Brandolini, A., 1993, “A description and an Assessment of the Sample Surveys on the Personal Distribution of Incomes in Italy.” University of Cambridge Discussion Paper MU 9303.
Cannari L., and G. D’Alessio, 1990, “Housing Assets in the Bank of Italy’s Survey of Household Income and Wealth” in Income and Wealth Distribution, Inequality and Poverty, edited by C. Dagum and M. Zenga. Berlin: Springer Verlag.
Cannari, L., and D. Franco, 1997, “La povertà tra I minorenni in Italia: dimensioni, caratteristiche, politiche.” Banca d’Italia, Temi di Discussione.
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Commissione di indagine sulla povertà e l’emarginazione, 1996, “La povertà in Italia, 1980–1994.” Roma: Presidenza del Consiglio dei Ministri.
Commissione per l’analisi delle compatibilità macroeconomiche della spesa sociale (Onofri Commission), 1997, “Relazione Finale,” mimeo.
Commissione per l’analisi delle compatibilità macroeconomiche della spesa sociale (Onofri Commission), 1997a, “La spesa per l’assistenza,” Documento di base No. 3, prepared by F. Bimbi, P. Bosi, M. Ferrera, and C. Saraceno , mimeo.
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We are greatly indebted to Alessandro Leipold for his many suggestions and comments. We also thank Gislene Jeffers and Patricia Gillett-Lorusso for their editorial assistance. We remain solely responsible for all errors and omissions.
Commissione per l’analisi delle compatibilità macroeconomiche della spesa sociale (1997), henceforth indicated as Onofri Commission. See also “The Welfare System in Italy: Recent Reform Proposals,” in IMF Staff Country Report No. 97/44, May 1997.
OECD data indicate an aggregate poverty rate (defined in terms of the number of persons with equivalent disposable income below 50 percent of the median) appreciably higher in Italy (14.2 percent) than in either France (6.8 percent) or Germany (9.1 percent; data refer to different years in the 1990–94 period). Furthermore, the poverty rate rose by 3.9 percentage points in Italy in the decade to 1993. See OECD (1997).
Certain sickness benefits supplied by bodies outside the general government (indennità economiche di malattia) are excluded from the Eurostat definition of Italy’s social expenditure but included in the corresponding figure for other countries; see Eurostat (1996).
This reality prompted the Onofri Commission to characterize social welfare as having largely grown as a “parasite” of the pension system (Onofri Commission, 1997a).
The methodology defines for each country a three-tier structure of social security comprising (i) a basic scheme, providing protection against insurable risks; (ii) a supplementary scheme, reinforcing the basic scheme; and (iii) a group of means-tested welfare instruments, targeting the needy on a solidarity principle.
The relatively scant attention devoted to policies affecting the family unit is even more evident if the analysis is extended beyond the expenditure side to embrace redistributional mechanisms working on the revenue side, along with the tax treatment of social assistance benefits themselves. Thus, for example, in France, the family burden is explicitly taken into account, through the quotient familial, in the marginal tax rate, and in Germany many forms of social transfers are tax-exempt. For an extensive analysis of the “citizen’s budget” in his/her relations with the government, see Centro Europa Ricerche (1997).
Most European social security systems were developed on the assumption that looking after children and infirm adults lay with women and that, for them, paid employment had a secondary role. More recently, however, many countries have introduced means to reconcile family and professional responsibilities. In this framework, for example, Germany implements both a transfer system to lone-parent households (Unterhaltsvorschuss), and a support scheme for mothers raising children (Kindergeld and Erziehungsgeld) and for workers caring for adults. Sole parenthood is also targeted in France (allocation parent isolé), the United Kingdom, and several other countries; allowances for long-term carers are available in the United Kingdom (Invalid Care Allowance), Germany (Pflegeversicherung), and Ireland.
A well-known example of the former kind is the Job Seeker’s Allowance scheme recently introduced in the United Kingdom, while examples of the latter are to be found in Germany (Wohngeld), in France, and in the United Kingdom.
