John Cochrane: Sand in the gears

Thanks heaps to John Cochrane for discussing ‘Employment, Italian Style.’ This will curl your hair: 


Once you hire employee 11, you must submit an annual self-assessment to the national authorities outlining every possible health and safety hazard to which your employees might be subject. These include stress that is work-related or caused by age, gender and racial differences. You must also note all precautionary and individual measures to prevent risks, procedures to carry them out, the names of employees in charge of safety, as well as the physician whose presence is required for the assessment.

Once you hire your 16th employee, national unions can set up shop. As your company grows, so does the number of required employee representatives, each of whom is entitled to eight hours of paid leave monthly to fulfill union or works-council duties. Management must consult these worker reps on everything from gender equality to the introduction of new technology

Hire No. 16 also means that your next recruit must qualify as disabled. By the time your firm hires its 51st worker, 7% of the payroll must be handicapped in some way,…

Once you hire your 101st employee, you must submit a report every two years on the gender dynamics within the company. This must include a tabulation of the men and women employed in each production unit, their functions and level within the company, details of compensation and benefits, and dates and reasons for recruitments, promotions and transfers, as well as the estimated revenue impact….

This kind of thing is hard to track down. You cant easily find a prepackaged ‘list of regulatory sand in the gears lowering productivity and employment in Italy,’ the way we can find (statutory) tax rates, spending numbers, interest rates, and so on.  So like the drunk in the old joke, looking for his car keys under the light even though he knows he dropped them a block a way, much economic discussion focuses on those headline issues (‘Stimulus!’ ‘Austerity!’ ‘Bailout!’ ‘Leave the Euro!’ ‘Raise/lower taxes!’) and ignores all the sand in the gears.

The journal writes, 

All of these protections and assurances, along with the bureaucracies that oversee them, subtract 47.6% from the average Italian wage, according to the OECD.

This is what “structural reform” entails. It is hard to imagine Italy reversing this decline until the population has suffered severely.

1 thought on “John Cochrane: Sand in the gears

  1. Regulation is necessary. However, excessive regulation can, and sometimes does, create more problems than it solves. From reading this article, it seems that Italy has extremely excessive regulation. I certainly hope that here in the U.S. of A., we will never have regulation that is that excessive.

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