The Unintended Consequences of Italy's Labour Laws: How Extensive Labour Regulation Distorts the Italian Economy

Abstract

Simple solutions to complex problems often have unintended and undesirable consequences. An example is Italy's approach to combating unemployment. Rigid laws designed to protect the employed perversely discourage businesses from hiring and people from working. They also encourage precarious temporary employment among young people, informal work, and under-the-table deals that compromise worker benefits. The numbers of Italy's unemployed and of those outside the workforce are much higher than official estimates suggest. Italy's employment protection legislation - arguably the most restrictive in Europe - creates that which it seeks to prevent: the insecurity of unemployment. © 2013 The Authors. Economic Affairs © 2013 Institute of Economic Affairs.