The consolidated accounts of Table 4 are net of publically provided in-kind services—in the first instance, health. Figures are elaborations of data from Istituto Nazionale della Previdenza Sociale (1997) and Ministero del Tesoro e del Bilancio (1997), as complemented by information provided directly by the authorities.
This broadly neutral criterion is the same as that used in the United States (with OASDI on the one side, and AFDC or SSI, on the other) and in Germany (with the contributory Rentenversicherung and Arbeitslosengeld opposed to Sozialhilfe). See Atkinson (1995).
Net of contribution rebates granted both on geographical and sectoral bases (largely for industrial policy purposes), this figure would be close to 7 percent of the total spent.
These include (i) the National Social Security Institute (INPS), by far the largest, which covers both dependent workers in the private sector and certain categories of the self-employed; it currently pays some two-thirds of all pensions, also acting as a government agency for the provision of a number of public assistance programs; (ii) the National Institute of Social Security for Public Employees (INPDAP), paying civil servants’ old-age and survivors’ pensions (and, more recently, also disability allowances); and (iii) the National Institute for Work Injuries (INAIL), granting compensation for temporary work-related injuries, as well as permanent disability payments in cases of more serious injuries or illnesses.
In the transition to the new social security system inaugurated by the Dini reform of 1995, whereby all civil servants’ pensions are to be paid by INPDAP, a few benefits (Lit 5.1 trillion, row 4, column 5) were still administered by the Ministry of Treasury and Budget in 1996.
Thus, for example, of the Lit 5½ trillion in transfers for temporary benefits targeting people in working age (row 12, column 9), only Lit 1 trillion (column 8) is actually used for the institutional purpose to which it was allocated. In the same vein, social pensions (granted to uninsured people above 65) absorb only some 70 percent of the transfers made available by the budget (Lit 3.4 trillion out of Lit 4.8 trillion; row 25, columns 3 and 9).
The 1995 reform, while leaving overall contribution rates unchanged, raised the contributions earmarked to finance pension funds from 27 percent to 32 percent of gross earnings (in order to bring them close to the notional rate of 33 percent used to compute a retiree’s first-year pension). This was done by relabeling as pension contributions part of the contributions previously accruing to the family benefits plan, given the latter’s structural overfunding. The operation resulted in a diversion of resources amounting to almost ½ percentage point of GDP from temporary benefits (with a distinctive welfare feature, as is the case of family benefits) to permanent pension transfers.
This system of ex post off-budget transfers has given rise over time to book liabilities of INPS vis-à-vis the state amounting to about 8½ percent of GDP by end-1996. In the awareness that the pension agency will never be in a position to repay the advances made, the government has put forward draft legislation canceling most of this debt.
These are means-tested supplements granted to pension recipients in cases where their accrued benefits fall short of a statutory minimum (described further in Chapter IV below).
Such episodes (typically consisting in lowering, by up to five years, the seniority required for retirement) have been frequent. At the end of 1995, the total number of retirees in receipt of pensions awarded before achievement of both the standard retirement age and the minimum contribution period (35 years) was as high as 391,000, accounting for total expenditure in the order of 0.2 percent of GDP; a budget transfer to INPS (Lit 2.8 trillion in 1996) covers part of this cost (Table 4, row 6, columns 1 and 9).
Rostagno (1996), by estimating the implicit average yield rate guaranteed on contribution payments by the various regimes in place since the first pension reform of 1992, provides a ranking of the systems according to an index of financial sustainability: only the so-called Amato reform, subsequently superseded by the 1995 law, was proved to pass the test of financial sustainability, although by a small margin. For critical assessments of the pension systems before and after the 1995 measures, see also, respectively, Demekas and Canziani (1995) and Hamann (1997).
The analysis does not include other welfare instruments, such as family benefits, long-term care allowances, veterans’ pensions, and the multiplicity of schemes at the municipal level. The characteristics and problems of the system of family allowances in Italy has already been extensively studied elsewhere (see, for example, Franco and Sartor, 1990 and 1994), and, for an official view, Commissione di indagine sulla povertà e I’emarginazione (1995). Long-term care allowances were not included as entitlement is not means-tested, while municipal aid was excluded because of the high diversity of access rules and the scarcity of observations in the sample used for this study. The latter applies also to veterans’ pensions.
