2006 the employment levels slightly decreased because of the above mentioned restrictions of new recruitments introduced at the end of 2004 (law no. 311/2004). However in 2008 the staff number increased again, reaching a peak due to stabilisation measures of temporary employees introduced for the years 2007-08, and then started to decrease, for the first time below 2050 employees in 2011, and even further in 2012, because of the externalisation processes carried out during the year (see below). Between 2008 and 2012 the staff decreased by more than 7 percent. Table 6: Employment levels in Modena municipality (2002-2012, staff with permanent and temporary employment contract) Municipal staff Diff. with the previous 2002 2006 2008 2009 2010 2011 2012 2,079 2,060 2,096 2,064 2,058 2,039 1,948* = -19 +36 -32 -6 -19 - 91 (-0.9%) (+1.7%) (-1.5%) (-0.3%) (-0.9%) (-4.5%) 90.4% 93.5% 94.5% 93.9 92.3% 95.2%* year in the table Permanent employees 90.9% on the whole staff (%) *Data refer to 5/31/2012. Source: Comune di Modena (various years). The staff reduction is determined mainly by the very low number of recruitments, which were strictly limited, far below the constraints imposed by the legislation on replacement ratios. After the exceptional peak of 2008 (including stabilization of temporary employees), when 232 new employees were hired, in 2009 and 2010 the municipality hired respectively 73 and 79 permanent employees, not far from the level of 2007 (91) and more than in 2006 (67). In 2011 and 2012 the new hiring of permanent staff amounted respectively to 12 and 18. 21 In 2012, along with restrictions in new hiring, staff reduction is due also to the externalization policy undertaken by the municipality, which involved services with a high ratio of temporary employees, which explains why the percentage of permanent employees increased by two points from 2011 to 2012, reaching a peak of 95.2%. From 2006 and 2009 permanent employees rose from 90.4% to 94.5% of all employees, due to the stabilization policy which was implemented up until 2009. Then the percentage decreased by two points and significantly increased again in 2012. As a result of these changes, from 2007 to 2011 the percentage of personnel expenditure on total current expenditure decreased from 38.7 to 35.4 percent (Table 7). In absolute terms, personnel and total current expenditures were respectively 74,819 million and 211,209 euro in 2011. Personnel expenditure is expected to further decrease because of the externalization of services carried out in 2012. Table 7. Percentage of personnel expenditure on total current expenditure 2007 2008 2009 2010 2011 Difference 2011-07 38.7% 36.9% 36.2% 35.6% 35.4% -3.3 Source: Modena municipality, Rapporto di attività 2011. Externalisation was undertaken in order to deal with the increasing shortage in the municipal workforce, which is due to the legal constraints imposed on personnel expenditure and cuts on staff turn-over. This is especially so in the education and social service sectors, where kindergarten teachers and social care workers who retire can be only partially replaced by new permanent or temporary employees. In the case of teachers of 3-6 year old children, the shortage is aggravated by the annual transfer of staff to the state kindergartens, where pay and working time conditions are more favourable compared to those of municipal kindergartens. In the year 2011-12, 41 municipal kindergarten teachers were lacking, replaced by temporary teachers hired with a one-year contract, as it happened in the previous years. However, temporary work contracts are subject to legal constraints and are included in the personnel expenditure subject to the Internal Pact of Stability, therefore they may only solve the problem in a partial and inadequate way. In order to deal with this increasing staff shortage, in the first part of 2012 the municipality externalised some directly-run services in two different ways: 1) in the social sector, one of the two residential care homes still directly run by the municipality was contracted out to a third sector organisation; 38 municipal jobs were suppressed. Most of the municipal workers on fixed-term contracts were hired by the new third sector employer or were replaced by other employees of this organisation. In order to ensure the continuity of the service, the few permanent municipal employees are continuing to work in residential care for one year under the new organisation, though they are still employed by the municipality (in the juridical language, they are “commanded workers” by the municipality to the third sector organisation), and will then reallocated in the remaining municipal residential care home or in other municipal services. Fixed-term contracts previously used by the municipality were not renewed. Other externalisation processes 22 involved some librarians and teachers for persons with learning disabilities, where temporary contracts had been used in recent years; 2) in the education sector, the municipality transferred four municipal kindergartens into a newly-established foundation. This foundation is entirely owned by the municipality but, according to current legislation, is out of the constraints on hiring and personnel expenditure set by the Internal Stability Pact and connected legislation; this circumstance allowed the hiring of twenty teachers and other staff. Similarly to what happened in the residential care home, six permanent municipal teachers were “commanded” for one year to work under the new foundation; they will then be re-allocated in the municipal kindergarten and substituted by other teachers employed by the foundation. In this way the municipality could suppress 38 jobs and limit the use of temporary contracts