UNEMPLOYMENT POLICIES IN THE ITALIAN
LABOUR MARKET TRANSFORMATIONS
Antonio M. Chiesi, Trento
The structure of Italian employment has been changing dramatically during
the last 45 years. In the 1950s Italy was still a mainly agricultural society. The
industrialisation took place quickly during the 1960s, but only in the northern
areas of the country. The occupations in industry grew only moderately as compared with other Western European industrialised countries and were affected by
an early decline during the 1970s. A further growth of small businesses mainly
based on industrial districts in the central and eastern regions partially compensated the loss of jobs in big factories. It has been a constant trend until the present days. The service sector has become the most important in terms of the
number of occupations since the beginning of the 1970s (see Figure 1) and accounts for most occupations at the end of the 1990s.
Figure 1
Occupation by sector
14000
12000
10000
Agriculture
8000
Industry
6000
Services
in thousand
4000
2000
0
1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996
Year
Most labour market transformations in Italy are similar to processes in other
Western European countries. The common trends are part of the modernisation
process and consist of an increasing labour activity rate of women, an increasing
education of the labour force, an extended welfare system (pension schemes,
unemployment compensations, public health system). However, as compared
with other Western European countries like France and Germany, the Italian labour market is traditionally marked by some specificities as well.
First, there is a relatively lower percentage of employed from the total population. This difference persists in spite of the above mentioned trend of growing
involvement of women in the labour market.
Second, there is a dramatic and persisting dualism between the northern and
southern regions in spite of the long tradition of direct intervention of the state
promoting employment at regional level;
Third, there is a high level of unemployment among young people seeking
job for the first time;
Fourth, another special feature is the centrality of small firms in the Italian
economy and therefore the presence of a labour market which is characterised
by a flexible use of work force through mobility between jobs and firms, by
widespread opportunity of second jobs, informal contracts and tax avoidance;
Fifth, Italian economy is marked by a high proportion of self employed which
make up to 28-29% of the labour force during the 1990s.
The relatively lower percentage of employed is due to the higher structural
unemployment rate and to the lower employment activity rate. During the nineties, the unemployment rate of the Italian economy has been higher than the
Western European average. Only Ireland and Spain have exceeded Italy in this
respect. However, the very specificity of the country consists of the quality rather than the quantity of unemployment. First of all, the lower employment activity rate of the Italian population can be interpreted as a consequence of the
difficulties that especially women and young people traditionally find in seeking
for a job.
In 1989 the employment activity rate was 49% which was well below the
European Union average of 54.2%. In 1997 the rate declined further to 47,6%
(Istat, 1998). Only Belgium and Spain had a lower rate, while the top position is
occupied by Denmark with 66.8%. In every country the level of the overall employment activity rate depends very much on the female component. In Italy,
also the male employment rate is below the average in the European Union.
During the 1990s the female employment activity rate is higher than that of the
1960s. The fact that the activity rate is lower among women and in the southern
regions, where unemployment is higher, has been interpreted with the so called
“discouraged worker hypothesis” (La Malfa and Vinci, 1970). According to it,
the lack of employment and the long time spent in seeking a job can determine
the worker’s withdrawal from the labour market. This interpretation can explain
the paradoxical situation of the 1980s. At that time, the consistent increase in
female employment has been accompanied by a dramatic increase in female
unemployment.
The persisting dualism between the northern and southern regions has been
fed by the divergent rates of economic development of these areas. This is the
background of the internal migrations which took place in the 1950s and 1960s.
In 1996, in spite of the enormous state intervention - both direct through the creation of posts in public administration and welfare public services and indirect
through incentives to the private initiative - the regional differences in the official unemployment rates remained remarkably high. The unemployment rate was
5.6% in the north-eastern regions, 7.3% in the north-western regions, 10.3% in
central Italy and 21.7% in the southern regions. This means that unemployment
was almost four times higher in the southern regions than in the north-eastern
regions.
