Touching pensions is a complicated thing. This government has also noticed this and, despite its bombastic declarations, is unable to get the ball rolling on the subject. With a high deficit, the new stability pact and an infringement procedure at the door, the government does not have the resources to fix pensions. The window for early retirement offered by the so-called ”quota 103” (62 years of chronological age + 41 of contributory age) with the penalty represented by the link to the contributory system will close at the end of 2024. The pension reform could be postponed until 2026.
In this regard we need to carry out a truth operation.
First of all, when we talk about ”pension reform”, now as with the latest governments, in reality it would be more appropriate to talk about ”adjustments to the Fornero reform”. A reform that was certainly poorly written, creating de facto injustices with the phenomenon of redundancies (now behind us), but which created the conditions to secure the pension system by lengthening the age requirement for retirement and limiting benefits.
Secondly, it is necessary to remember a fact that is not very well known: Italy is poorly positioned in terms of health spending at European level, as I showed last week on this site, but the same cannot be said about pension spending. In terms of resources in relation to GDP, Italy is second in Europe, behind only Greece, we are around 16%, more than double what we spend on healthcare. Furthermore, in terms of average level of pension benefits, Italy is in sixth place, ahead of France, Germany and Spain.
Ours is a welfare model which, due to successive sedimentations, favors pension spending. It would be too complex to establish whether this is good or bad for the well-being of our society, what is certain is that there is no shortage of resources allocated to pensions as a whole and that the problems must, if necessary, be identified in their distribution.
Any attempt to ”soften” the Fornero reform brings with it an increase in spending on pensions. An operation that we cannot afford lightly. According to estimates from the State General Accounting Office, the ”Quota 100”, ”102” and ”103” operations implemented in 2021, 2022, 2023 contributed to increasing pension spending by 0.4 % of GDP per year on average in the period between 2019 and 2022, reversing a downward trend that had been underway since 2014.
Under current legislation, the simulations show an increasing dynamic until the end of 2045 when pension spending will reach 17% of GDP, only then will the effect of the transition to the contributory system introduced with the Dini reform have all its effects and the share will reach to reach 14% in 2070. We therefore still have twenty years of suffering ahead of us.
The cumulative effect of the reforms that have taken place over the last twenty years has been significant: according to the legislation in force before 2004, the peak of pension spending in 2045 would be as high as 20% of GDP.
The State General Accounting Office also offers us a simulation on how much it would cost to make ”Quota 103” permanent: +0.3% of GDP until 2045, the subsequent dynamics would then be similar to that of current legislation. It is therefore not easy to get a handle on pensions, even just extending ”Quota 103” would cost one to two billion a year which are not easy to find in a lean period.
The main indication to counter this situation is to act on the birth rate but this would not significantly change the cards on the table in the near future: the fertility rate is at its lowest (1.24), it is estimated that it will grow in the next 50 years up to reaching 1.44 but this will not prevent the Italian population from contracting by 10 million (from 59 to 48) between now and 2070. The ratio between the population over 65 and the population between 15 and 64 would almost double, going from 36 to 62%. . Having more children brings benefits only in the very long term, greater relief comes from a more sustained migratory flow. The advantage for our welfare is that immigrants pay their pension contributions immediately and in doing so participate in the payment of pensions immediately. In the simulations, the migratory flow is stable at around 165,000; its reduction would significantly compromise the possibility of achieving a stabilization of the share of pensions in GDP by 2045.
Ultimately, it is not easy to simultaneously tackle the fight against immigration and the increase in resources allocated to pensions as the current government does. Immigration brings social problems that must be managed by also thinking about the benefits we can derive from it, including the sustainability of our welfare.
