The Case 17 October Oct 2017 1610 17 October 2017

Recipes from the World Economic Forum to Improve Our Labour Market

After twenty years and four reforms, we are still one of the world’s more rigid labour markets: a consequence of reforms that concerned only part of the workforce. One of the many (too many) things that we lack to be (at least) on a European level

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Twenty years, four reforms, thousands of hours of strikes, and we are still being told that our labour market is among the more rigid and less efficient in the world? This is the Italian market, according to the Global Competitiveness Report of the World Economic Forum, which ranks economies every year according to their capacity to stay on world markets and the efficiency of their institutions, infrastructure, macroeconomic environment, and financial ecosystem of training and technology. And, precisely, for an efficient and flexible labour market, able to adapt to this phase of perennial change.

Overall Result: We are 43rd out of 137, up a place from last year, up six compared to 2015, but one place behind Portugal, the last country in Western Europe that passed us. Not very good news, for sure. We have a sophisticated business system with a very high level of specialization, we have developed districts (8th in the world) and long, solid value chains (11th). Too bad we also have too much bureaucracy - we are ranked among the five worst in the world, including Africa - for a financial system that, overall, ranks 126th out of 137, and for a tax system that is the 126th most expensive in the world.

That is not all: according to the World Economic Forum, we are (still) one of most inefficient labour markets in the world. Out of 137, we rank 116th to be precise. We have been growing over the last three years, thanks especially to the monetary incentives and exemptions from social security payments, which have contributed to increasing the basin of recruitment.

The recipe is clear: we need entry incentives and greater elasticity of wages, productivity and prices. We need incentive policies designed to correct some of the many externalities that our market produces.

The worst area, though, is flexibility in setting wages. Here we rank 131th, six positions from the end: obviously, reforms to the margin, unlike those affecting all workers, tend to be much less effective. In addition to the connection between pay and productivity, where we pay for a stalemate that is almost unique all over the world, able to create more value from work that we do, especially when you think of what and how many technological revolutions have occurring during the past year. We are still not able to retain or attract talent. Unfortunately, we are also 89th - forty-six positions under the average - for our level of participation of women in the labour force.

The recipe is clear: we need entry incentives, and greater elasticity of wages, productivity and prices. We need incentive policies designed to correct some of the many externalities that our market produces. We need services for managing family and work time, so that women can have a less sacrificial professional career. And we need lots and lots of training to increase labour productivity. Perhaps, we are not really as bad as the Economic World Forum portrays us. But we can certainly be much, much better than we are now.

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