Regional differences come out to be the most important variable that can ex-
plain differences between unemployment rates. Table 1 gives an idea of the increasing regional divergence that affected unemployment during the eighties.
While the consequences of the economic crisis of the first half of the decade are
easily absorbed in northern and central regions, unemployment increases are
constant all over the period in southern regions, so that two separate labour
markets seem at work during the nineties (Ministero del Lavoro, 1991):
Table 1
Unemployment rate by regional areas
Year
M.
North
F.
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
3,5
4,1
4,9
4,9
5,0
4,9
4,8
4,1
3,4
2,9
3,1
3,5
10,6
11,3
12,4
13,4
13,1
13,1
12,7
11,3
10,2
8,6
8,4
9,5
M.
Centre
F.
5,3
5,8
5,8
5,8
5,9
6,1
6,2
6,1
6,5
6,2
6,0
6,5
14,2
14,1
15,1
14,9
15,0
15,9
15,7
16,2
17,4
15,6
15,5
15,2
Total
6,1
6,7
7,7
8,1
8,0
8,0
7,8
6,9
6,0
5,2
5,1
5,9
Total
8,3
8,6
9,1
9,0
9,1
9,7
9,7
9,8
10,6
9,8
9,7
9,9
M.
South
F.
Total
8,1
9,0
9,4
9,3
9,8
11,4
13,6
14,6
15,0
13,6
14,1
14,8
21,7
22,0
23,4
23,1
24,3
27,3
30,7
32,8
33,2
31,8
31,6
31,6
12,3
13,0
13,8
13,6
14,4
16,5
19,2
20,7
21,1
19,7
19,9
20,4
Other important differences are related to the higher rate of unemployment
among women and youngsters as compared with the Western European average.
Table 2 summarises the evidence in 1995 which has been a year of good economic performance in Italy. In that year the overall unemployment rate has been
slightly less than the European average. Data show also that the female unemployment rate is above the European level, while the male one is below. Differences with the European average are particularly high among young people between 20 and 24 years. Males between 40 and 60 years of age are particularly
protected from unemployment in Italy. The specific unemployment rate in this
group is very low (2.7% against 6.4%). This means that the Italian policies on
the labour market have been able to prevent the unemployment of adult males in
the range of age when they are often the only bread winners for their children.
Table 2
Unemployment rates in Italy and Europe 12 in 1995
Groups
Total
Men
Women
Young 20-24
Young women 20-24
Men 40-60
Italy
10,3
7,7
14,8
28,1
32,1
2,7
Europe 12
10,6
9,5
12,2
20,2
20,5
6,4
Source: Eurostat, Labour force survey
If we sum up these characteristics, we may notice the very high specific rates
of unemployment among young females with high school certificates, living in
the southern regions who have suffered an increasing rate of unemployment always above 60% since the eighties (Borzaga, 1990).
A further segmentation of the labour market is developing recently due to the
role played by immigrant workers. Italy has experienced widespread emigration
abroad of unemployed people from the southern regions, especially during the
1950s. Recently the country experiences immigration flows from less developed
countries. During the 1990s immigrants find employment in less qualified jobs
in the industry, in agriculture and services to the families. These jobs are not appreciated by native young people who are well educated.
Given these specific features of the Italian unemployment structure which are
both quantitative and qualitative, two phenomena have to be explained. One is
related to the high differences among specific categories within the labour force.
The other is the paradoxical end of interregional migrations, in spite of the increasing regional differences in official unemployment rates. There was a declining trend of internal immigration from 1956 to 1964 when it reached its
height. The migration has stopped since the mid 1970s, although official unemployment rate grew constantly and reached its height at the end of the 1980s. At
that time, the economic boom of small firms in the northern regions fed a demand of labour force which was sometimes unsatisfied.
