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Friday, September 14, 2012 2:31 AM


Reader Comments on Italy's Insane Labor Rules


In response to Why OMT Cannot Possibly Solve Anything; Italy's Insane Labor Rules, I received a nice email from reader Andrea who is from Italy but now lives in France.

Hi Mish,

I read with great interest your post on this topic and as you can imagine (probably expect) I have some comments to offer.

Your article is totally correct except for minor, insignificant details.

Amazingly, the Wall Street Journal report you cite actually underestimates (yes, under!) the burden of bureaucracy that Italian entrepreneurs have to deal with, and the time they spend with it.

Italian entrepreneurs are heroes. They have many  problems:

  • Very high cost of energy
  • Lack of infrastructure (bad roads for example)
  • Massive bureaucracy
  • Civil justice system completely dysfunctional (I do not have exact figures but the average delay to end a civil judgement is much above the European average)
  • Public administration pays invoices with huge delay
  • High pressure from criminal organizations in some parts of Italy
  • Lack of financing
  • Very complex and sometimes contradictory laws
  • High level of corruption within public administration and politics

Article 18, a  section of the Workers Statute makes layoffs for economic reasons very, very difficult and it is applicable to companies that have 15 or more employees.

This is a major reason why Italian companies have so few employees. The other one is that Italian company are mainly family run.

However, there is a workaround (be aware that Italians always have workarounds!) and the workaround explains the preponderance of micro-companies.

Many people today are hired with temporary contracts. With "projects contracts" the worker is not on the payroll of the company: rather the worker appears as a "consultant", hired for a certain period and has (in many cases) his "VAT number" to invoice the employer.

Contract work has much lower social protections and is widely spread among the youngest people.


That said, Italians entrepreneurs are heroes, because most of the small ones in the most competitive and unprotected environments put mortgages on their homes to get financing to make their companies survive during this period.

Despite the business-hostile environment, Italy is the third leading exporting country in Europe, behind only Germany and France.

Germany Exports
France Exports
Italy Exports

Put Italian entrepreneurs in a business-friendly environment and they will create great companies and great value, as they did after WWII.

Best regards,

Andrea
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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