Until the 1990s, the Italian employment strategy consisted of two approaches. Recurrent devaluations increased the competitivity of the Italian economy, and the productivity of its labour force was guaranteed by a ‘labour shedding’ approach. Consequently, a defining feature of the Italian labour market since the 1970s has been strong insider- outsider divides between fully protected insiders in the primary labour market, often working in large companies in the industrial sector, and outsiders with insecure positions (Ferrera 1996; Jessoula et al. 2010; Picot and Tassinari 2015). By the early 1990s, the traditional employment policy approach had reached its limits because of Italy’s ambition to enter the European Monetary Union (EMU) (Jessoula and Alti 2010; Ferrera and Gualmini 2004). Italian policy-makers managed to defrost the labour market and recalibrate social policies in the 1990s, but these policy reforms provided only temporary alleviation and most of all introduced selective flexibilization of the labour market. Among the most important reforms of this hopeful period was the elimination of the automatic indexation of wages to prices that was so advantageous to insiders and the reform of collective bargaining in 1992-1993 just after the ‘Tangentopoli’ scandal (Jessoula and Alti 2010). The institutional design of unemployment insurance and the unions’ strategies of wage
setting greatly exacerbated insider-outsider divides, even more as these
insider institutions were not offset by similar activation or integration institutions for outsiders.
Four years later, the centre-left cabinet, headed by Romano Prodi, pushed forward a path-breaking reform of employment policies—the so-called Treu-reform. This reform prompted a ‘selective flexibilization of labour market arrangements: flexibility was pursued ‘at the margin’, by favouring the spread of atypical, flexible job contracts with lower labour and redundancy costs than typical full-time permanent jobs, and by re-launching part-time work. At the same time, the automatic conversion of temporary to permanent contracts was abolished (Ferrera and Gualmini 2004). By contrast, job security for insiders remained untouched (Jessoula 2012), and the security side, that is, unemployment insurance, was not reformed. Hence, temporary employment was to become the dominant form of atypical employment alongside selfemployment, while part-time employment grew at a much slower pace. Within two years, temporary employment rose from 5.1 per cent to 9.3 per cent (Ferrera and Gualmini 2004: 101). Again, the EU, in particular the Maastricht Treaty and later the discussion about EES, exerted a crucial influence in inducing a policy-learning effect among Italian policy-makers (Jessoula and Alti 2010).
After a failed attempt in 2002 by the second Berlusconi government to reduce employment protection for insiders, that is, to reform the famous Article 18 on the Workers Statute, the government continued its line of selective liberalization throughout the 2000s until the outbreak of the crisis in 2008. In addition, the government ended the minimum insertion income, which had established a minimum safety net for outsiders.
Instead, resources were re-directed to ordinary unemployment insurance, which benefits mainly insiders (Jessoula and Alti 2010: 176).
Just as the EU acted as a catalyst for labour market and social policy reforms, the persistent crisis since 2008 acted as a catalyst for labour market and social policy reforms. The crisis has caused unemployment to increase again after a long decline and a rise in employment rates. Flexible workers were the first victims of the crisis, and the shortcomings of ‘selective flexibility’ without security dramatically appeared (Jessoula et al. 2010).11 Although Italy has been repeatedly criticized for its slow reaction to the crisis, a series of reforms has been implemented that re-regulate the use of temporary employment by facilitating the conversion of fixed-term to permanent contracts if the reason for the contract is not naturally limited. For example, the Monti government’s Riforma Fornero (Law 92/2012) introduced restrictions on the use of temporary contracts in 2012, and it improved unemployment benefits for non-standard workers.  However, the following labour market reform, the Poletti decree (Law No. 34/2014), deregulated fixed-term contracts and apprenticeship contracts in an attempt to quickly reduce mass unemployment and at a budget price (Picot and Tassinari 2015). Yet, the most noteworthy and intensely debated reform concerns the revision of Article 18 of the Workers’ Statute intending to reduce employment protection for insiders. After pressure from EU institutions and meeting fierce resistance from trade unions, Mateo Renzi, the prime minister of the left Partito Democratico (PD), replaced Article 18 employment protection for permanent employment with a new contract for new hires that features increasing employment protection according to seniority of employment (Picot and Tassinari 2015).
To sum up, Italy is a strongly dualized country with a selectively flexi- bilized labour market and an insider-biased social protection system. As a reaction, I expect labour market inequality to increase over time.
-  However, proposals to facilitate the integration of young adults into the labour market by creatinga system of vocational training and to introduce active labour market policies were seriously discussed in the wake of the employment crisis in the 1970s (Eichhorst 2007).
-  The influence of the EU is shown in the Legislative Decree 368 of 2001 implementing the 1999EU Directive (1999/70/EC), which eliminated the need for employers to justify the need to limitthe duration of a contract (Jessoula and ALti 2010).
-  Law 30/03 further pursued flexibilization at the margin by introducing a number of new atypicalcontracts (that is, on-call work, job sharing and so on).
-  This can be seen in Fig. 9.1, as unemployment and temporary employment move simultaneously.
-  It also aimed at reducing ‘pseudo self-employment,’ and limiting employer abuse of apprenticeship contracts, which enjoy notable fiscal benefits (Picot and Tassinari 2015).