within the municipal kindergartens in the year 2012-13. However, given the persisting shortages, other kindergartens as well as some nurseries are expected to be transferred to the foundation by 2013. The choice of two partially different solutions is explained partly by the different views towards externalisation of the Social and the Public Education municipal Ministers, with the former one more favourable to the private provision of welfare services, and partly by the circumstance that externalisation processes are less accepted and legitimated in the education sector, where the initial plan to contract out the kindergartens met strong opposition both by the local community and the municipal teachers. This is also due to the excellent reputation of municipal kindergartens, which are normally preferred by families to state or private ones. Similar staff shortage problems are shared by many municipalities, especially in the northern and central regions of the country, like Bologna, Florence, Turin, Alessandria, Livorno; the solutions adopted by the Modena municipality are often regarded as potential examples to follow. The decrease in the number of employees is expected to continue and possibly intensify in the years to come, reflecting a reduction of services directly provided by the municipality, especially welfare services. According to some interviewees, the general workforce shortages and subsequent externalisation are matched with the presence of staff in excess in other departments, like clerical employees in the Accounting department or technical profiles in Territorial Planning, Transports and Mobility department or Public Works. Cuts in these departments have been rather rare in the last years, mostly due to the opposition of managers; after the earthquake have been in any case postponed to tackle the problems of building maintenance and reconstruction. Until the end of 2012, the austerity measures have not stimulated a significant reorganisation of the internal structure of the municipality, although in 2011 changes in the organisation of some offices brought about some efficiency gains, 30 percent of which (equal to 150,000 euros), through an agreement between management, workplace representation bodies and local trade unions, went to increment the fund for performancerelated pay, as allowed by the national legislation (legislative decree no. 150/2009, art. 27, co. 1). 23 The only significant organisational change concerned an extension of the opening time of the registry offices, that allowed some savings in meal tickets and other bonuses enjoyed by employees, part of which was devolved to the fund for productivity pay. Recently the municipality has presented a plan to reorganise also the working time of Local Police, and negotiations with unions are about to start. Internal staff mobility as a tool to deal with shortages has been rare, as well as professional re-training of employees. The social dialogue: towards a “dialogue of the deaf” Industrial relations within the municipality are traditionally highly cooperative, especially with the unions affiliated to the largest confederations (FP-CGIL, FPS-CISL and FPL-UIL). Beyond formal negotiations in strict sense, managers of the HR and Decentralisation Department, often along with some local Ministers, and union representatives have weekly meetings to discuss all the issues concerning the personnel in an open and cooperative way. Cooperative relationship characterized also the definition of the new performance assessment system, adopted through municipal acts and related union-management agreements in 2011 and 2012, to implement the highly controversial regulation introduced by the Brunetta reform in 2009. The new evaluation system divides every year municipal staff into five groups or ranges which receive different shares of the funds available for productivity or performance-related pay, depending on the points (from 0 to 120) obtained in the annual evaluation: 1) up to 60 points = no performance related-pay ; 2) 70 points = the basic level of the available performance related-pay; 3) 80 points = 15% more the than basic level; 4) 90 or 100 points = 30% more than the basic level; 5) 110 or 120 points14 = 45% more than the basic level. This system to some extent softens the provisions of the Brunetta reform, that required to classify all employees in each single administration into at least three groups, the highest one including 25 percent of the personnel with 50 percent of the available PRP resources, the intermediate one including 50 percent of the personnel with 50 percent of resources, leaving the lowest 25 percent of the personnel without any performance-related pay. The Brunetta reform allowed however the parties at local level to agree upon some variations to the system; this possibility has been partially exploited in the municipality of Modena, mainly to reduce the percentage of personnel included in the lowest group, with no PRP (unions’ claim was to eliminate this group), and to enlarge from 25 to 30 percent the possible size of the top group. Despite these examples of cooperation, in 2011 and in 2012 the practice of social dialogue has progressively worsened and both parties recognize that the weekly meetings are becoming a sort of “dialogue of the deaf”. Unions blame managers and elected authorities for adopting unilateral decisions without any formal or informal negotiation, giving the 14 While the points can be in units up to 60 (for example 45, 55 or 58), from 60 points, they have to be multiples of ten (60, 70, 80, etc.). 