A Different Type of Liberalization? Italy’s Labour Policy Reforms in the EMU Era

Italy’s labour policy and employment regulation setup has undergone massive changes over the past twenty years – a period overlapping with the preparations to and then membership of the Economic and Monetary Union. From having in place extensive employment protection for those employed in the regular economy, state monopoly of job placement and employment services, income protection of core workers through extensive short-time work schemes coupled with negligible unemployment insurance, Italy now features one of the most liberalized regulatory frameworks for fixed-term workers and has been reducing employment protection for open-ended workers in a substantial way since the beginning of the sovereign debt crisis. This transition has been accompanied by the extension of income protection through unemployment benefits, while short-time work schemes have been extended too, but are planned to be curtailed to shift protection to unemployment benefits even further. Thus after a phase of dualizing-liberalization, the sovereign debt crisis has set in train a process of further liberalization, this time at the core. While sharing some traits with outright liberalization as deregulation, this politically-driven process has involved extension of income protection for the unemployed, thus likening this to embedded liberalization. The paper thus seeks to interpret changes in Italy’s labour policy in the past twenty years in the light of the recent refinements of the VoC literature, contributing to it from the perspective of a country that does not entirely follow the directions of change pertaining to the usually analysed cases in the VoC literature.