THE CGIL PLAN FOR JOBS AN EXTRAORDINARY PLAN FOR YOUTH AND FEMALE EMPLOYMENT

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1 THE CGIL PLAN FOR JOBS AN EXTRAORDINARY PLAN FOR YOUTH AND FEMALE EMPLOYMENT OVERVIEW The structural nature and the long duration of the crisis, the deep social and economic depression, still heavily affecting Italy, require a shock therapy able to mobilize extraordinary energies and resources in order to generate optimism. It is about creating jobs in order to restart growth. It is necessary to reduce youth and female unemployment (a real waste of the potential opportunities of Italy), by reactivating the inactive population (particularly youth and female), which was a pre-existing problem of Italy already before the crisis. The general idea is to generate NEW DEMAND (by increasing employment, salaries, consumption and investments), by promoting at the same time NEW SUPPLY (new economic sectors, new collective consumption, new skills, etc.) for a future development. We need to design policies that meet the social needs, in order to reduce the territorial disparities, improving the quality the public services, creating new economic activities, also in the market. It is about a policy against inequality, with the female employment issue and the emerging youth issue at its heart. We do not believe that these proposals are impossible to implement because they have always worked when they have been implemented in the past. We can refer to the American New Deal, the English Beveridge Plan, the centre-left policies of early '60 (largely urged by the CGIL Plan of Job in 1950), the Italian law on youth employment n 285 of

2 THE SOCIAL AND ECONOMIC SITUATION OF ITALY IN THE MIDST OF THE CRISIS Between 2008 and 2015, there were 1.6 millions fewer jobs (source: ISTAT, the Italian National Office of Statistics, National accounts, Unità di lavoro equivalenti). In 2015, the area of suffering and discomfort people (unemployed people; discouraged people available to work; employed on wage guarantee fund; valueadded tax (VAT) for low income, involuntary precarious and part-timers) amounted to over 9.3 millions (+ 3,7 millions compared to Source: Giuseppe Di Vittorio Foundation on ISTAT data processing). From 2007 to 2015, people leaving in conditions of extreme poverty increased from 1,789,000 to 4,102,000 (+2,313,442). Young people leaving in extreme poverty has tripled. In the South of Italy, 4 poor families out of 10 now live in poverty (source: ISTAT). The inequality index in the national distribution of income (equivalent), already very high before the crisis starting from 2008 to 2014, rose from 31,9 % to 32,6%. The inequality index in the pro-capita distribution of wealth rose from 63,2% in 2008 to 65,6% in 2012, and then dropped to 63,3% in 2014 (source: Bank of Italy). Compared to 2007, people with low income who give up care have increased to about 11 millions (+5.5 millions. Source: CENSIS). In 2015, and for the first time since World War II, life expectancy at birth decreases significantly, the mortality rate is higher and rate births is at an all-time low since the Unification of Italy. (Source: ISTAT) In 2015, the real GDP of Italy is lower of 8,3 points than 2007 (140 billions of Euros less, source: ISTAT). From 2008 to 2015, fixed investment in the Italian private sector plummeted by 30% and investments in the the Italian public sector of 27.8%, thus contributing to lower GDP more than other components of the aggregate demand (source: ISTAT), putting the loss of the potential fixed capital formation at 300 billions of Euros. PROCEDURES FOR THE EXTRAORDINARY PLAN The implementation of the Plan includes the establishment of a National Agency (with a Steering Committee where both social partners and local governments representatives participate). The Agency manages extraordinary funding in relation to the territories, following the action areas identified by the Plan and distributing them according to percentage of youth, female and structural unemployment at local level. The general areas then become priority projects to be defined by the local governments which activated a dialogue with social partners, employers associations, cultural and environmental associations, professional associations, and research and universities centres. The extraordinary funding must be topped up by European funding and public resource already existing, Cassa depositi e prestiti, bilateral system resources (bilateral institutions, building schools, etc.) The extraordinary Plan and priority projects become the reference for the ordinary policies as well (active labour market policies, Youth Guarantee, universal civil service, etc.). The 2

