Analysis-Italy promotes short-term job market, shunning Spain's example

By Antonella Cinelli and Valentina Consiglio

ROME (Reuters) - Marta Pizza, a 26-year-old swimming instructor, has worked at a Rome sports centre for the last two years earning 8.50 euros per hour with no pension contributions, sick pay or holidays.

Italy's right-wing government is taking steps to facilitate temporary and informal work arrangements like hers, rolling back previous restrictions and angering trade unions, who say the move will exacerbate in-work poverty and stagnant productivity.

New Prime Minister Giorgia Meloni's government argues that more flexibility will mean more jobs, and induce employers to legalise workers previously not declared at all.

The euro zone's third-largest economy has a growing army of workers without stable contracts - around 5 million out of 23 million employed people, according to a study by Italy's largest union, the CGIL.

Like her fellow swimming instructors Pizza is not on the sports centre's roster of permanent staff, and her contract does not allow for regular shifts. Yet the reality is very different.

"We all have weekly shifts assigned and there is no limit to the number of hours we can work," says Pizza, who boosts her income helping out as a baby-sitter, cleaner and waiter.

In recent years some euro zone countries have sought to rein in temporary contracts to promote stable jobs. In Spain, the European Commission even made it a condition for receiving billions of euros in EU pandemic recovery funds.

Meloni is moving at least partly in the opposite direction.

Her first budget extended some tax breaks for permanent hiring introduced by previous governments, but also increased the scope for the use of job "vouchers".

These are an extreme form of labour flexibility that was largely scrapped in 2017 after an outcry by trade unions, which were promoting a referendum to abolish them.

Under the system - even less structured than Britain's so-called zero-hours contracts - workers are paid through the state welfare agency using vouchers which the employer buys online for 12.5 euros ($13.62) each.

The worker gets nine euros for each 12.5 euros of face value, with 3.5 euros going to cover insurance and pension contributions.

There is no contract, so workers have no right to sick pay, holidays, leave or jobless benefits when their employment ends. Vouchers are popular among businesses, but critics say they leave ample room for abuses.

FLEXIBILITY

Government members close to Meloni say she is also preparing to relax curbs on other forms of short-term work.

Under rules imposed in 2018 workers can be hired on a temporary basis for 12 months without restrictions. This can be extended to 24 months under strict conditions such as an unexpected surge in business or to substitute other staff.

These rules were already somewhat eased in 2021 during the COVID-19 crisis, and now Meloni intends to go further, something that concerns some experts such as Michele Tiraboschi, a labour law professor at Modena University.

"Vouchers and short-term contracts offer firms temporary relief by cutting their costs, but the last 25 years have shown us we should be focusing on the quality of work, on training, on raising productivity to enable higher salaries," Tiraboschi said.

The government will either allow firms to hire workers on temporary contracts for two years without giving any reason or it will broaden the reasons that can be given, officials say. These contracts will possibly be extendable to three years under certain conditions and with trade union agreement.

It also plans to reduce the labour tax costs to employers of temporary contracts, which were raised in 2018. A decree is likely to be presented next month.

"Flexibility should be seen as an asset and an opportunity, not as a problem," said Paola Mancini, a senator with Meloni's Brothers of Italy party. "Restrictions for businesses have to be cut."

SPANISH ALTERNATIVE

Spain, southern Europe's other major economy, has taken an opposite path, with encouraging results.

Temporary contracts in Italy and Spain https://fingfx.thomsonreuters.com/gfx/mkt/lbpggbrbkpq/LFSQ_ETGAED_LINE_2023-01-26T15_26_23Z.png

It has the second-highest ratio of short-term workers among the 27 EU countries, at 20.3%, according to Eurostat data for the third quarter of 2022, while Italy is third on 17%.

The Spanish percentage was down from 26.1% a year earlier, however, while Italy's remained stable.

A revamp of Spain's labour rules in March last year has led to a 141% rise in young workers with permanent contracts, official data for December shows.

The reform reversed the easy hire-and-fire regime put in place after the sovereign debt crisis a decade ago by abolishing most forms of temporary contracts.

It also included a provision to give permanent contracts to seasonal workers in sectors such as tourism and farming. They are entitled to benefits even when not working and can be called up by their employers at any time.

Madrid says the reform was a driver of last year's 5.5% economic growth rate, increasing people's financial stability and boosting confidence and consumption.

In Italy, since 2008 the number of employed people has remained stable at around 23 million. Within that total, the number of temporary workers has jumped by 25% from 2.4 million to 3.0 million.

Unstable work on the rise https://fingfx.thomsonreuters.com/gfx/mkt/jnvwywqjmvw/ITALY-UNSTABLE-WORK.jpeg

Tania Scacchetti, a leader of the CGIL union, said both the use of vouchers and the encouragement of temporary contracts were driven by an old, free-market model which puts workers in an "instability trap".

"We've increased the number of workers but the work is badly paid and precarious. Stable contracts should be the norm, not the exception," she said.

($1 = 0.9181 euros)

(Additional reporting by Belen Carreno in Madrid and Gavin Jones in Rome, Writing by Gavin Jones, Editing by Catherine Evans)