The paper analysis labour law recently approved by Italian Government and its effects on employment growth. The main thesis of the paper is that the new labour market law will have no positive effects on the rate of employment ,on the size of firms, and on the size of the black labour market in Italy. On the other hand if workers interpret the new law as an hostile act, morale in the firms would fall and so would firm’s profit. Our conclusion is that the effect on productivity growth and employment of the new law will be the opposite of what Italian government expects.