24 unions only the “take it or leave it” option. The municipality managers maintain that they are forced into this attitude because of the opposition of the unions to any change aimed at solving the problems caused by the austerity measures. Moreover they underline that the 2009 Brunetta reform strengthened managerial prerogatives on HRM issues and significantly reduced the number of negotiable matters at decentralized level. In particular, the reform excluded, among others, matters connected with work organisation and obliged managers, in case this possibility was explicitly included in higher level collective agreements, just to inform unions about their decision, without opening negotiations. The debate and confrontation about the way to deal with the staff shortage caused by the austerity measures highlights this situation. Union proposals are focused on the use of internal mobility and professional re-training. They press also the municipality to take into consideration a whole internal re-organisation as a tool to significantly improve the service efficiency, preserving the same level of service despite the staff shortage. The municipality political authorities and managers, on the contrary, do not believe that internal mobility and re-organisation would allow an effective management of the staff shortage problem and think that, given the legal constraints on personnel expenditures and the direct or indirect pressures to reduce it, outsourcing processes are inevitable in the welfare services, if the municipality wants to keep on providing the same service level as in the past. The unions opposed any outsourcing process in the social and education services, mainly to avoid a worsening of terms and conditions of employment, that in the private sector are usually less favourable than in the public sector. In the two cases described above, the terms and conditions of employment for staff hired by the residential care home have certainly worsened, as a consequence of the national collective agreement applied in this sector, with pay and working conditions substantially lower than in the local government agreement adopted for municipal employees. In the case of the foundation kindergarten, the municipality decided to use the national collective agreement for private schools. This is made possible by the private legal status of the foundation, which allows to use private sector agreements instead of the local government agreement, although, as mentioned above, the foundation is entirely owned by the municipality. At the end of August 2012 negotiations resulted in a draft company level agreement which aligned terms and conditions of permanent teachers hired by the foundation to the level of temporary municipal teachers, slightly lower than the conditions of permanent municipal teachers. The unions affiliated to the three largest confederations decided not to sign the company agreement, which was instead subscribed only by one independent union of teachers, traditionally strong in the state school sector but not in the municipality. This episode has considerably worsened the relations between the municipality and the unions, especially in the childcare sector. In Autumn 2012 kindergarten teachers went on a series of strikes to protest against the uncertainty of the future of municipal kindergartens and nurseries and the risk of new “privatisations”. Other grounds for strike were a general worsening of staff conditions: teachers as well as ancillary staff are increasingly not substituted for one-day absences, while there is a growing use of manpower agencies in the services, especially for teachers. The municipality maintains that it is forced to use 25 manpower agencies for the new constraints imposed on the renewal of temporary contracts by the labour market reform approved in June 2012 (law no. 92/2012), but according to the unions these constraints should not be applied in the school sector. The Sesto San Giovanni municipality The Sesto San Giovanni municipality is located in Lombardy, the biggest and most populated Italian Region (more than 9 million inhabitants), in the North of Italy. It has a population of over 80,000 people, slightly increased in the last decade, and is situated on the north-east border of Milan, with over 3 million inhabitants. Sesto San Giovanni was a rich industrial area, now partly de-industrialized, and until a few years ago it was considered a blue collar town, with a strong communist political tradition (it was known as the “Italian Stalingrad”). The municipality has traditionally been run by left-wing parties (the Communist Party and the Socialist Party) and is currently ruled by a coalition of centre-left parties led by the Democratic Party. This helps explain why in the 1960s and 1970s the municipality developed a wide range of services aimed at supporting the working class, such as nurseries, kindergartens, social care services and a large public housing sector. During the 1980s and the 1990s the public housing was ‘regionalised’ (transferred under the responsibility of the Region), while, unlike Modena, the municipal kindergartens were all transferred to the central government administration. However, according to a widespread tradition in Lombardy, the municipal Department of Education also runs four “civic schools” providing languages, arts and music courses for about 1200 young students and adults. As in the other case study, social services were contracted out in the 1990s and 2000s and are at present largely provided by third sector organizations on behalf of the municipality. The municipal nurseries were not contracted out, but the service coverage was extended mainly through private providers which are funded and regulated by the municipality. However, municipal structures still provide the large majority of service for 0-3 year old children. At the end of April 2011 (latest data available) the staff of the Sesto San Giovanni