The first phenomenon is the result of labour market policies which aim at
preventing male bread winner unemployment at the expenses of those who occupy a marginal position in the labour market, i.e. young people seeking job for
the first time and the female labour force. This policy was developed during
the 1970s and 1980s when restructuring of large firms and consequent labour
force reductions was made socially acceptable through pre-pension schemes and
unemployment compensations. The widespread application of pre-pension
schemes brought to a reduction of the employment activity rate of males. At the
beginning of the 1980s unemployment compensations called “cassa integrazione
guadagni” covered three quarters of the total number of those who lost their jobs
because of the restructuring of large scale businesses (Reyneri, 1996). The efficacy of these policies (at least till the beginning of the 1990s) is obvious on the
increasing distance between the rate of total unemployment and that one of
males who lost their previous job. Table 2 gives evidence of this efficacy
through the difference between male vs. female and adult vs. young unemployment rates. Unfortunately, the cost of these policies was high and contributed to
the state debt in the following decade.
As far as the second phenomenon is concerned, a number of economic and
social reasons are discussed in the literature. These can be summarised as follows:
First, southern households have experienced an increasing standard of living
and their purchasing power has been strengthened by state subsidies, welfare
transfers and unemployment compensations. The new generation has enjoyed an
increase in education and their achievement levels have grown consequently.
Second, trade unions have fought successfully for getting equal salaries
across regions.
Third, households in the southern regions are often taking advantage of a
number of revenues, usually marginal, that grant a standard of living which can
prevent youngsters from entering the labour market of seasonal and unfair jobs,
where immigrants from South Africa are established.
Fourth, the quality of unemployment in the 1980s and the 1990s is different
from that one of the 1950s because of the lower proportion of bread winners that
have lost a job and the higher percentage of young people who still live with
their parents waiting for their first job.
Fifth, the traditional mechanisms that fostered migration during the 1960s are
no longer at work. The industrial labour market in the northern regions is not
any more driven by large plants, seeking masses of anonymous unskilled workers coming from the countryside. It is rather driven by the needs of small businesses where skilled workers are requested to enter organisations where mutual
trust and compliance are important.
Although the situation is not homogeneous across the South, some areas have
experienced a recent industrialisation which is often based on informal and
shadow economy. This means that the official unemployment rate is sometimes
underestimated.
The efficacy of unemployment policies during the 1990s is seriously conditioned by the need of reducing the huge state debt in order to keep the targets
imposed by the monetary union agreement. This means that the state can no
longer afford to compensate unemployment and in the meanwhile is drawn to
induce indirectly the creation of jobs by means of the reduction of overtaxation
that increases the cost of labour. Moreover, the need of flexibility of the labour
market prevents from defending occupation levels rigidly (Chiesi, 1997). The
introduction of flexibility measures concerns:
First, salaries, implying the introduction of incentives and variable earnings
according to the economic results of the firms;
Second, working time, implying the diffusion of seasonal jobs, part-time
(which has been fought by the unions and neglected by firms) and various forms
of temporary work;
Third, the introduction of new forms of labour contracts which are in between
self employment and dependent work;
Fourth, increasing opportunities to move workers in different positions of
labour organisation and in different jobs by means of vocational retraining. This
is a crucial point because of the low efficiency of the traditional public intervention in the field of vocational training, which has been left to private firms.
It is reasonable to believe that these interventions are less expensive than
those pursued until the previous decade, but are also less effective in combating
unemployment in the southern regions, where opportunities of getting job are
rare. In the same time, they can increase the need of employment in the industrialised regions where firms find sometimes difficult to employ skilled manual
workers and technicians, because of a steady lack of offer. Moreover, the 1990s
have witnessed an increase in the number of males who lost their previous job,
while total official unemployment did not diminish. Therefore, we can conclude
that while the overall unemployment has not diminished, its seriousness has increased. This does not prevent an increasing use of foreign immigrants in those
jobs which are no more wanted by native educated youngsters.
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