Intervento al convegno promosso dalla Graduate School in Social Economic and politica Sciences in collaborazione con IBM Italia, per l’inaugurazione della terza edizione della IBM Rotating Chair (tenuta quest’anno da Pierre Cahuc) sul tema “Are models of capitalism exportable? “ –  Facoltà di scienze politiche dell’Università di Milano, 18 novembre 2008

            The Yann Algan and Pierre Cahuc paper of 2006 (Civic Attitudes and the Design of Labor Market Institutions: Which Countries Can Implement the Danish Flexicurity Model) has been regarded, in Italy, as a terrible disappointment for all those who believe in the necessity to shift from the old Mediterranean equilibrium to a Northern-European equilibrium in our labour market, i.e. to shift from high protection in the work-place to a system inspired by the “flexicurity” model. But Algan and Cahuc’s warning about the impossibility of introducing flexicurity in a country characterized by a low level of civic attitudes has not been sufficient definitively to cool down the attraction exerted by that labour market model on our low European latitudes.

            In order to overcome this obstacle – or at least to bypass the objection ‑ a group of scholars and politicians who are working on the flexicurity idea, within the Italian Democratic Party, has drawn up a project of employment protection flexibility combined with a strong enhancement of services in the labour market, based on the idea that these services can be both managed and entirely financed by the companies of a determined sector.       The idea is that efficiency and rigor in the management of unemployment benefit and other services (placement and retraining) can be strongly incentivized by the risk of the increase of costs deriving from inefficiency: the longer the unemployment spell, the higher the cost for the enterprises of the sector.

            The project foresees that labour market services for workers laid off for industrial adjustment reasons are entrusted to a “bilateral board”, jointly managed by employers and unions of an economic sector. In this way efficiency and rigor should be guaranteed by the entrepreneurs’ direct involvement, while equity should be guaranteed by the unions’ involvement.

            Moreover, the project provides that the worker laid off is offered an individual outplacement contract, by virtue of which he/she, during the spell of unemployment, will be fully subordinated to the directives and control of the bilateral board, in return for unemployment benefit and retraining services.

            The first question I ask Pierre Cahuc is: do you think that it is possible to cope with the problem of the low level of civic responsibility in the country by means of a sound system of control of workers’ behavior, entrusted to those – the employers – who must finance the workfare system and are more interested in its cost-effectiveness?


            The second question refers to the necessity that the reform of employment protection in the work-place (inspired by the Blanchard-Tirole project of 2003-2004) be immediately combined with the enhancement of security in the labour market. The change cannot be achieved little by little, one step at a time: the change must be achieved simultaneously in every direction, in every part of the system. What we are designing for our country system is not only a labour law reform, nore only a labour market services reform, but both at the same time, because the one cannot exist without the other. This means shifting from one overall equilibrium to another; and we know how difficult a shift of this kind can prove o be.

In our case, the problem involves the shift from a typical Mediterranean equilibrium (characterized by a lack of fluidity in the labour market, high levels of protection for those with good jobs, little protection for those who lose their jobs and therefore limited mobility) to a Northern-European type of equilibrium (characterized by a fluid labour market, low levels of protection of job security, but high levels of services and protection for the unemployed). It is probably impossible to achieve such an equilibrium shift in the whole system overnight.

The idea is that it can be easier to achieve this aim gradually, through the application of the new system only to new work relationships, beginning from a defined date. This idea of reforming employment protection and labour market security applying the s.c. method of layering, was outlined by Gilles Saint Paul fifteen years ago. I ask Pierre Cahuc: can it prove to be a good idea?

Beginning in such a way, would effectively provide the programme with a blank page upon which new employments rights could be written and new labour market services could be designed and built, starting from scratch. The new employer-employee relationship would commence according to the new equilibrium right from the very beginning, but in a limited number of cases: only new hirings would be affected. And at the beginning there would be only hirings and not firings: hence zero costs and the possibility to accumulate a first amount of economic resources; then there would be a few months during which the number of cases of workers needing help would be fairly small, allowing the new bilateral boards gradually to get the assistance and control mechanism into shape.

In this limited, but gradually increasing, area of new work relationships, the system would provide both a new regime of flexibility for companies and of security in the market for workers. The good functioning of the system would be based, at the same time, on effective instruments with which to influence and control the behavior of workers within the labour market, and on a strong incentive for the service providers to maximize their efficiency. It shouldn’t be too difficult to progressively refine the balance between efficiency and equity of this system as the number of workers involved increases.

Is all this realistic, or is it only an unrealistic dream?

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