EUROPEAN PAPERS ON THE NEW WELFARE

Possible Activation Strategies for Older Workers Dismissed Early from Employment

1. Introduction

For over twenty years demographic research has revealed that the more economically developed countries are witnessing a new demographic phase, known as “second demographic transition”. Among the principal implications of this is the change in the age structure of the population with a growth in numbers among the older age groups. The increase in average life expectancy and particularly the lengthening of the period of life in good health and in complete autonomy, have profound implications for social organisation. Among these, research has revealed a redefinition of social times and of the roles linked to age. Picking up on Peter Laslett’s well known thesis (1989), from the lengthening of the average life in good health emerges a ‘new life map’ in which, limiting ourselves to the older ages, new life times are revealed which fall between the ending of productive roles (in the labour market) and the reproductive ones (in the family and domestic sphere) of middle age and the final loss of personal autonomy. We are dealing with new social times, in which one observed the contemporaneous destabilising of end of career paths and the redefinition of transition mechanisms towards retirement with wide margins of uncertainty on roles, identities and processes of social recognition. In the third age complex social innovation processes are experienced, which revolve around the redefinition of the mechanisms which govern the transition from work to retirement, from active life to retired life.

The widest and most discussed debate on this subject, however has been about the economic consequences of demographic transition, focusing attention on the mid to long term sustainability of the welfare system. In this regard Giovanni Battista Sgritta speaks of an ‘unnoticed revolution’ underlying the demographic transition, maintaining that “any alteration to the structure by population age is bound to reflect on the system of rules that determines the possibility of acting, exchanging, participating in political life, protecting one’s own interest and relationships within the family (…). Demographic ageing has introduced a deep ‘asymmetry’ between age distribution and the symbolic and regulatory framework which till then had governed the relationships of exchange and solidarity between age groups” (1993: 24), thus necessitating a general reorganisation of welfare mechanisms, and in particular a reform of the welfare system.

In the case of Italy, since the early 1990s there has been a long and articulated process of reform of the public welfare system1 in line with European Union guidelines. The main objectives of this reform have been to delay the time of retirement, both by raising the minimum criteria for obtaining the pension and by reducing institutional early retirement options2.

Pension reforms, most sensitive to the macroeconomic sustainability of public welfare, have adopted a reductionist approach to the subject of work and the employment of those advanced in years. In the labour market, indeed, there has not been a corresponding lengthening of working careers. In fact for some occupational groups most exposed to functional ageing and no longer safeguarded by welfare type protection new risks have emerged of social exclusion linked to involuntary early exit from the labour market no longer guaranteed by welfare type protection. When it comes to extending participation in the labour market in advanced years, generally speaking companies, the industrial relations system, the public bodies working in the active employment policies area, have often been unprepared for managing the ageing of the work force or dealing with the phenomenon of early exits from jobs.

To help face the challenges connected to demographic transition, particularly in governing a complex process of social innovation of welfare institutions and of labour market regulating, led by the European Union, an active ageing strategy has been adopted. This is based on a global approach to the ageing question, centred on the key notion of ‘activation’ (Barbier, 2005). Starting from the Council of Lisbon of 2000 and subsequently the creation of the renewed Lisbon Strategy of 2005, the notion of activation has been one of the directional pillars of the European Union’s economic and social policy. It directs governments towards policies to stimulate global increases in employment rates, with specific objectives for older workers. Active ageing, aimed at making the elderly active in the labour market, has developed an adaptive institutional approach with the objective of guaranteeing the health, independence and social productivity of individuals for as long as possible, retaining that, as Alan Walker writes, “active ageing could supply an important means of seeing to it that demography doesn’t become an obstacle to sustainable development, of preventing radical changes to social protection systems and of avoiding any generational conflict and preserving the European social model” (2005, p 1).

Within the active ageing strategy, moreover, there is a more coherent convergence between welfare system reforms and activation policies for people advanced in years. This is particularly the case when it comes to the development of the so-called ‘fourth pillar’ (Reday-Mulvey, 2007), i.e. the incentive for those advanced in years to work, in some cases having recourse to forms of part time work or non standard models of remuneration. In the public and scientific debate however, the analysis of the costs of ageing have dominated, while it has been only recently that new interpretations have been developing that view the third age as a new productive phase of life in the areas of economy or of socially useful activities. There is a place in this area of thought for the view of the healthy elderly person as a social resource and no longer as a cost.

