|
|
Amazing
discrepancies in small business employment in Italy vs. the rest of the EU
will go a long ways towards explaining why Mario Draghi's
OMT plan to "save the euro" cannot possibly work.
I pieced the following analysis together after reading some interesting
comments on Eurointelligence in today's Daily
Morning Briefing.
Monti Warns Italian Unions
Mario Monti warned Italian labour
unions during a meeting in Rome that time was running out for action,
government sources told ANSA. "Greece, Spain, Ireland and Portugal have
boosted productivity and lowered labour costs, turning
around a negative trend, while Italy has not improved productivity and has
increased labour costs," Monti
said. An effort for concrete results is urgently needed from talks between
business leaders and unions, Monti told to the
union leaders. But the biggest Italian union CGIL said "growth cannot
come on backs of workers alone." Monti
reminded unions that only a few weeks remained before the eurogroup
and EU summits in October. The premier called for concrete signals within a
month.
Over 200,000 Jobs at Risk in Italy
Italy’s main small business association found that Italian SMEs may be
cutting 172,000 jobs, the lionshare of all jobs at
risk in Italy from the recession, La Repubblica
reports. Yesterday, the CGIA reiterated that idea. Italy risks having an
additional 202,000 people unemployed in the second half of this year,
relative to the same period in 2011, CGIA data shows. The association says
the tax burden was the main problem - at over 60% for SMEs, and over 55% on
average for Italian companies.
The Five Star Movement Established Itself as Italy’s Third Party
The Movimento 5 Stelle
(M5S) has entrenched its position as the third Italian Party,
according to several polls appear on Il Fatto Quotidiano. The last poll (Ipsos)
shows that the Silvio Berlusconi's party PDL is the second one in Italy, with
21.9%. The first is PD (Partito Democratico)
with 25.4%. Beppe Grillo’s
Movimento 5 Stelle comes
in at 17.9%. Italian analysts compare the M5S to the Greek Syriza. It is opposed to the euro, to austerity, to the
ECB, and wants to regain sovereignty on monetary policy, and favours a default (Icelandic way), followed by
devaluation.
Understanding SMEs
Inquiring minds (mine) had to look up the word "SMEs". It stands for small and medium
sized businesses.
Micro businesses have fewer than 10 employees, small businesses fewer than 50
employees, and medium businesses under 250 employees.
Please consider this EU SME Fact
Sheet
SMEs in Italy – A Brief Fact Check
There are approximately 65 SMEs per 1000 inhabitants in Italy, which is
substantially above the EU27 average of ca 40. In
line with this, the relative importance of SMEs for the Italian economy
exceeds by far the EU average, as illustrated by a considerably
above-EU-average share of persons employed and value added accounted for by
SMEs. It should be noted, that this elevated importance is mainly due to the
micro enterprises, while medium enterprises are, in fact, underrepresented
vis-à-vis the EU average.
Italy SMEs
 
click on chart for sharper image
Italy SMEs vs. EU
·
94.6% of
Italian businesses are "Micro Businesses" vs. EU Average of 91.8%
·
47.1% of
Italian employment is by "Micro Businesses" vs. EU Average of 29.6%
Note those amazing differences, especially point number two. I will explain
why in detail below, but union work rules are at the very heart of it all.
The SME comparison stats are from 2005, but if anything, I expect they would
be even more lopsided now.
Italy Labor Force
Italy has an estimated Labor Force of about 23 million.
Unemployment Rate in Italy
A loss of 200,000 jobs would raise Italy's Unemployment Rate by about .9 percentage points, from
10.7% to 11.6%.
Italy's Insane Labor Rules
In searching for material on SME's I came across the Wall Street Journal
report Employment,
Italian Style which
helps explain Europe's economic crisis. Here are a few key snips:
Imagine you're an ambitious Italian
entrepreneur, trying to make a go of a new business. You know you will have
to pay at least two-thirds of your employees' social security costs. You also
know you're going to run into problems once you hire your 16th employee,
since that will trigger provisions making it either impossible or very
expensive to dismiss a staffer.
But there's so much more. 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.
Now say you decide to scale up. Beware again: 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, or else your company owes fees in-kind.
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.
Businesses with no more than 250 employees may also still be enjoying their
three-year profit-tax holiday, which was granted in 2010 for small and
medium-sized firms that reinvest their profits in forging
"networks" for "innovation" with other small businesses
nearby.
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. Two-thirds of that bite comes before payroll, meaning many Italian
workers are unaware of their gross cost to employers.
Tax
Holiday Ends
Note the second to last paragraph above regarding the end of the three-year
profit-tax holiday on SMEs.
Italian unemployment is going to soar.
Structural Problems
The EU nannycrats and officials at the ECB think
the problem in Europe is one of interest rates. The above analysis clearly
shows something else.
The first structural problem is preposterous labor work rules in Italy,
Spain, and Greece.
The second structural problem is the ECB and the euro itself. One size
interest rate policy cannot possibly work in a mix of cultures and work
rules.
Instead of fixing work rules or breaking up the eurozone
(both are needed), the nannycrats in Brussels want
higher taxes, the socialists in France want higher taxes, and the radical
left parties want more stimulus and no pension reforms.
Mario Draghi's OMT cannot possibly fix anything.
If "progressives" and union advocates in the US had their way, we
would be in the same shape.
Addendum:
Note to All Facebook Users:
If you have not yet voted for your favorite charity (it costs nothing to
vote), please do so. Chase is giving away $5 million to charity, and I have a
cause that I support.
Please click on this this link: Facebook
Users, I Have a Favor to Ask, then follow the instructions.
|
|