The structure of consistency controls, double checking, poststratification reweighing (to correct for differential response rates by sampling strata) conducted on the raw data, as well as a thorough account of underrepresentation problems of the sample, are surveyed in Brandolini (1993).
For civil disability pensions, this distinction was applied only to those declaring themselves to be “nondisabled,” and excluding those defining themselves as currently disabled (included in a Group D, in a manner analogous to that noted above for INPS disability pensions).
While there are equivalence scales to bring incomes accruing to families of different sizes to a comparable position, there is no equivalence scale measuring the amount of resources that would suffice to place a single person living in an extended family above a certain minimum standard of living.
Commissione di indagine sulla povertà e l’emarginazione (1995a) provides a detailed account of the hypotheses behind the adoption of this particular poverty threshold. For an alternative view to this approach, see Cannari and Franco (1997).
For a view on the debate on the advisable degree of coverage to be assured to different categories of citizens, according to their working history, see Franco and Morcaldo (1988).
Notwithstanding assurances about the anonymity of the information provided, evidence on low response rates and systematic underreporting of income sources (see Brandolini, 1993; and Cannari and D’Alessio, 1990) would suggest that the relative incidence of the “nondisabled” may be underestimated by a fairly high number of false returns.
A breakdown by age for recipients of survivors’ pensions (widowed and orphans) and for the genuinely disabled is, of course, not relevant.
Recall that groups A, B, and C among those receiving INPS disability transfers are actually nondisabled.
Note that a measure of the average poverty gaps for the entire population targeted by the different schemes is provided by the complements to 100 (if positive) of the figures reported in Tables 7 and 8.
Defined by the amount of own resources, that is, the sum of external sources of income and accrued pension rights.
The table has two levels of aggregation. First, a broader one that concentrates on the totality of expenditure made to subsidize recipients’ own resources (supplements to the minimum paid to old age, survivors and INPS disabled retirees, social pensions and civil disability allowances). Second, a narrower one that excludes the entire transfers (both the accrued pension and the subsidy to the minimum) made to INPS “disabled,” thus eliminating the insurance element present in the latter’s benefits, in order to concentrate on the share of outlays with a pure welfare support function. The results do not change appreciably, and the text reports on the first level of aggregation only.
An ideal scheme should be designed in a way to twist curve B, for a given curve A, to completely fill the gap beneath the horizontal poverty line, and to reduce the distance between the two curves above this line. A situation in which curve Β were uniformly flatter than curve A, would indicate that the preexisting degree of income dispersion across the targeted families (as measured, for example, by the ratio of the highest to the lowest decile) had been reduced by public intervention.
As reported in Atkinson (1995). Note that the decile ratio calculated on the entire population should be systematically higher than the one estimated on the portion of the population targeted by public welfare support mechanisms.
Figure 6 gives the number of families covered, the average transfers made, and total resources committed, as percent of the current corresponding levels, were the counterfactual system to replace the current one fully and instantaneously. Figure 7 illustrates the distribution of outlays among different income groups.
A notable exception regards Groups A and Β among recipients of disability allowances: in this case, however, the worsening of the poverty indicators is entirely due to the exercise’s (rather pessimistic) assumption that young “nondisabled” recipients of a disability transfer, once deprived of their pensions, would not find a job to make up for the shortfall in their family income.
This screening procedure does not allow to identify pensions receiving prorated supplements. Resort to the latter is made when the full payments of the subsidy would cause the cumulated own-plus-pension income to exceed the family income limit. However, since the incidence of such prorated supplements over the total is lower than 10 percent, the error involved in disregarding them is accordingly of limited substance. See Box 1 for the eligibility rules governing supplements to old-age, seniority, and survivors’ pensions.
For people above 65 this further allowance amounts to Lit 1.6 million per annum.
A further test based on the number of years of contribution did not prove particularly helpful.
This distribution was kindly provided by INPS.