The analysis of the relationship between age, work and participation in the labour market of people in advanced years, before or after crossing the retirement threshold, is crucial in the active ageing perspective. Our work comes within this perspective and, on the basis of several field studies3 it concentrates on the employment situation of the oldest workers in the Italian labour market. On this subject we consider the institutional regulatory mechanisms for the transition from employment to retirement (paragraph 2) and of company management of human resources practices in relation to age, with particular reference to the manufacturing sector (paragraph 3). The reference framework having been determined, possible strategies for the activation, in the Italian labour market, of individuals over fifty who have lost their jobs, or who are inactive and on the slippery road to retirement are analysed (paragraphs 4,5 and 6). To these are added some brief considerations, presented at the conclusion of the article.

2. Ageing and Employment for the Oldest Workers in Italy

Demographic ageing in Italy has come about faster and more intensely than in other European countries. In the last twenty years between 1988 and 2008, the percentage incidence of people of 50 years and over has risen from 32% to 39% of the total population, a growth that especially concerned the over 65s. Comparing the Italian data with those of the EuroArea-154, we find that in Italy the incidence of over 50s was greater at the beginning of the period in question, (32% compared to 30.8%) and then increased faster than in the other countries over the following twenty years (+21% compared to +18%). If initially this phenomenon was attributed to a large extent to the reduction in the birth rate, most recent trends demonstrate that it is instead, the increase in average life expectancy that determines the growth in the proportion of the older age groups relative to the total population (Baldi and Cagiano de Azevedo, 2005). In the coming decades this phenomenon will be even more noticeable, as official Istat demographic projections reveal. From these it emerges that the percentage incidence of people aged 50 and over will be about 40% in 2010 and will account for half the population in 20505.

With regard to these demographic trends, despite an inversion over recent years, the main labour market indicators reveal, a low level of employment among the older age groups, once more strongly indicating a situation that has been defined the “paradox of functional ageing in demographically elderly societies” (Carrera, Mirabile, 2000: 14). Looking at the available statistical information, from the Eurostat data6 it can be seen that in 2007 the employment rate in Italy in the 55-64 age group was 33.8%, a much lower rate than the European average whether one considers the EuroArea-15 (46.5%, or that of the enlarged European Union of 27 (44.7%). These data represent a critical situation, especially when account is also taken of the fact that the European Commission at the Stockholm European Council of 2001, had set the objective of achieving an employment rate for the 55-64 age group of 50% or over by 2010. Looking back and comparing the employment rate in 2007, with that recorded ten years earlier in 1997 however, a growth from 28% to 33.8% is revealed, an increase greater than that recorded for the entire population aged 15 and over (which rose from 41.7% to 45.9%). At the same time, however, the employment rate for those over 65 years went down slightly, from 3.8% to 3.2%.

Going back to the 2007 data (Istat, 2009), in the 55-64 age group the non-active population represented fully 65% of the total (i.e. 4.6 million out of a 55-65 year old population of 7.1 million). Among the inactive the most important groups were firstly the one made up of individuals already retired, 47%, then the group of those who declared they “had no interest in work” accounting for 27%; 9% had health problems, and finally, the discouraged workers, (5%) i.e. those, who convinced they wouldn’t find work, had given up actively looking for a job. An analysis of the rate of unemployment shows it is very low, (2.4% but if one only adds the discouraged workers to those looking for work, the unemployment rate rises to 10.3%. To sum up, there are few employed people among the 55-64 year olds in Italy compared to the European average. This is due to the early exit from the labour market, firstly for early retirement7, secondly because of the great difficulty in finding work once over the 50 year threshold (if not before), and finally, to a lesser extent, because of people’s lack of motivation in relation to work.

This brief statistical picture shows that in Italy the phenomenon of early exit from the labour market persists, and particularly so for the number of people of advanced years who join the no-active population. Using the Political Economy of Ageing approach (Kohli, et al. 1991; Maltby, et al., 2004), some recent analyses (Mirabile et al., 2006) suggest that this is due to inertia on the part of the Italian economic and social system, when it comes to adopting an integrated approach to active ageing policies. While welfare reforms have aimed at delaying retirement, in the labour market there has been little in the way of developed support for the employment of the elderly. The social protection system and the negotiation practices of the unions, moreover, continue to deal with the passive defence of workers removed from employment early, despite the fact that this strategy is applicable to an increasingly small number of older workers from the great industrial corporations. Using the pattern prepared by Anne-Marie Guillemard (2003), one can see a shift in the Italian case, from an original model in which, while there were few active employment policies, there was a high level of protection against the risk of unemployment, to a new model marked by a weakness in both dimensions (Figure1).

Figure 1: Typologies of the trajectories on the labour market of elderly worker in terms of the relationship between labour policies and those relating to social protection
pirone-fig1
Source: Guillemard (2003: 74); Our elaboration.

