Abstract

In most developed countries the insurance against involuntary unemployment is a pivotal policy for supporting the income of workers. In Italy, it has just a marginal role; furthermore, it is currently questioned for the very low coverage it grants to its target population. In this paper we show that the weaknesses and inconsistencies in the design of the Ordinary Unemployment Benefit (oub), the main unemployment insurance measure in Italy, are even more serious. Exploiting an original database tracing the transitions in and out of the measure, we are able to show that what should be considered its proper use - a benefit granted for episodes of frictional unemployment - accounts for just half of the cases. The other half is absorbed by seasonal work, «permanently precarious» work in the public sector, and temporary layoffs. In the latter case, oub is used as a substitute for the measure specifically targeted to temporary layoffs (the Cassa Integrazione Guadagni) when the eligibility conditions for it are not met, this way hampering the effectiveness of those conditions. Furthermore, it appears that a large share of individuals eligible for oub do opt for a competing measure, nearly equivalent in terms of benefit but not conditional on job search and availability for work - a crucial requirement for oub recipiency, again this way neutralizing its effectiveness. Finally, with a simple accounting micro-simulation we show how the documented (mis)uses of oub do imply a structural imbalance between contributions and benefits across different categories of workers. This evidence raises both equity and financial sustainability issues, that we briefly discuss.