Does labour law actually produce equality among workers? A tentative law and economics approach to the question of coherence between the protective rule's egalitarian ratio and its effective consequences

The purpose of this paper is to deal with the problem of labour law effectiveness, i.e. the comparison between the protective rules’ reasons for existence and their practical effects.

The paper briefly reviews the most important economic models from which arguments can be drawn in support of (or against) the coherence between labour law aims and effects, particularly focusing on the principal/agent model, which considers the work contract as partially functioning as a sort of insurance policy aimed to guarantee a certain degree of equality among workers notwithstanding their different ability and luck. The paper then assumes the traditional labour law commitment to building equality among workers as a test‐bench of the labour law effectiveness. It then proposes a crucial test for the equalization principle's practical functioning: when is it fair to dismiss an inefficient worker? The paper analyses the current mechanism of judicial application of just cause for dismissal, showing how, in its Italian version, it actually causes the most rigid courts’ orientation – instead of the average one, or the median one – to be assumed by employers and employees as a benchmark for their behaviour in case of litigation.

This mechanism appears theoretically coherent with the guarantee, traditionally pursued by labour law, of equality among workers independently of the differences among their performances; but this effect is based on the prerequisite that they are hired “under the veil of ignorance” about the efficiency of their future performance; this is why this effect can operate only within the firm where they are employed. Outside the firm, in the external labour market, the same traditional mechanism causes an effect of exclusion for the worker whose lack of efficiency is already visible. The paper concludes that the best effective guarantee of welfare for the worker who turns out to be the loser in the natural or social lottery is today given – rather than by a strong protection of stability of the work relationship – by a system of education, professional training, information and intensive assistance in the labour market, capable of reducing as much as possible, or even eliminating, his/her deficit of initial endowment or handicap, either pre‐existing or acquired.

The paper offers insight into the issue of whether labour law actually produces equality among workers.