Unions and government discuss pensions reform

Download article in original language : IT0305102NIT.DOC

In April 2003, Italy's three main trade union confederations, Cgil, Cisl and Uil, met the Minister of Labour to discuss the content of a'proxy law' on reform of the pension and social security system, currently under discussion in parliament. The unions made a number of proposals for amendments to the legislation, and threatened action if their demands were not met.

Italy has a'mixed' pension system which provides both for a mandatory state pension scheme and supplementary occupational pension schemes. The mandatory state pension system is funded by social security contributions deducted directly from workers’ pay (total security contributions amount to 32.70% of gross income) while the supplementary pension system is managed by pension funds. Supplementary occupational pension funds are divided into'closed collectively agreed funds' and'open funds'. The'closed funds' are established by collective agreements and are available only to those workers who are employed under a collective agreement providing for these kind of funds. The'open funds' are promoted by institutions operating on the financial market, mainly banks and insurance companies, and anyone can join them.

The mandatory state pension system, managed by the National Social Security Institute (Istituto Nazionale della Previdenza Sociale, Inps), was reformed in 1992 by the Amato government and in 1995 by the Dini government. These reforms related to Italy’s demographic problems. Forecasts indicate that by 2050 Italy will be Europe’s'oldest' country, with six out of 10 people aged over 65 years. The ageing of the population goes hand in hand with a very low employment rate (55% in 2001) and a low presence of older people in the labour market: 28% of people aged between 55 and 64 are in employment in Italy, compared with an EU average of 38.5%.

Expenditure on the pension system weights heavily on Italy’s economy, which already suffers from a severe public debt. In 2000, pension expenditure represented 13.8% of gross domestic product, a percentage which is expected to increase to 16% in 2033.

Parliament is currently examining a proposal for a'proxy law' (whereby parliament delegates to the government the power to legislate on particular issues) on reform of the social security system, and notably pensions, submitted by the centre-right government (IT0201277F). The bill was approved by the Chamber of Deputies in February 2003 (IT0303305F) and at present is under discussion in the Senate. The key features of the proposed law include the liberalisation of the retirement age, new economic incentives to encourage people of pensionable age to remain in work, reduced social security contributions for newly-recruited workers, and support for supplementary pension schemes.

On 17 April 2003, the three main trade union confederations - the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil), the Italian Confederation of Workers’ Unions (Confederazione Italiana Sindacati Lavoratori, Cisl) and the Union of Italian Workers (Unione Italiana del Lavoro, Uil) - met the Minister of Labour, Roberto Maroni to propose a number of changes to the bill. The three union confederations jointly put forward three main proposals:

  1. The bill would reduce the social security contributions paid by the employer in respect of workers newly recruited on open-ended contracts by between 3 and 5 percentage points. This measure has been welcomed by Italy’s main employers’ organisations,Confindustria and other employers’ associations because it will entail an important reduction in labour costs. The government guarantees that the consequent reduction in pension benefits brought about by the reduced contribution payments will be made up by supplementary pensions. The trade unions, however, believe that if these contributions are not paid, not only there will be an automatic reduction in workers’ pensions but the consequences for social security finances will be disastrous. According to Cgil, Cisl and Uil, this measure could be replaced by eliminating or reducing contributions for some schemes provided by the mandatory state social security system (such as family allowances, unemployment benefits and maternity allowances) and charging the costs to the state’s budget. Such a measure would lead to a decrease in labour costs but would not jeopardise pensions for newly hired workers and the financial balance of the pension system.
  2. The draft law provides that accruingend-of-service allowance s (Trattamento di fine rapporto, Tfr - a portion of a worker's pay [around 8%] set aside by the employer and then paid as a lump sum at the end of the employment relationship) must compulsorily be paid into a supplementary pension fund. The government believes that this measure will guarantee the operation of supplementary pensions. According to the trade unions, this is an unconstitutional measure and deprives workers of the right to decide how to use this amount of money. Cgil, Cisl and Uil want only a non-compulsory transfer of the Tfr for this purpose, conditional on a voluntary decision by the worker. This could also take the form of'silent assent' whereby, in the absence of explicit refusal by the workers concerned, there Tfr would automatically be paid into a supplementary pension fund.
  3. The draft law would make closed, collectively-agreed supplementary pension funds and open funds promoted by banks and insurance companies equal in regulatory and taxation terms. The unions want the most favourable tax treatment to apply only to the closed funds.

The Minister of Labour was due to meet the trade unions again on 5 and 6 May 2003 to evaluate the latters’ requests.

The parties welcomed as positive the resumption of dialogue between the trade unions and the government on such a complex and delicate issue, though the unions seem to be very concerned about the outcomes. Adriano Musi, the Uil confederal secretary responsible for pension issues, stated that if Mr Maroni’s response to the unions' requests is negative,'a general strike will be unavoidable'. The relevant confederal secretaries of Cgil and Cisl, Morena Piccinini and Pier Paolo Baretta respectively, also declared that a conflict will be unavoidable in the even of a negative response:'there are two possibilities, either an agreement will be reached to close the whole pensions issue or a useless and detrimental conflict will take place.'

According to Confindustria, the cut in employers' social security contributions for new recruits is the most important part of the bill. However, it believes that the measures planned by the government are not sufficiently far-reaching, and that the pension system requires a more radical reform.

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment