Italy and Denmark from Early Retirement to Active Ageing. Problems and Solutions for Structural Unemployment and Pension Funding
4.2 Consolidating the Silver Age during the 2000s
The second phase of the reform process started in both countries in 2001, with the electoral success of the centre-right and the formation of the Berlusconi II cabinet in Italy and of an executive chaired by Anders Fogh Rasmussen in Denmark, both in power until 2005. The policy direction of reforms was in both cases consistent with a consolidation of the choices of the Nineties. However, the Italian political system was more contentious, introducing unilateralism and random steps (Natali 2008) in the process. The Berlusconi government enacted two important reforms of the pension and labour market policy, which presented decisive aspects for the further development of a multi-pillar system and for the reduction of early retirement. The Biagi Law (L. 30/2003) proceeded further along the path taken by the Treu Package. It stimulated the involvement of private agencies in the provision of employment-related services, this time not exclusively limited to placement. Secondly, it introduced a great number of new contractual typologies, and flexible employment opportunities (staff leasing, job on call, more deregulation of part time) suitable also for the elderly. Finally, it strengthened the link between training and the entitlement to unemployment insurance.
The Maroni pension reform (L. 243/04) increased the age requirement for seniority retirement set by the Dini law for 2008, bringing it to 60 years, with a sudden big-step 3-year increase. For the new contributory regime (whose first retirees had, in any case, been foreseen for 2012) it also raised the retirement age to strictly 65 years (60 for women), eliminating the flexible retirement option previously granted between 57 and 65. The painful and heavily debated introduction of the big-step was selectively ‘compensated’ for by granting a generous superbonus to a minority of the oldest insiders, very common in the North (Natali and Rhodes 2005). Private workers entitled to seniority retirement before 2008 were given the opportunity to remain employed and receive a tax free salary bonus equal to the amount of their pension contribution. Moreover, allowing partial accumulation of pension benefits and work income, it created a channel for retirees to re-enter the labour force on a part-time basis, exploiting the new opportunities granted by the Biagi Law. A procedure of silent assent for the conversion of Tfr from 2008 was also established: the worker could keep his Tfr in the severance payment fund at the company level only with an explicit declaration. Otherwise, savings would be moved to a second pillar closed fund or to a residual public fund.
The opposition heavily campaigned against the most unpopular measures of the Biagi and Maroni reforms, such as the big step and the new contractual formulas considered more likely to create temporary jobs and further occupational segregation in the labour market. However, the government efficiently used its strong majority in Parliament and its perceived stability, weakening the opponents in the electoral and corporative arena with a stop and go strategy of consensus building, alternating dialogue and forcing (Natali and Rhodes, 2005). Furthermore, the most electorally painful measures in the Maroni reform had been programmed for 2008, so that the following government was meant to bear the electoral backslash. Notably, the robust relation between the Lega Nord and the blue collar workers of the North granted the government an NiC commitment opportunity useful in various moments during the negotiations.
The ultimate consequence of such a powerful unilateralism, however, resulted in a higher likelihood of policy reversal. Once the centre-left won the 2005 elections, it brought forward the silent-assent mechanism for the conversion of the Tfr, to 2007, but it also started to work on possible amendments to the legislation of the centre-right. With the Welfare Package of December 2007 (L. 244/07), the government adopted minor parametric and compensatory measures for atypical and low skilled workers, expanded social expenditure considerably for the first time since 1992 and substituted the big-step with a new gradual progression, in line with the original Dini reform. Moreover, it abrogated the most contentious forms of contract introduced by the Biagi Law. As with what had already happened in 1994, the tone of the policy discourse was somewhat more extreme than the final content of the reform packages. However, as political players contended symmetrically on both retrenchment and restructuring, some of the common objectives settled in the Nineties were subjected to partisan reinterpretations.
In Denmark, the centre-right government, externally supported by the right wing minority, gave a new declination of flexicurity, more inclined to “re-commodification” and retrenchment. It reduced the amount of social assistance for all occupational groups (Job Plan, 2002) and, with bi-partisan consensus, rationalized and fully extended the activation phase to the adult unemployed (More people at work, 2003). Interventions on the first pillar of the pension system were more contradictory and reflected the institutional incentives to compromise that characterize minority governments. In 2001, the SP was newly transformed into a contributory scheme, only to be suspended from 2003 onwards. Still in 2003, a new tier parallel to ATP was introduced to grant disabled workers the opportunity to pay more contributions to improve their public pension, and an income tested “elderly check” was introduced for retirees with no income other than the national pension. With the creation of the People’s stock exchange (Folkeborsen), the centre-right forced the introduction of an opt-out from the SP to private investment, engineering a right-of-centre parliamentary majority for the purpose. In the meantime, the occupational pillar became more internally consistent: between 2000 and 2004 the (very low) contributory rates of the new schemes introduced in 1991 were renegotiated to 10.8%, getting close to the mean value of those in the pre-existing schemes, ranging from 12% to 15% (OECD 2008).
Unlike the Berlusconi II government, the liberal-conservative coalition was reconfirmed in the 2005 elections and could continue its project of socio-economic reform with a new cabinet, almost identical to the previous one. The activation strategy of the liberal-conservatives proved successful: unemployment started to drop steadily again in 2004, reaching an historical minimum of 2.7% in 2007. In 2006, the ruling coalition engineered a Welfare Agreement that obtained a nearly unanimous consensus in the Folketing and introduced a delayed increase in retirement age: from 60 to 62 years with 30 years of contribution in the efterløn from 2019-2022 and from 65 to 67 in national pension, from 2024-2027. From 2015, both age limits will be indexed to the mean life expectancy at 60 years, taking into account various demographic parameters. A new sequence of parametric changes has also been established for 2007 in the unemployment scheme. The beneficiaries will face a stricter duty of activation and of active search for a new job. The new Job Plan 2007, presented a few months before the elections, had the primary objective of boosting the employment rate, with particular attention to the elderly, providing cash premiums to reward permanence in employment and eliminating mandatory retirement for civil servants (OECD, 2008).
Drawing any conclusion from the comparison of this recent sequence of reforms is obviously more difficult, as they are nearer in time. In line with my research design, I also omitted any reference to the European level, which becomes more and more relevant throughout the 2000s. However, I believe that the comparative analysis has illustrated how the more consensual character of reforms in Denmark is a key asset for the stability and the functionality of the new initiatives. While the institutional drift in the first pension pillar can be attributed to the necessity of formulating parliamentary compromises, the mutual adjustment of the different pillars of the pension system and the impressive achieving of the flexicurity model show a remarkable degree of continuity.
Italy, instead, proceeds with its never-ending pension reform, whose cumulative effects are equally evident, especially regarding the shift to a multi-pillar system. Conversely, the issue of early retirement, while addressed directly and even with immediately effective measures is still not convincingly solved. Furthermore, given the age and gender bias in the insider/outsider structure of the labour market and in the introduction of more flexible contracts, the pursuit of active ageing per se could aggravate, rather than alleviate, the system of inequality underlying the Italian labour market (Carrera and Mirabile, 2003). While the phasing out of early retirement is an economic and historical necessity, its impact on the different socio-economic aspects of the transition to a post-industrial economy must be assessed in the broader institutional bricolage of welfare and production regimes.
Tags: Active ageing Denmark Italy, early retirement, Political Competition