The policies for the extension of working life in Italy between lights and shadows

The policies for the extension of working life in Italy between lights and shadows Marco Socci and Andrea Principi Centre for Socio-Economic Research on Ageing INRCA – Italian National Institute of Health and Science on Ageing Via S. Margherita 5, Ancona, Italy; Tel. 0039 071 8004788; E-mail: m.socci@inrca.it IAGG-ER 8th Congress – Unlocking the Demographic Dividend Dublin, Convention Centre, 23th April 2015

Contents of the presentation • Demographic ageing: European trends • National policies for extending working life • Effects of national policies • Future perspectives • Final remarks

Proportion of population aged 65 and over in Europe 2004-2013 Source: EUROSTAT

Proportion of population aged 80 and over in Europe 2004-2013 Source: EUROSTAT

Old-age-dependency ratio per 100 persons in Europe 2001-2014 Source: EUROSTAT

The “Fornero” pension reform (Law 214/2011) • Pursue long-term sustainability of the pension system • Increasing the statutory retirement age • Gender harmonisation of the public and private sector pension systems • Economic “penalties” in case of early retirement • Stricter requirements to access the main public early retirement scheme (i.e. “seniority pension”) • Establishing of flexible retirement from 62 to 70 years

Statutory retirement age – Old age pension (years of age) before and after the “Fornero” reform

Statutory retirement age – Seniority pension/early retirement (years of contribution) before and after the “Fornero” reform

The “Fornero” pension reform: future steps • Old age pension: from January 2018 onwards, workers of both genders will retire at the same age, 66 years, with this limit rising to 67 years from 2020. • Early retirement: a gradual yearly increase of the contribution period has started in 2013 (i.e. men 42+2 months; women 41+2 months; in 2014 men 42+3 months; women 41+3 months). • From 2013, statutory retirement age and contribution requirements are re-calculated every three years in accordance to life expectancy at 65 years.

Labour market policies (1) • From late 1990sreforms aimed at increasing the flexibility of the Italian labour market, reducing the employment protection of the labour force, boosting employment and labour force participation of people aged between 15 and 64 (i.e. Law 196/1997; Law 30/2003). • During the recent economic crisis, several measures enforced by the Government and the Regions aimed at widening the range of workers receiving unemployment benefits and to better coordinating active and passive employment measures. Older workers often target groups of such measures. • Other relevant policies: introduction of an age antidiscrimination legislation which acknowledged the specific European Directive 78/EC and improvement of the legislation on health and safety at work.

Labour market policies (2) • The labour market reform enforced in 2012 (Law 92/2012) has introduced a set of measures aimed at protecting the market position of older workers, e.g.: • From 2013, a new incentive to hire over 50 year old people who have been unemployed for 12 months or more, adapting the amount of the incentive (i.e. tax reductions 50% for 12/18 months) according to the age of the workers, their job position and their type of contract (fixed/open-ended). • The new legislation has also confirmed the longer coverage of unemployment benefits for workers aged 55 and older (in comparison to younger workers).

Policies allowing work after retirement • Before 2009 in Italy was not allowed to fully combine work and pension income. • From January 2009, the Italian legislation allows the full combination of paid employment and pension incomes. • Introduction of flexible working contracts facilitating opportunities for the employment and self-employment of retired workers (i.e. fixed term contracts; job placement contracts; job on call; temping, etc.).

Average effective retirement age compared to official retirement age in 34 OECD countries; men and women; 2007-2012 Source: OECD

Average effective retirement age in Italy and in 34 OECD countries average; men; 1970-2012 Source: OECD

Duration (years) of working life in EU 28 and Italy; males and females; 2004-2013 Source: EUROSTAT

Employment rate of older workers (55-64) in Europe 2003-2013 Source: EUROSTAT

The effects of the “Fornero” reform on the labour supply • The pension reform is expected to generate a further increase of labour supply by people in the age group 57 to 66 of about 830,000 individuals, until 2020. • The activity rate of the labour force aged 57 to 66 is expected to increase up to 47 percent, instead of 36.6 percent, which was the percentage projected in absence of the last pension reform (CNEL 2012).

The effects of the “Fornero” reform on pensioners’ economic conditions and on their working attitudes after retirement • Future pension income will be lower than in the past because of the transition from the wage-based to the contribution-based system (i.e. the pension substitution rate is going to fall from the current 80% to 60% of the last received salary). • As a consequence of the increase of statutory retirement age and of the discouragement of early retirement, the number of working pensioners, especially younger ones, can be expected to decrease in the short term. • At the same time, in the long term, the phenomenon can be expected to grow, because new (and older) pensioners will probably join the labour market again for economic need, due to low pensions. • In Italy it is not possible to start receiving a pension without having completely withdrawn from the labour market (condition for becoming working pensioners).

Retired people (55+) working in Italy, by gender (N)2009-2011 Source: INPS-ISTAT

Unemployment rate in Europe 2005-2014 Source: EUROSTAT

Unemployment rate in Italy (15-24 and 55-64 years) 2005-2014 Source: ISTAT

The “Jobs Act” bill (Law 183/2014) Main goals • Increasing both the demand of labour and the employmant rate of Italian workers, reducing youth unemployment • Simplification of the procedures for starting and managing employment contracts • New hiring through a permanent employment contract with increased protections according to the length of service • Reduction of the employment protection of Italian workers, typically considered high (i.e. for companies it is easier to fire workers) • New unemployment insurance (i.e. “ASPI”) covering a broader number of people than the currently eligible ones

Initiatives on the demand side and on the supply side of labour (meso level) • Awareness campaigns, anti-discriminatory activities, exchange of methods and best practices for promoting effective approaches to support the participation of older workers in the labour market/within companies. • Initiatives implemented by private companies (especially by medium large enterprises), such as: age management practices, work-life balance measures,corporate welfare programs, initiatives focusing on health promotion in the workplace, on ergonomics, lifelong learning, etc.

Final remarks (1) • The trend of the main labour market indicators relative to older workers (55-64) shows a gradual improvement in recent years (e.g. increasing of the employment rate) although critical aspects still persist. • Emerging of a sort of “blocking strategy” pattern: the restrictions to access early retirement and the increasing of the retirement age, actually “block” older workers in the labour market. • At the same time, possible emerging of an “intergenerational conflict”, between younger and older people. Even though the literature (e.g. Reyneri 2011) shows no correlation between youth and older people employment rates, the high youth unemployment is a very sensible issue in Italy.

Final remarks (2) • According to OECD (2014) the “Jobs Act” has the potential to improve the functioning of the Italian labour market by reducing its widespread segmentation and fostering the creation of more productive, secure and rewarding jobs, especially for disadvantaged youth and other vulnerable groups (e.g. long-term unemployed people in older age). • But an evaluation of this new Italian labour market reform could be possible some time after its enforcement. • Increasing role of innovative initiatives implemented by private companies (meso level).

Final remarks (3) • In Italy measures aimed at extending working life are not supported through organic policies in the Italian labour market. • In order to promote the extension of working life, it is necessary to adopt comprehensive policies and specific actions, developing issues such as employability and workability and practices of age management. • Last but not least, it is crucial monitoring the effects of the pension reform and to learn lessons from other countries (e.g. introduction of gradual retirement).

Thank you for your attention! Marco Socci Centre for Socio-Economic Research on Ageing INRCA – Italian National Institute of Health and Science on Ageing Via S. Margherita 5, Ancona, Italy Tel. 0039 071 8004788 E-mail: m.socci@inrca.it Website: www.inrca.it

The policies for the extension of working life in Italy between lights and shadows