DISCUSSION PAPER SERIES IZA DP No. 11768 Faces of Joblessness in Italy: A People-Centred Perspective on Employment Barriers and Policies Daniele Pacifico James Browne Rodrigo Fernández Herwig Immervoll Dirk Neumann Céline Thévenot AUGUST 2018 DISCUSSION PAPER SERIES IZA DP No. 11768 Faces of Joblessness in Italy: A People-Centred Perspective on Employment Barriers and Policies Daniele Pacifico Herwig Immervoll OECD OECD and IZA James Browne Dirk Neumann OECD OECD and IZA Rodrigo Fernández Céline Thévenot OECD OECD AUGUST 2018 Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. 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IZA – Institute of Labor Economics Schaumburg-Lippe-Straße 5–9 Phone: +49-228-3894-0 53113 Bonn, Germany Email: [email protected] www.iza.org IZA DP No. 11768 AUGUST 2018 ABSTRACT Faces of Joblessness in Italy: A People-Centred Perspective on Employment Barriers and Policies In the aftermath of the financial and economic crisis, large shares of working-age individuals in Italy either did not work or only to a limited extent. As the employment rate bottomed out in 2013, 32% were without employment during the entire year, and a further 7% had weak labour-market attachment, working only a fraction of the year, or on restricted working hours. This paper applies a novel method for measuring and visualising employment barriers of individuals with no or weak labour-market attachment, using household micro- data. It first develops indicators to quantify employment obstacles under three broad headings: (i) work-related capabilities, (ii) incentives, and (iii) employment opportunities. It then uses these indicators in conjunction with a statistical clustering approach to identify unobserved (“latent”) groups of individuals facing similar combinations of barriers. The resulting typology of labour-market difficulties provides insights on the most pressing policy priorities in supporting different groups into employment. A detailed policy discussion illustrates the use of these empirical results to inform people-centred assessments of existing labour-market integration measures and of key challenges across different policy areas and institutions. The most common employment obstacles in Italy were limited work experience, low education and skill levels, and scarce job opportunities. Although financial disincentives, health limitations and care responsibilities were less widespread overall, they remained important barriers for some groups. A striking finding is that more than half of jobless or low-intensity workers face three or more simultaneous barriers, highlighting the limits of narrow policy approaches that focus on subsets of these employment obstacles in isolation. JEL Classification: C38, H31, J2, J6, J8 Keywords: employment barriers, profiling, activation, policy coordination Corresponding author: Herwig Immervoll OECD 2, rue André Pascal 75016 Paris France E-mail: [email protected] 3 │ ACKNOWLEDGEMENTS This document was produced with the financial assistance of the European Union Programme for Employment and Social Innovation “EaSI” (2014-2020, EC-OECD grant agreement VS/2016/0005, DI150038). It is part of a joint project between EC and OECD (VS/2016/0005 (DI150038), Cooperation with the OECD on Assessing Activating and Enabling Benefits and Services in the EU) covering six countries: Estonia, Ireland, Italy, Lithuania, Portugal and Spain. The results are published in six separate papers and are also available through the project website: http://www.oecd.org/social/faces-of- joblessness.htm. Authors extend their thanks to officials in government administrations of participating countries for the information and support provided during extended fact-finding and country dialogue missions, to numerous independent experts and researchers who provided additional information and advice, and to country experts and the European Commission for comments provided on earlier drafts. Herwig Immervoll coordinated the project and the preparation of this report. All views and any errors are the responsibility of the authors. In particular, the report should not be reported as representing the official views of the OECD, of the European Union, or of their member countries. This project is co-funded by the European Union 4 │ Table of contents 1. Introduction and motivation ............................................................................................................ 6 2. Faces of Joblessness in Italy .............................................................................................................. 8 2.1. Labour-market and social context ................................................................................................. 8 2.2. Target groups for activation and employment-support policies ................................................. 10 2.3. Employment barriers: Summary of empirical results ................................................................. 13 3. Activation and employment-support in Italy: Overall policy stance .......................................... 19 3.1. Income support ........................................................................................................................... 19 3.2. Active labour market policies ..................................................................................................... 26 4. Overcoming employment barriers: Policy challenges and priorities for selected groups ........ 36 4.1. Anatomy of employment barriers for selected groups ................................................................ 36 4.2. Overcoming key employment barriers: inventory of policy measures ....................................... 41 5. Conclusions ...................................................................................................................................... 66 Annex 1: Latent class results for Italy ............................................................................................... 69 Annex 2: Description of employment barriers ................................................................................... 73 Annex 3: The “Jobs act” REFORM package ..................................................................................... 75 6. References ........................................................................................................................................ 76 Tables Table 1. Risk of poverty or social exclusion ........................................................................................... 9 Table 2. Share of people facing different employment barriers ............................................................ 14 Table 3. Potential targets of activation and employment-support policies ............................................ 16 Table 4. Main out-of-work benefits in Italy: entitlement rules, amounts and duration ......................... 25 Table 5. Distribution of PES employees by type of contract and geographical area ............................ 29 Table 6. The “re-integration voucher”: input and outcomes ................................................................. 33 Table 7. Estimated coverage and duration of unemployment insurance before and after the Jobs Act 42 Table 8. The “Active Inclusion Allowance”: input and outcomes ........................................................ 46 Table 9. Number of registered jobseekers: focus on youth ................................................................... 49 Table 10. Employment activation support measures for NEETs: inputs and outcomes ........................ 54 Table 11. Employment activation support for women in the Lazio Region: inputs and outcomes ....... 55 Table 12. Former working mothers: main reason for interrupting their previous job ........................... 62 Figures Figure 1. Employment rate: slow recovery from the crisis ..................................................................... 8 Figure 2. Trends of population groups with potential labour market difficulties .................................. 12 5 │ Figure 3. Composition of the population with potential labour market difficulties .............................. 13 Figure 4. Employment barriers in Italy ................................................................................................. 15 Figure 5. Number of simultaneous barriers ........................................................................................... 16 Figure 6. Share of individuals facing multiple simultaneous employment barriers .............................. 18 Figure 7. Out-of-work benefits for working-age adults in Italy - Recipients .......................................