municipality consisted of 795 employees, including 16 managers. The largest municipal departments were Education (about 19% of the whole staff), the “Department of Service to Citizens”, which comprised the registry and other offices issuing certificates and authorizations (about 13%) and the local police in charge of traffic and city regulations (12%). No significant change in staff number has occurred in 2012. Among the unions, in the 2012 elections for the unitary workplace representation bodies (Table 8), FP-CGIL obtained 8 seats out of 15 and 58% of the votes; FPL–UIL had 2 seats and FPS-CISL 1 seat. The independent USB union (Unione Sindacale di Base), with a radical stance, obtained 3 seats and another independent union, the already mentioned CSA (Coordinamento Sindacale Autonomo)-FIADEL (Federazione Italiana Autonoma Enti Locali) obtained 1 seat. Moreover, few months after the elections, one of the FP-CGIL representatives left its union to join the independent organisation of the local police SULPM (Sindacato Unitario Lavoratori Polizia Municipale)-DICCAP (Dipartimento Autonomie locali e 26 Polizie Locali). Therefore FP-CGIL lost the absolute majority in the unitary workplace representation body of the municipality. Table 8: Elections of workplace unitary representation bodies (2012 and 2007) No. votes and % Seats No. votes and % 2012 Seats 2007 Diff. in seats FP-CGIL 302 (57.6%) 8 306 (66.3%) 10 -2 FP-CISL* 39 (7.4%) 1 = = +1* FPL-UIL 59 (11.3%) 2 43 (9.3%) 1 +1 USB (SDL) 109 (20.8%) 3 112 (24.3%) 4 -1 15 (2.8%) 1 = = +1** 524 (100.0%) 15 461 (100.0%) 15 = CSA-FIADEL Total * FP-CISL did not present any candidate in the 2007 election; ** FIADEL-CSA did not present any candidate in the 2007 election. Source: Sesto San Giovanni municipality, 2012 Compared with the 2007 elections, when FP-CISL and CSA-FIADEL did not present any candidate, in 2012 FP-CGIL lost about 9 percentage points of its votes and USB more than 3 percentage points. The workplace representation body is much more fragmented in 2012, and, as we have seen, few months after the election the FP-CGIL lost the majority of seats, with problematic effects on social dialogue practices within the municipality. The impact of the austerity measures: critical issues and current adjustments In May 2012 the municipal elections took place in Sesto San Giovanni. As usually happens in the electoral years, this determined a substantial paralysis in the decision making of the municipality, which, according to many interviewees, followed the policy of the previous administration to postpone potentially controversial decisions. This would be shown by the sales of municipal real estate assets, chosen as a way to increase the municipal revenue, enabling the municipality to respect the pact of stability without significantly cutting the expenditures both for services and staff. The put-off policy is reflected in the stability of employment levels which, unlike in Modena, have not been reduced yet (Table 9). The total number of employees, temporary staff included15, decreased from 2002 to 2006, due to restrictions on new hiring introduced at the end of 2004 (law no. 311/2004), then started to increase, as in the case of Modena, reaching a peak in 2008 (+7.2% compared with 2006), stabilising in the following years. From 2006 to 2012 the total number of staff increased by 4.4%, while in Modena it decreased by 5.4%. 15 Official documents provide data about the number of staff positions planned in the organizational structure of a public administration. Any position should be covered by a permanent or temporary employee. This is not always the case given that in many public administrations some positions are vacant. According to official documents and to what emerged in the interviews, in the case of Modena the number of planned positions corresponds to the actual staff number, while this is partly different in the case of Sesto San Giovanni, with variations from year to year. 27 Table 9: Employment levels in Sesto San Giovanni municipality and employees with permanent contract (2002-12; ‘dotazione organica’) Municipal staff Diff. with the previous 2002 2006 2008 2009 2010 2011 2012 763 747 801 800 795 795 795* = -16 +54 -1 -5 0 0* (-2.1%) (+7.2%) (-0.1%) (-0.6%) 0.0% 0.0%* 93,4% 93.5% 94,5% 95,0% 94,7% 94.5%* year in the table Permanent employees 94,4% on all the staff (%) *Data for 2012 refer to 3/10/2012 Source: Sesto San Giovanni municipality acts and internal documents, various years Between 2006 and 2009 also the number of permanent employees significantly increased from 698 to 764, due stabilisation policies adopted in the period, when 76 new permanent employees were hired. In 2011 personnel expenditure amounted to 37.4% of current expenditures (27,248 million euro on 72,808 million euro). Table 10: Ratio between personnel expenditure and current expenditure 2009 2010 2011 Diff. 2011-09 38.3% 37.8% 37.4% - 0.90% Source: Sesto San Giovanni municipality, Rendiconto di gestione 2011. The high level of hiring of the previous years and the legal constraints introduced since 2008 caused in the following period a drastic fall in new hiring: 21 permanent employees were hired in 2010 and only 4 in 2011. This recent trend is probably destined to continue, forcing the new municipal administration to face a staff shortage problem, like in the case of Modena. Until the end of 2012 this shortage, which is starting to be significant in the social, childcare and education services, has been tackled using fixed-term contracts, but this strategy is not sufficient to solve the problem, given the new legal constraints also on the use of temporary workers. In September 2012 a dozen civic school temporary workers were transferred, with the same kind of