Italy and Denmark from Early Retirement to Active Ageing. Problems and Solutions for Structural Unemployment and Pension Funding

1. Introduction: The Possibilities of the New Politics

Over the last fifteen years the welfare state has undergone an undeniable process of policy and institutional change. Confronting the empirical evidence of an unexpected political commitment to unpopular socio-economic reforms, the influential interpretation of welfare institutions as immovable objects or frozen landscapes revealed itself to be an oversimplification (Arza and Kohli, 2007). The role of societal and technological change has been newly recognized as a source of challenge and policy crisis, thus an engine of change (Esping Andersen et al., 2002). The notion of crisis (or challenge), however, has also evolved. The stagflation pressure of the Seventies, the ‘big government’ worries of the Eighties and the globalization debate of the early Nineties all framed crisis as a constraint on public expenditure and a challenge to national politico-economic sovereignty and social citizenship (Castles, 2004). Conversely, throughout the Nineties, the old drivers of expansion themselves have been reframed as a new kind of crisis, under the budgetary constraints of unanimously recognized ‘hard times’. As population ageing (World Bank, 1994) persistently pushes social expenditure against the old social risks of the former core labour force, the growth of the third sector and rising female employment create urgency for a new set of social protections (Myles and Quadagno, 2002; Bonoli, 2005).

While both convergence and pure retrenchment failed to materialize, the distributional consequences and the political endorsement of the process of so called ‘recalibration’ (Ferrera et al., 2000) have let down the dominant reading of a ‘new politics’ of the welfare state and its expectations of stability and policy making by stealth (Pierson, 1998). Reforms have forced different welfare regimes, states and programs to adapt in unique ways to the new challenges and policy trade offs. Even in the toughest scenarios, a combination of rationalization of outlays and re-commodification of the labour force extended coverage to new and traditionally unprotected social groups (Arza and Kohli, 2007).

These elements of complexity call new attention to what was once called ‘the possibility of politics’ (Ringen, 1987). Since social policies are entwined in complex interactions and trade offs between production, distribution and redistribution, reformers are able to push forward their preferred outcomes, purposely circumventing some of the organizational and institutional constraints that their operative context imposes on their opportunities structure (Hacker, 2004; Streeck and Thelen, 2005). The orthodox reading of institutional stability is thus charged with underestimating the fact that, even if singular policies can manifest increasing political and cognitive returns, their interaction can create self-undermining vicious cycles (Crouch and Farrel, 2002). In the real world of reforms, the choice to address multi-dimensional policy linkages may even increase the sustainability of unpopular interventions.

This paper attempts to analyze a similar multi-dimensional reform pattern, comparing the sequences of labour market and pension reforms enacted in Denmark and Italy between 1992 and 2007. The two reform pathways both focused on the link between retirement and labour market policies and fostered a shift from a paradigm based on early exit from the labour market and generous retirement conditions to a new one based on active ageing and fair pension treatments. In particular, I am interested in the common effort to phase out early retirement and in the evolution of a multi pillar pension system in the two countries. The puzzling question here is not why policy has changed or why there is some form (or some lack) of convergence. Denmark and Italy were, and still are, one of the most heterogeneous possible pairings among European countries. Rather, my question is why some specific reform patterns or dynamics have emerged. Following the logic of a most-different systems design to maximize the variance of possible intervening factors, I will look for common but independent factors capable of explaining the common effort:

• to reduce the scope and attractiveness of institutionalized pattern to early retirement and

• to establish or (in the case of Denmark) to improve a multi-pillar pension system.

In the first section I will provide the general rationale of the research. The second and the third paragraphs offer an empirical account of the reform process in both countries, while the fourth concludes with three tentative generalizations.

2. Denmark and Italy from Challenges to Reactions

Having been two countries in crisis at the end of the Eighties, both enacted major socio-economic reforms over the last fifteen years. Denmark introduced the most celebrated policy paradigm of the last decade: the flexicurity model. Italy, in its turn, pioneered the last wave of pension reform in Europe, adopting a ‘Swedish’ NDC contribution formula in 1995.

At first sight, similar changes were somewhat unlikely in both countries. One reason is that Italy and Denmark were expected to handle their institutional complementarities by improving their institutional coherence in the direction of greater coordination (Hall and Soskice, 2001; Ebbinghaus, 2006). Instead, the outcomes of the reforms in the two countries indicate a further hybridization in terms of a shift towards more liberal solutions, with particular reference to the Danish flexicurity (Campbell and Pedersen, 2007) and the relaxing of the public monopoly over pensions in Italy (Ferrera and Jessoula, 2006). Furthermore, both the phasing out of early retirement and the revision of the structural configuration of their pension systems are visible and sensible interventions on very popular and strongly institutionalized features of their political economy. As a consequence it is deemed unlikely that they will take place according to an orthodox reading of institutional path dependency (Pierson, 2001).

A better explanation can be found by analyzing the interaction between the challenges faced by the two countries and the intervening effect on political agency and policy legacies at the national level. This is particularly the case for early retirement and for the introduction of a multi-pillar pension system. The institutionalization of the former is traditionally considered a case of institutional bricolage and of a creative reinterpretation of the existing schemes (introduced with a different mission) (Kohli et al., 1991). The latter, in its turn, is intimately linked to the interaction between the state and the market (and the financial market) in the provision of welfare (Bonoli, 2003). There is no single factor that can explain how the various links between the labour market and the different retirement routes can or should be crossed. Challenges and crises, as direct causes of policy change, only exist in interaction with a more complex structure of self-sustaining but also contradictory and unstable institutional settings. Reinterpreting the notion of institutional complementarities, the emerging post-determinist (Crouch, 2007) branch of neo-institutionalism has precisely underlined how ambivalent is the effect of existing policy linkages on the stability of the whole regime and of its components (programs) (Campbell, 2004; Hacker, 2004). The opportunity to correct multidimensional problems acting on different fronts, while providing broader compensations and concessions, can unleash the potential of new coalitional dynamics and argumentative strategies, lead to more plausible problem solving efforts and improve the commitment to reform. Consequently, political entrepreneurship strongly influences this phase of re-consolidation (Campbell, 2004; Natali, 2008).

Furio Stamati: Istituto Universitario Europeo, Department of Social and Political Sciences, Via dei Roccettini 9, San Domenico di Fiesole, 50014 Firenze. Please e-mail comments to:

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