Wanted: 21 Million Jobs…The Growing US Job Challenge

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Permalink Reply by Massimo Arrigoni on July 15, 2011 at 8:33pm

Well, there is a big difference between Italy and the US in that full time employment in Italy is not "at will", as it often is in the US. The difference between full time employment and contract-based employment in the US is not about the "security" of your job, but rather mostly about health and retirement benefits being included/excluded.

As many have been suggesting for a long time, substantial, radical reform is needed in Italy's labor laws to make full-time employment less onerous on the employer and easier to attain for the employee. It must be a win-win, and it must get done soon. Labor law reform is a "must-have" for Italy. The status quo is not sustainable and is indicated as a major reason why foreign investment in Italy is low compared to many other countries. On that topic, I recommend Pietro Ichino's recommendations with regard to the "flexsecurity" approach (NOTE: I don't care at all about political party affiliation: what Mr. Ichino proposes simply makes sense, and he is one of the top experts on the subject).

As for the US - as many economists have pointed out - one of the problems the real estate industry as a whole grew to an inflated level and generated a large number of unsustainable jobs. With the correction in the real estate industry, jobs were lost and will not come back. This is one of the reasons why it is taking so long to create new jobs.

I personally agree with the findings of the National Commission on Fiscal Responsibility and Reform in that the corporate tax rate should be reduced as part of many provisions to promote new business activity in the US.

By the way: if you have not read the final report of the commission, please do. It will give you a lot to talk about at the dinner table when the topic centers on US debt and deficits. I just hope that the good work of the commission is indeed part of the ongoing, difficult discussions on this topic happening in Washington. If not, it's hard to understand why.

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BAIA TeamPermalink Reply by Matteo Fabiano on July 17, 2011 at 8:44pm

I think one of the biggest problems for enterprises in Italy is the "cassa integrazione" trap. Offsetting costs to the taxpayer by keeping employees "employed" while being unable to shift the labor structure to respond to the market. What we have as a result is a labor force of two classes: the "untouchables" who have a permanent position and the army of "perennial temps" who are, in many ways, treated as second class citizens. This structural aberration is not compatible with a healthy, thriving, modern labor market. I plan on giving a good look at the "flexsecurity" proposal.

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Permalink Reply by Massimo Arrigoni on July 17, 2011 at 11:20pm

Matteo, you are exactly right and that's what Mr. Ichino and others are trying to address, based on successful implementations of the same model in northern Europe (a summary, in Italian, is here).

Unfortunately there's often not a lot of common sense in Italy when it comes to any labor-related debates. Mr. Ichino has been under armed escort for years (and many of you will remember the assassination of professor of labor law Marco Biagi in 2002).

Mr. Ichino is a moderate voice in an otherwise over-heated debate. Whether it's his proposal or another common-sense reform effort that is ultimately given the "green light", changes in this area are badly needed and hopefully will be implemented sooner than later. Most economists agree that there cannot be real GDP growth in Italy without labor law reforms (e.g. see items 16 to 20 in the IMF report on Italy).

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