fixed-term contract, from the municipality to the a “special company” providing training courses for Sesto and other municipalities of the area. As already mentioned, a special company (or special firm) is a semi-autonomous organisation, provided with a private legal status though entirely controlled by one or more municipalities. Since 2013, special companies will be included in the ISP constraints except for those providing cultural, education, social services as well as those managing pharmacies (a special company to run municipal pharmacies was created in the previous years). This personnel transfer could be only the beginning of wider changes in staff and in the municipality organisation. In the medium-long term some possible solutions to staff shortage could be the following ones: 28 1) in the social services, the municipality could transfer a part of the directly-managed services, such as residential and semi-residential care homes, to a foundation already managing social services in the area. The foundation, created in 2003, is controlled by the Sesto San Giovanni municipality, which appoints 4 of the 7 members of the board of governors, and involves some charities and non-profit organisations which appoint the other 3 members of the board of governors. This foundation can be considered an “institutionalised Public-Private Partnership (PPP)”, in which the cooperation between the public and the private sector takes place within a distinct entity, in charge of ensuring the delivery of a work or a service for the benefit of the public. “An institutionalised PPP can be put in place, either by creating an entity held jointly by the public sector and the private sector… or by the private sector taking control of an existing public undertaking” (European Commission, 2004, p. 18; see also Neri, 2011). In some ways, the Modena foundation school can be considered an institutionalised PPP, because its internal governance is conceived to include private partners, but, unlike the Sesto foundation, is completely owned by the municipality; 2) in the education sector, a solution could be the creation of a special company which would be excluded by the ISP constraints, as mentioned above. Another option is contracting out some nurseries to third sector organisations. Moreover, many interviewees focused on the increasing difficulties to manage and motivate staff to provide good quality and efficient services and to meet performance targets, because of increasing employee dissatisfaction and absence of adequate incentives. Several austerity measures would directly or indirectly bring about these difficulties: the freeze of collective negotiations at national and partly at company level until the end of 2014, with the consequent freeze of pay improvements; the very limited possibility of career advancements; the severe cuts in training expenditures. These critical issues, linked to a nation-wide legislation, have been found also in the Modena municipality, but in Sesto they apparently have more serious effects. In this case the problem of motivating employees is worsened by the current difficulties to find the financial resources for the performancerelated pay system for 2012, due to the need to cut total staff expenditures. This circumstance would determine some paradoxical consequences, as in 2011 the Sesto municipality widely revised its performance evaluation system (see below), with a significant involvement of managers and personnel, feeding great expectations among staff that now risk being seriously disappointed. As a partial safety valve, so-called ‘horizontal progressions’, that is simple economic advancements within the same grade of the job classification system, continue to be attributed despite the legal constraints. This is different from the case of Modena, where horizontal progressions have been simply denied until 2015. However, even in Sesto San Giovanni they are attributed with strict limitations, given the scarcity of available financial resources. In the second part of the 2000s, and again in 2011, the Sesto municipality undertook some processes of internal re-organisation, but none of these resulted in staff reduction or in significant cuts in staff expenditures. A new, more complex re-organisation is currently under definition and will be probably influenced by the austerity measures, with possibly 29 deeper effects. At present, internal mobility is rare and the municipal managers do not seem to rely on this tool to fill personnel shortages. The social dialogue: from cooperation to instability? As in Modena, industrial relations within the Sesto municipality have been traditionally highly cooperative, especially with the unions affiliated to the three largest confederations (FP-CGIL, FPS-CISL and FPL-UIL). As in Modena, the managers of the HR Department, often along with some local Ministers, have very frequent meetings with union representatives and the workplace employee representation body to discuss all the issues concerning personnel in an open and cooperative way. Moreover, during 2012 a former FP-CGIL local leader was appointed as the head of the cabinet offices of the new mayor, showing the closeness of the new administration to the main union organization within the municipality. Therefore, municipal managers and union leaders think that the difficulties emerged as a consequence of the austerity measures will be faced through a strict cooperation between the social partners, as is currently occurring to find the financial resources necessary to fund the PRP system. A cooperative style was adopted in the negotiations aimed at defining the methodology and criteria of the new performance evaluation system in 2011, to comply with the rules introduced by the 2009 Brunetta