Actually, looking at the last decade, with regard to active employment policies at national level, workers over 50 years of age who are out of work or about to lose it are considered ‘disadvantaged workers’ and therefore can take advantage of the insertion contract8, besides being protected against discriminatory practices9. When it comes to the decentralisation of employment policies and employment services, the framework is much more developed. However current research shows that at a regional level the subject of older workers generally has little specific place in planning documents, but rather can be found among measures concerning a wider public in the area of education and equal opportunities (Folini et al., 2004: Gilli e Marocco, 2006; Mirabile et al., 2005; 2006).

Concerning cover against the risk of unemployment, instead, until the mid 1990s, besides early retirement there was a whole range of institutional safeguarded pathways out of the labour market, created by means of the use of social safety valves and company incentives, usually aimed at the employees of large industrial corporations. In quantitative terms Istat records that in the second half of 2006, around 9% of retired workers had taken advantage of an incentive to take early retirement (Istat, 2007b). These strategies were made easy by a corporate industrial relations model, and by the preparedness of the public player to use economic resources and National Insurance contributions to support early exit from the labour market, guaranteeing a certain level of income, agreed with the unions. In the current phase, however, there is a crisis in these negotiation practices. There are at least three reasons for this: (a) the first linked to demographic trends: a slow down in turnover due to the dwindling number of young members of the work force entering the labour market; (b) the second concerns welfare restructuring: the reduction in institutional early pathways out of the labour market and the favouring of activation tools, rather than passive measures for guaranteeing income; (c) the third is linked to the evolution of occupation composition: the increase in older workers dismissed from small and medium companies where traditional forms of social protection covering the slide towards retirement are not applied.

The analysis shows that a rebalancing between social protection measures and those relating to activation in the labour market is called for, both to take account of people who cannot be activated and to allow the adjustment of active employment policies through the creation of a strategy specifically aimed at keeping people in the labour market despite advance in age. The active ageing approach requires also that there be strict coordination between the various policy areas otherwise — as Massimo Paci warns — “these interventions are destined to have poor results, if they do not form part of an integrated ensemble of policies that deal with problems relating to health, technology, business organisation, and in general, a culture on old age shared by workers, employers and unions.” (2005: 174). It is important therefore, that company and worker action strategies and existing conditioning in the various local action contexts be analysed — at the macroeconomic level.

3. Businesses and Older Workers in the Manufacturing Sector

The Italian industrial development model, even in the economic miracle years, was characterised by a marked selectivity in the choice of workers, with a preference for workers “in the flower of age” (De Cecco, 1971, Paci, 1973), usually masculine, who could adapt to high productivity industrial production systems. In this model retirement was the mechanism that safeguarded high levels of productivity from the risk of functional ageing on the part of the work force (Mingione, Pugliese, 2002), but it was also the expression of a Fordist social pact (Ambrosini, Ballarino, 2000) in which work and dedication to the company for one’s whole life were exchanged for employment stability and protection from a codified series of various social risks including reduction of earning capacity in old age.

This ‘pact’ went into crisis with the first industrial restructuring of the eighties, when as a result of the drastic reduction in manufacturing employment a considerable number of employees, more or less near the retirement threshold, were pushed out of the labour market through the adoption of various retirement schemes or by means of a protected shift towards retirement. During these years businesses developed workforce rejuvenating strategies using the young in/old out pattern (Contini, Rapiti, 1994) that only partly went into crisis as a result of the welfare system reforms from the early nineties till the present. Selectivity on the part of businesses has been increased, moreover, with the de-regularisation of the labour market over the last decade10. Businesses have been more easily able to adopt a human resource management model based on the centro-periphery pattern (Harvey, 1997; Dore, 2005), which has resulted in the ‘fragilisation’ of older workers (Gallino, 2001). Particularly where there is a structural excessive labour force, de-regularisation of the labour market allows businesses to choose components that are most productive, economic and adaptable to the company needs. As a result there is an increase in the ‘peripheral’ aspect in the labour market, with the consequence, on the one hand, of further increasing the vulnerability of traditionally disadvantaged groups, and on the other, of the removal of new groups of workers from the strong “nucleus”, among them the oldest unskilled ones who are always the least safeguarded by the social protection system (Castel, 1997).