3 general objective of the extraordinary Plan is, therefore, to activate further public and private funding, both on the demand and supply side and to achieve schemes for social participation in the elaboration of projects. CONTENTS OF THE EXTRAORDINARY PLAN The plan targets female employment (all age groups), youth employment (age group between 20 and 39) and the long-term unemployed. a) 20,000 open ended contracts 1 researchers. Sectors of intervention: renewable energy cycles; re-use of materials (waste, circular economy, new materials, etc.). Activities and private sectors to boost: green economy and circular economy, green high-level professionals, private research, engineering, chemistry and telecommunications. b) 100,000 open ended contracts in the Public Administration. Sectors of intervention (al least for the first five years): digital integration of public administration, to increase diagnostic performance in the public health, to increase educational projects against early school leaving. Activities and private sectors to boost: services, biomedical, publishing. information technology and business c) 300,000 extraordinary contracts, called years. Sectors of intervention: earthquake prevention, land maintenance and reclamation, care of the coasts and beaches, social structures for children, active ageing and not self-sufficiency, marginalization and permanent education, social housing renovation. Activities and private sectors to boost: sustainable building, infrastructural facilities, new expertise in town planning and design, social sector professions. d) 100,000 three-year contracts. Sectors of intervention: cultural and archaeological heritage (in particular, in Information and technology implementation and fruition of the cultural and archaeological heritage), digital access for all, Italian language for migrants. Activities and private sectors to boost: tourism, enhancing schools and universities, software and hardware production, local transport. e) 60,000 employed in new youth and female cooperatives, covered by the collective bargaining agreement (composed by at least 50% of young people, women and long-term unemployed), receiving administrative and bank credit facilities with a non-refundable bonus of 20,000 Euros to each member belonging to the above mentioned groups. Sectors of intervention: organic farming, on farm tourism, cultural production, protection of natural resources and forestry, family care. 1 The open ended contract with increasing entitlements is a new form of contract introduced with the Jobs Act by Matteo Renzi' government. In case of unlawful dismissal, reinstatement is not more possible for workers hired with this contractual arrangement, instead they will receive financial compensation based on the worker's length of service. 3

4 Activities and private sectors to boost: agriculture, household services, furniture industry (wood). f) 20,000 additional jobs in new youth companies receiving administrative and bank credit facilities with a a non-refundable bonus of 20,000 Euros to each member belonging to the the above mentioned groups. Activities and private sectors to boost: energy conservation and energy efficiency, creation of new technological devices for the territory, social housing. Activities and private sectors to boost: building, energy, software house, co-working and sharing economy. EXPENDITURE AND MULTIPLIER EFFECTS: A MACROECONOMIC SIMULATION The amount of funding needed to implement the extraordinary Plan is approximately 10 billions and 149 millions Euros per year (i.e., about 30 billions and 448 millions per three years), of which 2 billions and 424 million per year for open ended contracts. From the econometric perspective, for example, investing 30 billions Euros in the extraordinary Plan during the period would imply : Using public funds for new contracts in the public sector, namely new work-related income (including fixed term work for the duration of the Plan), accompanied by new public investment and a more efficient management of public resources, even redirecting, reorganizing, reassembling and re purposing the public spending already foreseen. Calculating some cause-effect relationship: new jobs in the public sector would result in an increase of the global salary levels, in new savings and namely new consumption; the consumption expectations lead to the purchasing of new production tools, namely to an increasing of private fixed investment (accelerator effect); increase of employment in the private sectors where investments were used and growing of income for new employed and, consequently, for consumption and investments, i.e effective demand and national income ( the income multipliers effect); new consumption lead to a moderate price increase as well, by devaluing, thus, the public debt and net indebtedness in the Public Administration, measured as a ratio of nominal GDP ; the new employed employees and inflation, in addition to new revenue into the national budget, will tend to drive public and private workers towards new nominal pay rises, increasing, thus, the labour unit cost and, at the same time, reducing inequalities in the distribution of income, with effects on consumption and savings. From the fiscal and budgetary perspective, the extraordinary Plan increases the sustainability of public accounts and namely of public debt, which would reduce in over a three year period even more than the objective set by the Italian government, due to new nominal GDP growth and new tax revenue resulting from new jobs and wage increases. 4

