1. Macroeconomic Conditions and long term trends in Employment, Wages and Mobility

1.1 Employment From the end of the 70’s to the early 2000’s the employment cycle in Italy had two long periods of growth, from 1983 to 1990 and from 1994 to today, interrupted by a strong recession from 1991-1993. The first growth phase was marked by steady GDP growth accompanied by a very modest increase in employment, with 3-4 percentage points difference in 1984-89 (it was described as “jobless growth”; see figure 1.1). In the early 1990s Italy was hit by the most severe recession since the second world war in terms of job losses. During the crisis of the early 1960s, which put an end to the so called “economic miracle”, total employment declined by 640,000 full-time equivalent units; now the cumulative fall reached 1,080,000 units (Brandolini et al, 2006). The high drop in employment was not mitigated by job creation in the public administration, nor in State owned companies. Moreover, layoffs were easier – thanks to the 1991 reform of collective dismissals (see below, section 2) – and a drastic restructuring process continued till 1995. The subsequent recovery, in contrast with what observed in the first growth phase, was marked by strong trends in employment – that took advantage of a period of salary moderation and labour market reforms – and a modest increase in GDP. Fig. 1.1 shows that from 1996 on employment started increasing again, with growth rates similar to the GDP. Beginning in 2000 this trend inverted and the employment growth rate exceeded GDP growth – which, while remaining positive, was clearly in decline. The elasticity of employment to GDP in the years post-1994 was about 0.7%, almost double with respect to 0.38 % that characterized the phase of “jobless growth”. Fig. 1.1. Growth rates of GDP, employment and Bank of Italy’s coincident indicator of the Business Cycle