reform. The new system divides staff into four groups or ranges which receive different shares of the funds available for the performance-related pay, depending on the points (from 0 to 1,000) obtained in the evaluation process: 1) 2) 3) 4) up to 400 points = no performance related-pay; from 401 to 600 points = 60% of the available performance related-pay; from 601 to 800 points = 80% of the available performance related-pay; from 801 to 1,000 points = 100% of the available performance related-pay. As in the case of Modena, the system partially softens the constraints of the Brunetta reform, exploiting the limited room of manoeuvre that the reform itself left to negotiations between the social partners; in particular, the system does not imply that 25% of the personnel be compulsorily evaluated in the lowest group with no productivity pay. However, traditional cooperative relations entered a state of instability in Autumn 2012, partly because of disagreements between the parties, but even more because of increasing inter-union rivalries. As stressed above, in the 2012 elections for the unitary workplace representation body (Table 8), the largest union, FP-CGIL, lost about 9 percentage points of the votes compared with the 2007 elections and its number of seats decreased from 10 to 8, out of a total of 15 seats. This decrease, linked to a number of organisations participating to the 2012 election greater than in 2007, is probably due also to a dissatisfaction of employees with an allegedly excessive collaborative policy adopted by the FP-CGIL, and a preference for a more radical stance. The election results reflected, and at the same time stimulated, a more confrontational union attitude towards the municipality and weakened the position and relative strength of FP-CGIL, which, on the other hand, strengthened its links with the new administration bringing one of its local leaders into the mayor’s cabinet. Moreover, a few months after the elections, FP-CGIL lost the absolute majority of seats within the unitary 30 workplace representation body, because one of its representatives abandoned the union and joined the SULPM-DICCAP, the professional union of local police employees which previously had no seat. Since Autumn 2012 union representatives have been divided, as shown by the dispute on the local police service. The municipality intends to eliminate the night shift of the local police workers (from midnight to 6.00 am), introduced in the year 2000, leaving to the state police force the traffic and street control during the night, as it used to be before 2000, and using private guards for the supervisory control of public buildings. Concentrating the local police in the daily hours would allow the municipality to save money, prevent a possible staff shortage and strengthen the safety and street control tasks of the local police workers. In September 2012 FP-CGIL and the municipality signed a preliminary agreement which approved the abolition of the night shift and regulated the new tasks of the local police. The other unions opposed this change, which would deprive the workers of the night shift allowance, and did not sign the preliminary agreement. The conflict was one of the reasons that motivated one FP-CGIL representatives to leave the union and join the SULPM-DICCAP. In subsequent negotiations, however, the other unions have not apparently been able to offer a unitary alternative proposal to solve the problem, strengthening the municipality position to proceed in its decisions even with the consensus of the sole FP-CGIL. This ongoing dispute has considerably worsened the relationships between the unions, and created tensions and instabilities in traditional social dialogue practices. On the one hand, these inter-union rivalries risk weakening the position of workers’ organisations in future negotiations with the municipality, on the other hand they deprive the municipal managers of a traditionally cooperative counterpart. This happens when the new municipal administration, elected in May 2012, has to define and start implementing medium and long-term plans, including changes aimed at dealing with the consequences of the austerity measures. As described above, outsourcing solutions are slowly emerging, similarly to what happened in Modena, although with more uncertainties and at a slower pace. If this choice will be taken, the relationships with unions are bound to worsen. Despite internal divisions, unions have already stated their opposition to outsourcing, both in the case of transfer of services to foundations or other kinds of public-private organisations and in the case of outsourcing to third sector organisations. Unions fear that any kind of externalisation would result in a worsening of terms and conditions of employment. As an organisation with a private legal status, a foundation could employ its personnel according to the clauses of a private sector national collective agreement, probably one of the collective agreements utilised in the third sector. These agreements offer worse pay and working conditions than those established by the national agreement for Regions and territorial authorities, and, according to past experience, at least in the social services sector, it is unlikely that a private sector company level agreement would substantially fill the gap between the two national collective agreements. Therefore terms and conditions of employment would worsen. If this is the case for a publicly-owned organisation with a 31 private legal status, it is even more so for a third sector organisation, which employs its staff according to third sector collective agreements. As in Modena, a significant part of the staff of the outsourced services would consist of temporary