5 In terms of employment, a public expenditure commitment of 30 billion Euros for 520,000 ( new public jobs and 80,000 private jobs (cooperative and startups) can generate additional 1,368,000 ( jobs, in the public and private sectors, i.e. jobs created directly and indirectly. The unemployment rate would drop to 4.8% in Over a 3 year time the total growth of the real GDP could amount to 5,7 points, i.e. an increase of 186,7 billion Euros of nominal GDP compared to the growth trend. Impact of the extraordinary Plan on employment and GDP (index numbers 2007 = 100) Key: GDP Employment rate GDP (with the extraordinary Plan) Employment rate (with the extraordinary Plan) Source: ISTAT and CER data processing 5

6 Annual percentage changes The Italian Government forecasts (DEF, April 2016) The Extraordinary Plan scenario GDP 1,2 1,2 1,3 3,2 1,1 1,3 Imports 3,2 4,3 4,0 6,9 2,3 2,6 Household consumption 1,0 1,3 1,4 1,4 0,6 0,8 Public consumption -0,1-0,4 0,8 10,7-0,3 0,8 Gross fixed capital formation 2,5 2,8 2,5 10,6 4,6 2,7 Exports 3,8 3,7 3,5 0,8 2,1 3,0 GDP deflator 1,4 1,7 1,7 1,6 1,9 1,8 Inflation 1,8 1,8 1,8 1,4 2,0 2,0 ULCP 1 (private sector) 0,5 1,5 1,1 1,9 2,7 1,7 Employment 0,7 0,7 0,6 3,9 1,2 0,6 Unemployment rate 10,9 10,4 9,9 8,3 5,7 4,8 Net debt of Public Administration % GDP -1,8-0,9 0,1 0,9 2,3 2,9 Primary surplus % GDP 2,0 2,7 3,6-2,5-1,2-0,3 Public debt % GDP 130,9 128,0 123,8 129,3 127,7 125,2 Source: ISTAT, MEF and CER data processing 1 Unit labour cost productivity 6

7 FINANCING There are several possibilities sources of financing for the extraordinary Plan. It is to be noted that the Government spent about 34 billion in the period , of which 6.9 on an annual basis(mainly in terms of income losses) for measures like the tax relief for new open-ended contracts with increasing entitlements (introduces with the Stability Law 2015), structural reduction of IRAP 2, cancellation of TASI 3 for high valuable housing, The first possibility is to change European policies by supporting the ETUC's proposal of an investment plan A new path for Europe (a public investment plan amounting to 260 billion per year over 10 years, directly from EU). The overall objective would be to demand the revision of the Stability Pact (excluding public investments for priority objectives) or at least suspending the Pact over at least three years. The second possibility is about the introduction of a progressive wealth tax, according to the proposal already made by the CGIL (additional income of 20 billion per year). The third option is a breakthrough in the structural reduction of tax evasion, by proposing to transmit, by means of an app, VAT invoices to the Italian Revenue Agency, see The CGIL's 25 proposals to combat tax evasion. RESOURCES ALREADY COMMITTED BY THE ITALIAN GOVERNMENT Tax relief for new open-ended contracts with increasing entitlements (Stability Law 2015) Reduced tax relief for new openended contracts with increasing entitlements (Stability Law 2016) Deduction of labour costs from IRAP (LS2015) Abolishment of property tax for luxurious dwellings ,4 4,9 5,0-0,8 2,1 Structural funds (on an annual basis) 2,7 5,6 5,6 5,6 1,3 1,3 1,3 1,3 Total 7,4 12,6 14,0 6,9 2 Regional Productive Activities Tax 3 First home property tax 7