Getting Skills Right in Italy

By Fabio Manca

Italy has only just started to recover from the Global Financial Crisis with moderate improvements in both economic growth and labour market performance. While the crisis put an extraordinary stress on Italy’s productive system and its labour market, some of the causes behind the current economic weakness are deeply rooted in the Italian economic and social fabric and started well before the global financial crisis. Of key importance amongst these is the distance between the skills developed in the education system and those required by the productive sector.

Developing better skills and using them effectively can play a major role in revamping stagnant productivity growth in Italy and promoting a more inclusive labour market.

The OECD has recently released the Getting Skills Right: Italy report which takes a close look at the various dimensions of skills imbalances in Italy, while also assessing the effectiveness of recent reforms aimed at spurring a better skill match in the country.

Skill mismatches and shortages are pervasive in the Italian labour market. Some 18% of workers in Italy hold a qualification that is below the requirements of their job. More surprisingly, despite Italy’s disappointing performance in the OECD Survey of Adults Skills (PIAAC), one in five workers are in jobs that require a lower qualification than the one they hold and one in three are working in a field unrelated to their studies. These disappointing results are linked to the weak demand for high-level skills by many small and medium-size firms whose productivity, degree of internationalisation and use of new technologies is low. Italy is thus trapped in a low skill equilibrium where the supply as well as the demand of skills are low by international standards, hindering the productivity and competitiveness of the country.

To give an example, recent analysis stemming from the OECD Skills for Jobs database  (Figure 1) shows that technology advanced economies such as Finland, Sweden and Denmark have already undergone substantial changes in the way they organise work. This has helped support the introduction of new technologies, reduce costs and improve productivity and, more generally, adapt to the workforce challenges brought about by the mega trends of digitalisation, globalisation and rapid population ageing. These are also the countries where the demand for high-level skills in the field of Administration and Management is stronger.

Italy is found, instead, in the bottom-left corner of the chart and in a low equilibrium where, on the one hand, the majority of firms have not yet been able to adapt their workplace with innovative solutions to adopt new technologies and, on the other hand, the demand for management skills (administration, leadership or management of resources) is low.

In light of the many skill challenges, the Italian Government recently launched a set of comprehensive reforms to strengthen the functioning of the labour market (the Jobs Act), the education system (la Buona Scuola) and the industrial system (Industria 4.0). These reforms are interconnected and show many potential synergies and should potentially contribute to reduce skill imbalances by strengthening the linkages between education providers and the world of work, and boosting the demand for high-level and technical skills.

However, as discussed in Getting Skills Right: Italy, a number of implementation challenges remain. These include:

• The new introduction of mandatory internship periods for all upper-secondary students in Italy (Alternanza Scuola Lavoro). This reform aims to create stronger links between Italian schools and the world of work. An effective implementation of the reform, however, needs much more co-ordination between school managers and firms and clearer guidelines on the role of all stakeholders involved.
• The new measures of the Plan Industria 4.0. These measures aim to stimulate the adoption of new technologies such as Big Data Analytics, Cloud Computing, Industrial Internet, Additive and Advanced Manufacturing (i.e. 3D printing and interconnected robots) through a mix of public and private investments in new infrastructures, R&D initiatives and programmes to upskill the Italian workforce. However, Italians lack ICT skills and managers in small firms are not yet prepared nor adequately informed to adopt these technologies. While much needs to be done to upskill Italian workers and the managers, much remains to be done to align funds for adult learning to develop skills in high demand in the labour market.
• The important switch from passive to active labour market programmes (ALMPs) in Italy and the creation of the new Agency for Active Labour Market Policies (ANPAL). The latter is now in charge of finding ways to accompany jobseekers in the development of work-relevant skills. The current limited resources and weak infrastructure for ALMPs are a challenge to the effectiveness of reform. The development of skills profiling tools (already underway) could help PES case workers to streamline their activities and provide more tailored and effective support to the unemployed. Co-ordination challenges may also arise as ANPAL is sharing the responsibility for the delivery of ALMP with regional governments that have very different administrative capacities.