workers who, in the case of Sesto, would be however hired with permanent employment contracts. Therefore externalisation would confront unions with a difficult trade off between accepting the stabilisation of temporary workers in exchange of a worsening of their terms and conditions of employment, or vice versa defending better conditions without stabilisation. A true dilemma in a time of acute economic crisis and high unemployment rate. Comparison The centrally imposed austerity measures on local government seem to promote a slow but deep change in the role played by the municipalities. National legislation directly or indirectly connected with the ISP, along with general measures affecting public sector employment levels and turn-over ratios, constrain municipalities not only to start a downsizing process, reducing the staff number, but also to progressively abandon the direct provision of welfare services. Social assistance, childcare and education services for 0-6 year old children, traditionally directly provided and run by Italian municipalities, are increasingly given to private sector providers, both for profit and, especially, non-profit organisations. If this trend continues, the municipalities would become similar to commissioning organisations, in charge of planning, financing/purchasing and monitoring the services provided by other, private sector organisations. This shift in the role played by the municipality in the organization and provision of public services already started in previous decades, but it would be accelerated and intensified as a consequence of the austerity measures. As seen above, staff reductions and potentially significant outsourcing processes of welfare services, that in Modena have already started, could soon start in Sesto San Giovanni as well. However, because of the strong opposition to “pure” externalisation and privatisation of services by employees, trade unions and often local communities as well, in many cases the municipality prefer to transfer the directly-run services to semi-autonomous organisations controlled by the municipalities themselves. These organisations, such as foundations or special companies, are partly free from the legal constraints on hiring and personnel expenditures which are imposed on municipalities. In a sense, this service and personnel transfer looks like an elusion of the ISP rules, but are often considered as a politically less divisive and more easily viable solution by municipalities required to make unpopular decisions. The unions usually oppose these externalisation trends, given that they imply a worsening of workers terms and conditions of employment. However, in an era of acute economic crisis, the unions find it difficult to justify this position and are confronted with a dilemmatic situation when the transfer of services to semi-autonomous or external organisation is accompanied by the stabilisation of temporary workers, as it is shown in the case of Sesto. The outsourcing processes are making it hard to promote or maintain a cooperative social dialogue. In both cases traditional relationships between the municipality and trade unions were highly cooperative, but there are signs of change underway. In the case of Modena, 32 relationships are clearly shifting to open conflict, a shift that is not apparently linked to an occasional, limited dispute but is likely to last for a certain period of time. In the case of Sesto San Giovanni, rivalries between unions are negatively affecting the relationship with the municipality, creating tensions and instabilities in a context in which controversial issues are likely to emerge in connection with the internal re-organisation process under exam by the new administration. In this context, it is proving increasingly difficult to find shared solutions also for other critical issues created by the government austerity measures, in particular the lack of resources to fund adequate incentives for employees to provide efficient and good quality services. 4. Conclusion To conclude, let us address three broader questions. The first one concerns the type of changes brought about by government austerity measures, and in particular whether they consist only in short-term, quantitative cuts or in more structural, lasting reforms. To some extent this implies also to consider the more general issue of the relationship between the economic crisis and public service reforms (Hood, 2010; Pollitt, 2010). The second and third questions regard the relationship between social dialogue institutions and practices and austerity measures, in both directions: on one hand, whether and how social dialogue has helped shaping and implementing austerity packages, and, on the other hand, whether and how government austerity policies have affected and changed social dialogue institutions and practices. In all cases there are similarities, but also variations between the levels. As for the first question, both the national experience and the two case studies illustrated above suggest a sort of trajectory from an initial stage in which simple quantitative measures are adopted, with short-term effects on employment levels, recruitment of new personnel, economic and career prospects of employees, to one in which deeper changes, with longer term effects on the re-organization of service provision are detectable. This trajectory can be a fruit of an original deliberate design, but also, in a sense, an almost inevitable by-product of quantitative measures. Modena is a good example in point. Employment levels slightly increased between 2002 and 2008, when they reached a peak, then started to decline significantly as joint effect of both national measures severely affecting turnover ratios in all Italian