How to relaunch the labor market in Italy

There is a very urgent need to structure increasingly effective active policies which must find adequate matches in the jobs offered, with a match between supply and demand for quality work. The speech by Alessandra Servidori, professor of labor policies

The health emergency has upset our country’s economic and social system, and has aggravated the problems of a labor market where employment has been gangrenous for years. Despite the push of new technologies and new organizational methods, the cruxes of an increasingly atypical occupation and with poor wages remain. A support could come from training, which shows a rich offer of paths, which however does not correspond to an equally strong participation, while skills find it difficult to align with production needs. Thus the weakest categories remain more exposed to the growing risk of hardship and poverty, while inequalities increase and the need to update welfare systems is manifested.

Added to this is an exceptionally unfavorable economic situation which is affecting by now chronic weaknesses and where the urgency of targeted and structural interventions clearly emerges. The obvious consequence of the pandemic has been the increase in public financial resources intended to strengthen passive intervention measures on the labor market (wage subsidies to reduce the impact of the suspension and/or reduction of working hours, unemployment benefits also for atypical and self-employed workers). In some European countries, attempts have been made to encourage the mobility of workers towards sectors with a shortage of manpower, and to protect particular groups of individuals who already had a low degree of employability before the pandemic.

Active policy interventions should in any case have a twofold long-term objective: to improve participation rates and employability and at the same time enhance employment services in their role of support to the processes of allocation and reallocation of the workforce. Both the Employment Centers and active policies as a whole remain far from optimal: they fail to be effective intermediaries in highly professional positions, but neither in low-skill occupations and this lack of collaboration with the agencies of intermediation remains insane.

Among the most fragile groups in terms of employment and employability there is certainly that of the disabled. In the DM n. 43/2022 and in the guidelines on placement aimed at them, indications are formulated with reference to both young people with disabilities, those accessing the placement lists for the first time, and the long-term unemployed. To find job opportunities, the formation of integrated networks will be fundamental, with the cooperation of various local public services (labour, health and social), the active involvement of the disabled person, the involvement of the so-called ‘Head of job placement’, the systematic collection of good practices.

We are well aware that the increase in financial resources allocated and expenses for passive measures has caused a reduction in those dedicated to active policies: the activities of employment services, professional training interventions, hiring incentives have therefore slowed down and suspensions, essentially for social distancing measures but also for their inaction.

There is a very urgent need to structure increasingly effective active policies which, however, will have to find adequate correspondences in the jobs offered, with a match between supply and demand for quality work.

It is clear that state-of-the-art employment centers will be fundamental in tackling structural challenges successfully, as already recognized in the extraordinary plan for their strengthening. The goal is to create services that not only intermediate more low-income jobs intended for particularly disadvantaged individuals, but that of preserving and indeed increasing the country’s human capital and it is necessary that not only informal channels are disadvantaged, but that a large reindustrialization project of the whole country is launched which will require both funds made available and valid – among others – on the PNRR, and of purely national derivation. Employment centers must therefore become guarantors of effective intermediation that leads the unemployed to obtain jobs built in innovative sectors, especially – but not exclusively – in manufacturing.

Effective intermediation spending on the labor market will not suffice, but it will be necessary to strengthen the country’s industrial system. Without a response to the need to reindustrialise the country, the digitization processes of the entire PA system, which will see AI being used more and more, risk remaining sterile exercises that will not generate the desired, massive, favorable economic, technological, and even environmental repercussions. Without an organic process of new development, AI runs the risk – and unlike the use of robots or software in the recent past – of targeting only particularly small niches of the labor market, generally only highly specialized workers; in other words, it cannot be the instrument which for practical purposes will determine the success of mediation in the labor market.

Professional guidance will finally have to go back to having a central role, not only for ‘operator-orientators’ but also for ‘user-oriented’ and will have to be based on horizontal experiences that will necessarily have to involve schools, universities, training centers and services for employment and private brokerage services. This network will have to make use of a ‘single language’, while respecting the natural heterogeneity of the local markets, which are particularly strong in a country with a dual structure such as Italy. Priorities will be the training and inclusion of young people, to start a virtuous circle of development, growth and new quality opportunities while preserving the right aspirations of adults who may find themselves in particular employment conditions and groups at high risk of exclusion, such as the disabled ( as well as people at risk of poverty and foreigners at risk of social exclusion).

The institutions must therefore (re) take on the role of ’employer of last resort’, creating a contrast to the reduction of the real wage below the poverty line (or below the minimum wage). They would end up favoring even the most reluctant sectors of the private economy: on the one hand because it would see them forced into productive investments to try to stabilize the profit share; on the other hand, because the reduction of poverty would increase aggregate demand and their revenues and therefore their demand for work (paid above the salary offered by the State). To this end, the action of reindustrialization is decisive, taking advantage of a reduced dependence on foreign countries, with an increase in the income multiplier which, in turn, would start a process of acceleration of investments.