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Italy's labour reforms will boost youth employment

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Italy's labour reforms will boost youth employment
Prime Minister Matteo Renzi wants to make it easier for companies to hire and fire employees. Jobs photo: Shutterstock
13:42 CEST+02:00
Prime Minister Matteo Renzi's controversial labour reforms will be painful in the short-term but will eventually boost jobs, especially for young people in Italy, an economist told The Local.

Renzi on Tuesday managed to crush a revolt in his Democratic Party over plans to make it easier for companies to hire and fire.

The labour reforms are a key part of his plans to revive Italy’s economy, which is among the most stagnant in the eurozone.

The support from his party members - who voted 130-20 in favour of the so-called Jobs Act - came the same day it was revealed that unemployment among 15 to 24-year-olds hit a record high of 44.2 percent in August.

Under the proposals, employees’ right to have their job back will be severely restricted, while staff benefits will be tied to the time spent working for a company.

The debate also saw the 39-year-old premier branded a "Thatcherite" for his proposal to scrap legislation that makes sacking long-term employees of companies with more than 15 staff complicated and, at times, prohibitively expensive.

Despite the outcry, Christian Schulz, a senior economist at investment firm Berenberg, told The Local that the reforms were crucial for getting the economy back on track and that the ability for firms to hire and fire has a “clear advantage for investors”.

“Very often such labour market reforms cause pain in the short-term, as companies may use easier firing rules to downsize,” Shulz said.

“But after a year or so, companies will start hiring again because the cost will be down.”

Young people, who are currently excluded from the labour market due to policiies protecting older employees, will be the main beneficiaries of the reforms, he added.

“Companies don’t hire young people because they can’t fire the older workers,” Schulz explained.

Shulz commended Italy for its efforts in pushing ahead with labour reforms, saying “we’re more optimistic about Italy than we are about France.”

“It’s very difficult to compare labour market reforms, but to me it’s pretty clear that France has not done enough. Neither had Italy, but now Italy’s catching up,” he added.

READ MORE: Youth jobless rate hits record high in August

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