By Giuseppe Fonte

ROME (Reuters) – Italy plans contested legislation that will make it easier for firms to hire workers on short-term contracts, as part of a set of measures aimed at boosting jobs and families’ purchasing power, including tax cuts for middle- and low- income workers.

Prime Minister Giorgia Meloni has convened a cabinet meeting to approve the package on May 1, International Workers’ Day.

Government officials said some 3.4 billion euros ($3.73 billion) would go to reduce this year the so-called tax wedge, the difference between the salary an employer pays and what a worker takes home, with the benefit going to employees with an annual income of up to 35,000 euros.

The Treasury will fund the scheme by marginally raising the 2023 budget deficit to 4.5% of gross domestic product (GDP) from 4.4% under current trends.

Rome also intends to soften rules limiting job contracts of between 12 and 24 months and abolish from Jan 1, 2024 a “citizens’ wage” poverty relief scheme introduced in 2019, under a draft seen by Reuters.

“The package cuts anti-poverty resources and expands precarious work. Approving it on May 1 is a provocation,” opposition Democratic party lawmaker Antonio Misiani said.

The government says in the draft that more flexibility allows firms to adapt to the uncertainties of the market, while critics say the proliferation of short-term contracts increases job insecurity and makes people anxious about the future.

Meloni plans new welfare programmes at a cost for taxpayers of 7.7 billion euros in 2024, around 12% less than the 8.8 billion earmarked for the citizen wage scheme.

Poor people aged between 18 and 59 will be able to apply for 350 euros per month for no more than 12 months.

The citizens’ wage scheme provides an average of around 550 euros per family and has no expiry date provided recipients do not refuse job offers.

Meloni wants to replace the scheme to force able-bodied people to look for work.

Needy families comprising disabled people, minors or people aged at least 60 will be eligible for more than 500 euros for a maximum of 30 months.

A further tax break valid until December is designed to encourage entrepreneurs to hire young people who are neither working nor studying.

OECD data shows that 26% of Italians aged 15 to 29 in 2021 were in a category known as NEET — Not in Education, Employment or Training — far higher than the European Union average.

($1 = 0.9114 euros)

(Editing by Gavin Jones)

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