public administrations and the legislation connected with the Internal Stability Pact, specifically directed to contain Regions and territorial authorities expenditures, personnel expenditures included. From 2008 to 2012 the number of employees declined by 7%, significantly more than in the entire Italian public sector. This created a staff shortage problem that forced the municipality, with a view to preserving the same level of service provision, to externalize in various forms (special companies, foundations, private for profit and not-for profit organizations) part of the social and, to a lesser extent, education services, and the temporary employees devoted to these activities. This in turn implied a worsening of terms and conditions of employment of the externalized/outsourced employees, since the collective agreements applied by the new organizations have usually lower standards than public sector collective agreements. Also the conditions of employees remained within the municipality have been negatively affected by the austerity measures, as a consequence in particular of the legal constraints on salary and career progressions of all public employees and the scarcity of resources even for 33 productivity and performance-related pay. The final outcome, so far, seems to be a slowly changing role of municipalities in the area of social and education services, from direct provision to a role of service ‘commissioning’, with an apparently decreasing quality of the services provided to the citizens. An alternative solution to staff shortage problems, sponsored by the unions, would be a deeper bureaucratic restructuring of the municipality, based on processes of internal mobility and skill retraining, possibly to keep the entire service provision in-house. But managers and elected authorities of the municipality look sceptical on the efficacy of this solution, perhaps hoping to improve over time the capacity and performance of the municipality as ‘service commissioner’. Also the municipality of Sesto seems to be on the verge to follow a similar path towards a greater externalization of services, although with some delay and a less clear-cut line of development than in Modena, due also to the recent election of the new mayor which partly paralyzed any wide-ranging decision. Although employment levels have been rather stable in recent years, in Sesto as well the problems brought about by the austerity measures create uncertainties and strains in the relationship between the municipality and the trade unions, which are here to some extent more fragmented than in Modena. The role of social dialogue in shaping and implementing austerity packages has been on the whole limited, although with differences between the levels. A distinction is also needed between institutions and practices. Social dialogue institutions, as explained above, have been partially changed by the Brunetta reform, not by austerity measures. In response to the unexpected effects of the ‘second privatization’, the role and autonomy of collective bargaining as the main regulatory method of terms and conditions of employment have been to some extent reduced by the Brunetta reform, in favour partly of managerial prerogatives and partly of the role of legislation. What the crisis did was to freeze the practice of public sector social dialogue, even in its reformed configuration. At national level social dialogue did not play any significant role in shaping austerity measures, which were adopted unilaterally by the government without trade union consultation. These measures, in turn, among other effects, froze the machinery of national sector-level collective bargaining for almost two bargaining rounds, and drastically reduced the resources for decentralized negotiations at single employer level. In the Regions and territorial authorities subsector these effects have been further strengthened by the rules of the Internal Stability Pact. The case of Modena, again, well highlights the mutually reinforcing effect of these partly different sets of constraints. National level austerity measures and ISP rules affect employment levels, creating a problem of staff shortage. This forces the municipality to pursue some externalization processes which are unanimously opposed by trade unions and workplace representation bodies. But the municipality reacts asserting that the 2009 Brunetta reform strengthened unilateral managerial prerogatives and significantly reduced the number of negotiable matters at decentralized level. The combined effect of institutional reform, national level austerity measures and Internal Stability Pact rules is to freeze the practice of social dialogue, or to make it ineffective, even where it used to be a consolidate tradition, soundly based on tight relationships between center-left oriented municipalities and strong trade unions dominated by the Cgil. Finally, to come to Hood’s and Pollitt’s questions, did the crisis blocked or prompted structural reforms? Or did it left business as usual, with just some window dressing? In the light of previous analysis, the latter option can be excluded, while the answer is more 34 articulated with regard to the other options. The implementation of the Brunetta reform, that was adopted to some extent independently from the economic crisis, few months after its approval was frozen by government austerity measures in all its features related to employment relations and collective bargaining at national level. But its effects are visible at decentralized level, by limiting the scope of negotiable matters and encouraging unilateralism in union-management relations even in contexts where social dialogue had a sound tradition. 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