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The First Jobs Created by Italy’s Jobs Act?

Yesterday, Fiat-Chrysler announced the creation of 1,500 new jobs at its Melfi plant in Italy.

1,000 of these jobs will be new and it is likely the new workers will be taken on under the terms of a new form of permanent employment contract created by Italy’s Jobs Act employment law reform – once the reform has been activated by Italy’s government.

The advantage of the new form of employment contract for Fiat-Chrysler is that the company will be able to dismiss under-performing workers more easily and, should the necessity arise, it will also be easier and less costly for Fiat-Chrysler to lay off workers.

To all intents and purposes, Italy’s upcoming new contacts of employment are closer to those which exist in the United Kingdom. Some form of unemployment benefit is to be offered too, as in the United Kingdom. Italy’s government is hoping the reform will encourage businesses in Italy to hire people and offer them full-time, permanent, jobs.

In the past, partly because of how difficult it is to dismiss workers or to make them redundant, Italy’s employees have opted for temporary contracts of employment often for very short periods and at low pay levels. As a consequence of these short term employment contracts, job security in Italy was virtually non-existent and this meant workers were unlikely to be considered for long term finance such as, for example, mortgages. The lack of job security also deterred younger Italians from starting families. Arguably, perhaps, it has also caused some Italians to give up looking for work.

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Another effect of the absence of job security was that more and more Italians looked overseas for work. Indeed, many have headed to the United Kingdom in search of work even though employment contracts there offer less protection than Italy’s permanent employment contracts. United Kingdom contracts of employment still tend to offer much more stability than Italy’s short term contracts and unemployment benefit is available too.

Permanent contracts of employment have been notoriously hard to come by in Italy for around 20 years, if not longer. Now though, the situation might change and Fiat-Chrysler appears to be leading the way. Italy’s government will be hoping that more companies in Italy follow suit or even that foreign companies will now consider setting up shop in Italy.

On the face of it, Italy’s new style of permanent employment contracts should be good news in terms of job creation but the acid test will come when employees seek finance from Italy’s banks. Will those employed under the terms of these new contracts be offered mortgages or other finance? If they are, all well and good. However, if Italy’s banks decide that the new contracts are not stable enough for long term finance, then Italy may be back to square one. Then again, in view of the fact that Italy’s new employment contracts should soon become similar to those in the United Kingdom, it is not beyond the realms of possibility that non-Italian banks will offer long term finance to Italians. And if foreign banks start lending, Italy’s banks will more or less be forced to follow their lead. Italy shall see.

What needs to happen now is for Italy’s government to get round to activating these new style contracts of employment. A benefits system needs to be set up as well but Italy’s national debt problems may make it hard for Italy to fund such a scheme.

If everything falls into place as hoped, Italy will still have to wait for six months or so to gauge the effectiveness of this reform.

Will Italy finally see some form of economic recovery in 2015? Italy’s economy minister believes so even if Italians themselves are not so sure.

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