Within this general framework, one can find some notable differences in the management of the oldest workers and of the relationship between ageing and work (Molina, 2000). The first difference concerns the speed of technological change in the production sector and in companies. The status of the elderly worker, is actually inversely proportionate to the speed of technological and organisational change in his company. This means that where the change is faster, turnover accelerates and the oldest workers tend to run greater risks of removal from the company; where, instead, the technological and organisational change is slower, more account is taken of the elderly worker since his on the job experience is of greater productive value. In the sectors marked by periodic changes in their technological paradigm, businesses often prefer to get new competences from the market rather than change those within, through the counter-ageing of human resources (Biagioli, et al., 2004). This particularly penalises the oldest workers for whom the cost/benefit ratio of training reduces company expectations on the duration of the working cycle of the oldest employee, in whom it is hardly convenient for the company to invest further resources. Moreover, in the current Italian labour market legislative framework the generation changeover guarantees the company a reduction in the total work costs, greater flexibility when it comes to contracts, and more generally, a reduction in the level of unionisation. The second difference concerns the direct relationship between economic circumstances (general and sector related), and the early dismissal of the elderly, since during negative phases of the economic cycle businesses tend to reduce to zero the peripheral components of human resources including the oldest workers.

In brief the analysis shows that the presence of older workers in the labour market is hindered by glaring recruitment selectivity in the manufacturing sector that produces a marginalisation of workers advanced in years, and also an acceleration in company turnover. Workers with superior professional profiles are less exposed to early exit from the labour market, as is suggested by the employment levels based on educational qualifications11, or of those in productive contexts where on the job experience is beneficial to the competitiveness of the company. From the workers’ point of view early exit from the labour market is mainly a hetero-direct choice, determined by the demand for labour. Within the available margins of freedom workers have developed various adaptive strategies with two common objectives: the first is to maximise pension income, including voluntarily leaving work early in order to benefit from favourable welfare provisions. The second, more general, is that of matching the time and manner of one’s final exit from the labour market for retirement to the balancing of working time and non-working time according to one’s personal preferences.

During the first industrial restructuring, the margins of individual autonomy and collective bargaining on the processes for early exit were such as to better guarantee both objectives. However, from the middle of the nineties on, early exit was increasingly involuntary and, as a result of the crisis, marked by the individual and collective impossibility of influencing the time and manner of the transition from employment to retirement as seen in the preceding paragraph. Faced with the overall re-dimensioning of safeguards linked to employment, in an active ageing perspective the system suffers from the difficulty the public player has in determining labour market regulatory mechanisms capable of guaranteeing the participation and employment of those advanced in years.

From research experience and literature on the subject (Accorini, Gagliardi, 2007) and given the current regulatory framework it is possible to draw some action lines for determining a many faceted strategy for activating older workers dismissed too early from the labour market, in accordance with the analytical pattern discussed in the following three paragraphs. This pin points (a) the typology of the workers targeted by activation policies based on basic education, on the level of professionalism and on orientation towards work; (b) the orientation of the labour market considering companies’ selective strategies; and (c) the policy options of the public player, taking account of the organisation of employment services and of already existing activation measures or ones that could be obtained through their re-orientation.

Francesco Pirone:  Department of Sociology and Political Science, Salerno Uiversity of Studies, fpirone@unisa.it
1 Reference is made to the public welfare system reforms contained in legislative decree 503/92 (Amato Reform), l. 335/95 (Dini Reform), l. 449/97 (Prodi Reform) and in the most recent l. 234/2004 (Berlusconi Reform).
2 Italy has followed a welfare reform model similar to that adopted by most continental European countries based on joint penalty and incentive action. On one hand the minimum conditions for taking retirement have been tightened, and on the other, with the introduction of the contribution system pension income for those who leave the labour market early has been reduced. Less use has been made of gradual retirement schemes using a mix of part time work and pension (Mirabile et al., 2006).
3 We are referring here to research carried out in various parts of the country, but mainly concentrated on the manufacturing sector: Pirone (2006), Pugliese, Morlicchio and Pirone (2007).
4 The EuroArea 15 includes the following countries: Belgium, Denmark, Ireland, Greece, Spain, France, Italy, Cyprus, Luxemburg, Malta, The Netherlands, Austria, Portugal, Germany, Sweden, Finland.
5 Our elaboration on the Eurostat data, Population forecasts (2007-2051, .
6 Our elaboration on Eurostat data, Labour Force Survey, epp.eurostat.ec.europa.eu.
7 In many cases these are people who started their contributory career early and who have benefited from seniority pensions.
8 A provision of Legislative Decree 276 of 10 September 2003 enacted on the basis of regulation EC nr. 2204/2002.
9 This refers in particular to the rules in Legislative Decree 216, 9 July 2003, implementing directive nr. 2000/78/CE.
10 Reference is made specifically to law nr. 196/197 and law nr. 20/2003 and implementing decree nr. 276/2003.
11 In the 55-64 age group in Italy, for 2007 the employment rate was 66% among those with university qualifications, 50% for those with diplomas, 31% for those with lower middle school qualifications and 20% for those with primary school certificates. Over 65 years of age the employment rate is 17% among those with university qualifications, going down to 7% for those with diplomas, and well under 5% for those with less than diploma level qualifications (Istat, 2009).


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