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It's Not Easy to Get Fired (or Hired) in Italy
Daily Policy Digest

International Issues / Unemployment and Labor Market Regulation

Thursday, June 27, 2002
Italy has about the toughest restrictions in Europe on firing workers, according to the Organization for Economic Cooperation and Development.

The country's labor code provides that after a short probationary period, an employee fired from a company with 15 or more employees can bring a lawsuit challenging the dismissal. If the suit is successful -- as is often the case -- the employer is forced to rehire the worker and pay back wages and social insurance contributions, as well as a large fine.

Needless to say, such heavy-handed and lopsided restrictions have generated some bizarre outcomes.

  • A bank employee involved in money laundering was recently held to have been unjustly dismissed -- and a judge ordered him reinstated in his job.
  • After workers have completed their three-month probationary period, their absenteeism rates more than double.
  • With little fear of dismissal, some employees provide less than peak effort when they do show up for work.
  • Given these circumstances, employers avoid hiring, resulting in an unemployment rate of 10 percent.
Unable to get jobs, half of Italians in their 20s -- and nearly one-quarter of men in their 30s -- live with their parents.

In November, the government proposed modest reforms to relax firing restrictions. But labor unions and left-wing politicians are dead set against reforms, and several prominent reform advocates have been assassinated.

Source: Alan B. Krueger (Princeton University), "Economic Scene: Reforming Italy's Extreme Labor Restrictions Is No Slice of Tiramisu," New York Times, June 27, 2002.

For text
http://www.nytimes.com/2002/06/27/business/27SCEN.html

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