Italy’s labour market reforms of 2012: Did they reduce unemployment?

This Working Paper critically analyses Italy’s labour market reforms of 2012 (Fornero Reform). It focuses especially on a measure designed to cut unemployment and labour-market dualism by reducing the protection against dismissal enjoyed by permanent employees.

The main argument of this paper is that labour market reforms focused on promoting flexibility by lowering employment protection had no significant impact on the labour market. There is little evidence that protection for permanent employees actually affected employment levels. The reforms of 2012 were not followed – in the short period for which adequate data are available – by any increase in employment. Nor did the reforms lead to any redressing of permanent to the detriment of atypical contracts. Instead, the trend was for newly employed workers to be recruited on the basis of irregular contracts.