As Italy’s emergency government comes to a close, one of the most controversial measures for which it will be remembered is new legislation governing labor contracts, aimed at making it easier for companies to shed employees.
But on Jan. 1, a potentially more transformative, though little-discussed, aspect of the new law kicks in: A broad welfare net along the lines of other advanced economies that makes unemployment benefits easier to get and more widely available—and requires recipients to seek new employment.
The so-called ASPI program, whose acronym stands for Social Employment Insurance, offers unemployment benefits to workers who lose their jobs after as few as 13 weeks on the job.
ASPI “is a landmark reform, and it’s the one that should have the strongest impact on behavior,” Labor Minister Elsa Fornero said in an interview last week.
Though Italy, like much of the rest of Europe, has a reputation for coddling its workers, unemployment insurance until now was available only to a select few, and then only as the result of a highly mediated process requiring the consent of business associations and trade unions.
The new program aims at a more universal means to replace programs that date back to when lifetime jobs at large factories were the norm.
Salvatore Pirrone, a senior manager at INPS, the social-security agency that helps to administer the new government program, said the funding available to the unemployed will expand by 15% nationwide, once the old plans are fully phased out.
“ASPI has been criticized and ignored, but it’s actually more generous than Italy’s existing unemployment schemes,” Mr. Pirrone said.
Italy’s current unemployment benefit system essentially boils down to something called cassa integrazione, or wage subsidy, in which workers on permanent contracts receive a hefty chunk of their usual pay—and aren’t counted as unemployed. Italy’s official unemployment rate is currently 11.1%, for example, but it would be above 14% if those on cassa integrazione were included.
The program, originally designed to help manage temporary downturns in demand as well as down time when factories were being upgraded, has over the years been expanded to include a slew of extraordinary long-term benefits.
Hundreds of former staff at Italian airline Alitalia, for example, were given seven years of wage subsidies—which the airline used as a costly bridge to the workers’ retirement rather than keeping the skilled workers on call.
There have been cases of people at various companies in Italy receiving wage subsidies for more than 20 years, stripping away any incentive to seek to find a new job.
Under the new law, the old cassa system will still exist, but only to deal with temporary furloughs.
ASPI will become the main jobless insurance program and cover far more people, ranging from those on temporary contracts—like the majority of young Italians—and the growing number with collaboration-type working arrangements in the retail and services sectors.
“It’s a step toward more universality,” Ms. Fornero said.
When Ms. Fornero, an economics professor and pensions-systems expert, joined Prime Minister Mario Monti’s cabinet in November 2011 with a mandate to make it easier to terminate contracts, she decided that tackling the outdated wage-subsidy program would be a key part of her package.
The so-called Fornero law that resulted was loudly criticized when approved last summer. Trade unions said the law, which replaces a 1970 statute that enshrined cradle-to-grave employment, made it too easy for companies to fire workers. Companies said it didn’t go far enough in giving employers control over workforce layoffs and restricted the use of looser contractual forms that had cropped up over the past two decades.
The ASPI part of the law is aimed at making Italian society deal with its unemployment problem, rather than sweeping it under the carpet. It is designed to match a more flexible job market by giving the unemployed more automatic benefits, and then encourage them to find new work.
The payouts are limited: €1,120 a month ($1,483) for up to 12 months, with an extra half year of benefits for those over 55 years old. They also require recipients to actively seek new employment.
“In Italy we have always tried to avoid having to say that a person is unemployed, to avoid the stigma and to avoid the problem,” said Ms. Fornero, who plans to return to her teaching job at the University of Turin after Italy’s elections in February.
Introducing ASPI wan’t easy. The ordinary cassa program covered more than one billion hours of lost labor this year, the equivalent of 600,000 full-time jobs, and it will be for the most part left intact.
But the nature and the funding requirements of ASPI mean the extraordinary types of cassa that employers and labor unions have exploited as a safety net for problems they couldn’t resolve—especially the widespread practice of masking early retirement packages as temporary restructuring aid—will come to an end. They will be phased out over the next four years.
Fiat Chief Executive Sergio Marchionne, for example, has asked for another round of long-term cassa subsidies for his workers who will be furloughed as he retools factories currently operating below 50% of their capacity.
The left-wing CGIL union complains that workers in the tourism sector will suffer, because they used to apply in advance for benefits during the off-season, but now must wait until they have lost their jobs.
Fearing that a future government might postpone her overhaul of Italy’s welfare rules, Ms. Fornero insisted that ASPI go into effect Jan. 1.
“Delay is death in Italian politics,” she said. “Once ASPI is up and running, people will see its virtues and it will be harder to dismantle.”