1. Ca’ Foscari University,Venice
The Italian Social Protection System: a Long Term Perspective
Agar Brugiavini
Ca’ Foscari University,Venice
Component Two Training Course “European practices in the Governance, Financial Management and Strategies for a Sustainable Social Security System”
Italy, October 16th -30th, 2016

2. Social Security in Italy in brief : a «recap»
Index
Social Security in Italy in brief : a «recap»
Labour Force Participation patterns over time in Italy and Europe
Perspectives for the future of Social Security in Italy
A comparison: Patterns of Retirement in China and Europe

3. Earnings related social security benefits Replacement rate is 80%
Background
1969 to 1992
Earnings related social security benefits
Replacement rate is 80%
Legal retirement age 60 (men) 55 (women)
Can retire at any age if 35 years contributions completed, with no actuarial penalty

4. Social Security Reforms
The years of major SS reforms ( ):
Amato reform (D.Lgs. 503/1992)
Dini reform (L. 335/1995).
“Parametric reforms” ( ):
…many until the……..Berlusconi reform (D.L. 78/2010, D.L. 98/2011).
Monti reform (L. 214/2011).

5. Social Security Reforms
1992
“Amato” Reform
Less generous benefits
Legal (old age) retirement age gradually reaching 65 (men) 60 (women)
1995
“Dini” Reform
Notionally defined contribution pension benefits
More stringent eligibility requirements for early retirement
Window of retirement ages (57-65) with actuarial penalty
To become fully operational after 2030

6. Monti Reform of 2011
Meant to guarantee equity and sustainability to the social security system
Link the retirement age to the life expectancy progressive increase in the retirement age
Transition to the contributive system (pro rata) for the calculation of pension benefits
Two possibilities:
Old age pension
Anticipated pension

7. Impact on the labour market
Reforms have long term effects
They change the structure of incentives
One major impact is on the LABOUR MARKET
When planning social security reforms one has to think about future effects on the choices of people/workers

8. Labour Force Participation Rate of Italian Men - ages 55-59, 60-64, 65-69

9. Effect of Incentives
The eligibility requirements in terms of age of entry into retirement have an impact on the labour force
In the age-group a U-shaped pattern. Men now work until older ages!
But there are different way to exit the labour force; pathways to retirement

10. Pathways to retirement

11. Pathways to retirement by gender and age group

12. Why do we see these long term trends?
Combination of education differences between cohorts and
…………..social security rules

13. Education and employment
Source for education data: Bank of Italy SHIW

14. 2011 Monti reform (effective as of Jan 2012)
Effect of incentives
2011 Monti reform (effective as of Jan 2012)
Sudden increase in old age retirement age, then retirement age linked to life expectancy (hence further increase in retirement age in the future)
Immediate and dramatic increase in years of contributions to access early retirement
Shorten transition to NDC, hence benefit reduction for a number of transition cohorts

15. Incentives: Eligibility ages and employment rate for men age 55-59

16. Eligibility ages and employment rate for men and women (60-64)
Old age men
Old age women
Early ret

17. Public expenditure for pensions (percentage of GDP)

18. Public expenditure for pensions by gender (percentage of GDP)

19. Urban workers leave the labour market early
Trends in China?
Evidence from the CHARLES Surevy (China Ageing and Retirement Longitudinal Survey)
Urban workers leave the labour market early
Compare with Europe (SHARE: surevy of Health Ageing and Retirement in Europe)

20. Old age dependency ratio
Source: United Nations, Department of Economic and Social Affairs, Population Division, World Population Prospects: The 2012 Revision, New York, 2013.

21. Employment rates by age cohort in China
Based on: National Bureau of Statistics, 2000 Population Census Statistical Materials (2002) and 2005 One-Percent Population Sample Statistical Materials (2007), China Statistics Press, Beijing.
Source: John Giles, D. Wang, W. Cai “The Labor Supply and Retirement Behavior of China’s Older Workers and Elderly in Comparative Perspective”

22. Employed vs. retired EUROPE– SHARE sample.2 .4 .6 .8 1 50 60 70 80 90
age of respondent
worker
retired
allother
Self-Reported Ecomomic Activity by Age
Figure 1 All

23. Work status of respondents in CHARLS
Source: John Giles, Xiaoyan Lei, Yafeng Wang, Yaohui Zhao, “Institutional Determinants of the Retirement Patterns of China’s Urban and Rural Residents”

24. Retirement rates – evidence from CHARLS

25. Retirement rate in China
Source: John Giles, Xiaoyan Lei, Yafeng Wang, Yaohui Zhao, “Institutional Determinants of the Retirement Patterns of China’s Urban and Rural Residents”

26. Important similarities in the long term trends in Europe and China
Conclusions
Important similarities in the long term trends in Europe and China
…..Chinese workers respond to incentives as much as Italian workers..
Thank you!