Labor pains in Italy: the European struggle over flexible employment turns bloody.

• Author: Rocca, Francis X.

That evening the professor came home in the usual way, by train from Modena to Bologna, then by bicycle to his house, less than a mile from the station in the city's former Jewish ghetto.

March 19th is the feast of Saint Joseph, which Italians celebrate as Father's Day, so the 52-year-old father of two could have expected his family to toast him at dinner. As a practicing Roman Catholic, he would have appreciated yet another meaning to the day: Joseph is the patron saint of workers, a group to which the professor had devoted his career as an expert in labor law.

A few minutes from home he cell-phoned ahead to his wife, who awaited his arrival at an upstairs window. But just as he reached the front door, two helmeted men on a red scooter pulled up alongside. The man behind drew a pistol, aimed and fired. One shot missed; another grazed its target. Two hit him in the chest and neck. The scooter sped away down the narrow medieval street.

A young man walking by, having heard what sounded like firecrackers, looked over and saw a white-haired man lying on the sidewalk under the arcade. "I thought he might be one of those who go through the streets with their dogs, begging for alms," the passerby later told police.

In fact Marco Biagi, who died on his way to the hospital, was not only a distinguished academic but a prominent commentator and policy maker. That very morning Il Sole 24 Ore, Italy's most influential business newspaper, had published the latest of several articles by Biagi calling for liberalization of the country's labor markets. The next day he'd been scheduled to meet with the minister of labor, with whom he had been working to develop a controversial program of reform.

Death threats had been aimed at Biagi for three years, since he helped draft an agreement making it easier for businesses in Milan to hire immigrants and the handicapped. For a while the government had provided him with a bodyguard. But last fall, for reasons that remain obscure, and despite the protests of Biagi himself, the protection had been taken away.

Two days after Biagi's murder, various news organizations received an e-mail taking credit for the crime on behalf of the Red Brigades, the far-left terrorist group that killed 75 people during Italy's "years of lead" in the 1970s and `80s. The message denounced Biagi as the proponent of "exploitative" policies and an agent of "bourgeois imperialism."

Analysis of gun cartridges found at the scene revealed that the murder weapon was the same 9-mm pistol used to kill Massimo D'Antona almost three years earlier. Like Biagi, D'Antona had been a professor of labor law and a government consultant. The Red Brigades had taken credit for his death, too, reviling the victim's "neo-corporative policies whose social aims coincided with those of the Imperialist bourgeoisie."

Both killings provoked near-universal expressions of outrage from Italian politicians, union officials and business leaders, and widespread anxiety about a possible resurgence of terrorism. Yet the horror that greeted Biagi's murder was also mixed with anger over a contentious national debate that the victim himself had helped to start.

In Italy, whose economy is the eighth largest in the world and the fourth largest in the European Union, only 52 percent of the working-age population has a job. That's ten points lower than the average employment rate in the EU and a consequence of regulation inhibiting what would otherwise be a dynamic labor market.

Following Italy's postwar recovery--the so-called "economic miracle" of the fifties and sixties--newly powerful unions asserted their influence through legislation and collective bargaining to ensure job security for their members, who were concentrated in labor-intensive industries such as...