Protection and Labor Market Segmentation
Labor market is often presented as "segmented": on the one side, there supposedly are the standard workers, employed under open-ended contracts and protected in the event of dismissal, on the other side, non-standard workers, with fixed-term contracts, project contracts or temporary agency work contracts, who generally are in lack of adequate protection.
Valerio De Stefano (Department of Legal Studies), in an article entitled A Tale of Oversimplification and Deregulation: The Mainstream Approach to Labor Market Segmentation and Recent Responses to the Crisis in European Countries recently appeared on Industrial Law Journal (vol. 43, no. 3, September 2014. doi: 10.1093/indlaw/dwu014), deals with labor market reform policies aiming at tackling such alleged "dualism".
De Stefano recalls that there can be different explanations for labor market segmentation. According to the mainstream opinion, its main cause lies in the fact that protections granted to standard workers are too strong, so that employers would be reluctant to hire new employees under standard open-ended contracts, in particular in a context of economic uncertainty. This approach has been shared by several international and European institutions and by various national legislators, such as those of Italy, Spain and Portugal.
Supporters of this approach, therefore, propose to reform labor law in order to redistribute protections among workers: protections which standard workers are entitled to should be reduced, while at the same time those granted to non-standard workers should be increased. In this context, it is maintained that it is necessary to promote "flexicurity": in other words, it is proposed to shift from a system based on job-security to a more flexible system, in which security comes from the possibility to find a job on the market.
De Stefano's article shows the limits of the traditional approach to the issue of labor market segmentation, based upon theories developed in the USA, which cannot be easily transplanted in Europe. The Author, on the contrary, reports on alternative theories, drawn from economic literature, which can better explain the same case.
De Stefano, then, examines the reforms adopted in last few years in Italy, Spain and Portugal and notes that the objective of balancing protections has not been reached, since standard workers protections have for sure been reduced, but those granted to non-standard workers have not been adequately strengthened: in some cases, they have instead been diluted. It is further highlighted that reforms concerning decentralization of collective bargaining could even emphasize, rather than reduce, the dualism between standard and non-standard workers.
The article also considers the proposal to introduce a "single-permanent contract", providing for a sort of long probation period (even two or three years) and the access to protections typically available to standard workers only after its completion. With reference to this proposal, De Stefano recalls, among other things, that such a law could be deemed in breach of the relevant international obligation, as already happened to a French reform that provided for a similar kind of employment contract, that was indeed repealed in 2008.
De Stefano concludes, therefore, that the mainstream approach to labor market segmentation, as well as reforms adopted in last few years in various European States, need to be reconsidered, also because they do not properly take into account workers' fundamental rights.