Renzi passes up equity-inspired pension reform

There was a time when left-wing politics was associated with wealth redistribution and social justice.

Not any more, or at least not in the Italy of Matteo Renzi, prime minister and secretary of the Democratic Party (PD), a distant heir of what was once the largest communist party in western Europe.

And so it seems the ex-Florence mayor had no qualms about ditching a proposal for pensions reform inspired by the principles of equity and protection for the most vulnerable groups before it had even been presented to the public for debate.

The proposal in question is set out in the document ‘Non per cassa, ma per equità’ (Not for money, but for equity) submitted to the government in June by the labour economist of international fame Tito Boeri, president of Italy’s social security institute Inps, for possible inclusion in the 2016 budget law.

The plan has two main objectives: to halve poverty among people aged over 55 – according to Inps the category worst affected by the recent prolonged recession and measures introduced by the Monti government in 2011 to push back the age of retirement – and to promote generational turnover in response to high youth unemployment.

Specifically, it contemplates awarding a basic income of 500 euros a month in the first instance to low-income families with at least one member aged over 55 on condition that unemployed people in the family actively seek work.

The measure is intended as a precursor of the national minimum wage, which currently does not exist in Italy.

The proposal also introduces a new flexibility scheme allowing workers to retire early on a reduced amount.

According to the document, the funds needed to cover these measures would be sourced by cutting welfare support to around 230,000 high-income families and recalculating so-called ‘golden’ pensions to around 250,000 people and annuities for over 4,000 elected officials (read: politicians) on the basis of contributions paid, meaning that recipients would get less.

The draft budget law signed off by the cabinet in October contained no trace of the proposals and in November Inps posted the document on its website for all to read.

The government and the pensions agency both insisted the on-line publication had been “agreed”, but the speed and intransigence with which the former rejected the plans after they had entered the public domain might suggest otherwise.

Renzi reportedly described the proposal to cut pensions as an “error” even before the document had been made public.

“Some of the remedies suggested by Tito Boeri’s Inps had the merit of equity: those who received more than they had paid in would have been asked to make a contribution,” the prime minister acknowledged.

“However, I didn’t think it was the right time: we need to restore Italians’ confidence” in the economic recovery, he continued, insisting rather on controversial tax-cutting measures that have found their way into the 2016 budget bill – measures that are traditionally advanced by the centre-right.

Critics of the proposals accuse Boeri of playing politics and of exceeding his remit as Inps does not have the right of legislative initiative under the Italian constitution.

However the economist has defended himself saying Inps has a long history of making proposals and that the attacks have come from “people who have clear interests in the operation that we wanted to launch”.

“The people who appeared on television foaming with rage to attack me are those whose annuity payment would be cut by half if our proposals were accepted,” Boeri continued.

In an age when expediency and vested interests seem to count more than political values or coherence, ‘equity’ has clearly become a dirty word.

Evaluating the Jobs Act in light of the figures

I don’t know about you, but my eyes glaze over every time I have to look at figures. However, I decided to overcome my habitual resistance when Italy’s national statistics institute Istat released its provisional employment data for September. The reason: I was trying to get to grips with the new labour market reform otherwise known as the Jobs Act for a story on prime minister Matteo Renzi’s reform agenda and I wanted to know whether the measures were actually achieving the stated aim of bringing down high unemployment and creating more stable jobs. Well, in the immediate term it seems they are.

The figures show a 0.9 per cent rise in employment year on year despite a less than brilliant GDP growth rate, suggesting that the upturn cannot be attributed to economic recovery alone. Rather, it is also the combined result of the Jobs Act and exemptions on social security contributions for employers taking on new steady hires this year.

The number of people in work in September rose by 192,000 over the same month in 2014, Istat said. Over the same period the number of people on permanent employment contracts rose by 113,000 and on fixed-term contracts by 107,000. Simultaneously the number of self-employed fell by 28,000. Ergo: more jobs and more stable jobs. Exactly what the government set out to achieve.

Of course much will now depend on whether the incentives for employers become permanent (economy minister Pier Carlo Padoan has said they will not and already in next year’s budget currently before parliament they have already been reduced considerably with respect to this year) and, to an even greater extent, on how Italy latches onto recovery after the longest and deepest recession since World War II. To quote one informed observer, economist and statistician Gabriele Olini, labour market reform has gone as far as it can; now it is up to economic and industrial policy to do the rest.