Sunday, April 01, 2012

Cliches of 2012 #3

"The labour market in countries like Spain and Italy is too inflexible".

If you could pocket a tenner each time you hear the above cliche', you'd probably be rich enough to qualify for one of George Osborne's nice tax cuts.

The same myth was perpetuated a hundred times more last week during the spectacularly superficial and Anglocentric media coverage (six-grade references to siesta and the rest) of Spain's general strike against the country's sweeping labour reforms.

Just to give you an idea, the only aspect of Rajoy's pre-Victorian reform that the the lazy British media (left and right) bothered to mention was that it will now be cheaper to fire workers. That is to say, the least unreasonable pillar of Spain's new employment legislation but - alas - a devastating one in the full context of the slew of 19th century measures imposed by Spain's right-wing government.

Not a word on the fact that now companies can unilaterally impose pay cuts (illegal in Britain), that backpay is abolished (illegal in Britain), that protection against unfair dismissals have been kicked into oblivion (coming up, in Britain), and much much worse (see here for a more detailed idea).

In Italy and Spain, the story goes, workers enjoy too much protection. In other words, the labour market is too "rigid", which is why investors are put off, and hopes of economic recovery go down the drain. Nice, simple and linear. Like most of the pap that you routinely hear from the free-market zombies.

However, it's about time this ignorant, lazy and contemptuous myth was laid to rest.

Let's start from Italy.

A bit of background will do no harm. In 2002, the old Berlusconi government passed a labour reform known as "Legge 30". The logic was that the Italian labour market was, that's right, too inflexible, and that companies should be allowed to hire and fire without red tape. "This will stimulate growth", was the messianic certainty.

Sure enough, overnight Italy saw an exponential rise in various types of casual contracts (contratti atipici, "non-standard contracts"). One of the most infamous became known as "project-based contract" (contratto a progetto).

A contratto a progetto is a legal monstrosity where an ongoing employment relation is turned into a make-believe "project" where staff are entitled to nowt: no holiday, maternity leave, sickpay, pension entitlement, notice of termination, statutory redundancy, nothing. Not even the guarantee to expect a regular wage. That would come at the employer's discretion, only on condition that "the project be fulfilled", whatever that means.

Note that any company in Italy can take on board as many workers "a progetto" as they please. Yet, most of the Anglophone press keep claiming that the Italian labour market is 'inflexible'.

On another level, when Legge 30 was brought in ten years ago, its supporters fended off criticism by saying that a contratto a progetto would constitute "good flexibility": a foot in the door of employment that would force job-seekers to "pull their finger out" and help Italy's stunted economy at last.

Nine years down the line, foreign companies are continuing to shun Italy. Quite obviously, what has been putting them off isn't the labour market, but a range of other reasons such as organised crime, clientelism, third-world infrastructure and stifling bureaucracy.

In the meantime, official figures point out that 76.3% of all employment contracts signed in Italy since the reform have been "non-standard", and that only 6% of them were ever converted into permanent ones.

Compared to ten years ago, there is now the added burden of 6 million extra workers on "precarious" contracts whose lack of employment stability makes them ineligible for mortgages. Add their chronic lack of purchasing power (most new contracts are the wrong end of 1,000 Euros per month), and you can see why the Italian economy is heading for a future of depression.

Even more dramatically, there is now a ticking bomb of millions and millions of people (today's 20 to 40-somethings) who will reach retirement age without a single Euro put aside for retirement. And that's because, in the name of flexibility, companies hiring "a progetto" pay little to nothing towards social insurance.

Yes, it's still true that the older generations may still enjoy secure contracts, but their number is dwindling and their impact on the wane, as each of them retires to be replaced one by one by a new "casual" recruit.

The picture is not dissimilar in Spain.

The only difference is that the economy there boomed like no other in the EU until 2007.

The free market zombies go on about Spain's "inflexible rules", but if that was true, how did Spain manage to create more than half all jobs in the EU in the period 2001-2006?

Many of them, of course, were temporary (the Spaniards call them contratos basura, "throwaway contracts"). Statistics at the end of 2009 showed that the number of Spanish workers on contratos temporales was well ahead of the rest of the EU, especially amongst the young.

Again, companies have been free to hire virtually as many people as they wanted, all on contratos basura, and all without fear of crippling statutory payouts. In 2006, the unions denounced that "almost 90% of new contracts for the young [were] temporary". Which may begin to explain Spain's mental unemployment rates the moment the crisis kicked in, as tons of people were dismissed at the drop of a hat, so much for "rigid labour market".

Of course, Spain's labour reform is doing nothing to address those problems.

Sure, it cuts the ground under the feet of the most protected workers by considerably weakening their protection. But, crucially, in return it offers nothing - not a shred of an improvement - at the most precarious end of the labour market, that is to say, the increasing masses of young and impoverished people with little to no spending power to contribute to the economy.

By introducing unilateral pay cuts, uncertainty is now virtually extended to the entire population. No wonder even consumer groups supported Spain's general strike last week.

Who will give any of them a mortgage if more and more people will only be able to show their bank managers an employment contract that can be ended or mangled on a whim?

How's that supposed to kickstart the economy and avoid an unprecedented depression?


claude said...

Stop being a troll, Jackart. And stop coming up with crap like "if you knew anything...etc"...

You...telling people what they know? The person who famously said that "at least fascist dictators like Franco leave people alone"?

If this is your playground-like way of "debating", then don't be surprised that your substandard comments get deleted.

You don't even read the posts. You certainly didn't read this one.

Because if you did, you'd know that no-one argued in favour of "making it really expensive to fire people". No-one said that, not even remotely, so why the fuck do you write shit?

Which proves that you are a troll, nothing else. Which is why you are banned from here.

"Contributions" (note the inverted commas) like the one you posted above are useless and typical of someone who is blinkered by ideology and just speaks through slogans.

So, for the final time. I get to say who is a troll on my blog and you are one. Find someone else to bore to death. Or, preferably, a hobby.


Stan Moss said...

Me and Daniel sussed him out last year. The guy is a fascist, nothing less.

As well as cognitively challenged. He never actually takes in what he reads.

Seeing him coming back here for more though is quite a picture. Hope you do ban him for good.

Paul said...

Jackart, employed a condescending style that was bound (and probably intended) to irritate. However banning does appear to be more than a bit authoritarian. You have had worse commentators on here such as Anna Chen (whom I actually quite like personally) but she is and has been an unreconstructed apologist for Chinese communism. A regime that murdered untold millions. Anyone can say something daft from time to time.

claude said...

Welcome back, Paul.
How's life treating you?

I don't think it's true what you wrote about Anna. But she'll be able to defend herself no doubt.

For sure, I can say that at least she's got manners, and that she doesn't troll. *Trolling* being the operative word.

claude said...

"However banning does appear to be more than a bit authoritarian. ".

Oh...and Paul, if I need advice about how to run my own blog I'll come and ask, ta.

Stan Moss said...

One year on, and that Jackart buffoon who commented has been proven bang wrong. Evidence that he doesn't know half of what he gobs off.

One year on, and the Spanish employment market is way worse than before. Dole rates are through the roof, GDP keeps falling, and job creation a distant dream.

Right wingers: Fuck off.