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14 February 2019

Italy: government resets pension age and launches new benefit scheme for low income earners

A decree concerning two of the Italian government's flagship measures - the 'citizenship wage' benefit scheme for job seekers, and the 'quota 100' pension reform that will reduce the retirement age for some people – has been approved by the Cabinet. However, critics question the system of basic income as it easily can lead to exploitation in a parallel market of unpaid public service jobs.

On 17 January 2019, the country’s council of ministers approved the legislative decree containing two of the coalition government’s key measures: the so-called ‘citizens’ income’ and the ‘quota 100’ system for pensions. The changes will come into effect from April 2019 and will be supported by funding set aside in the 2019 budget (presented in December 2018). It will lead to the introduction of a basic payment of around €780 a month for those on low incomes, paid out for a period of 18 months, with the option of renewal for another 18-month period, a policy for which the government has set aside 10 billion euro. The retirement age will be lowered from 67 to 62 for millions of people who have paid into the country’s pension system for at least 38 years.

The reform of the retirement age modifies an unpopular 2011 reform by the former government that raised the retirement age to 67. It allows workers to retire at the age of 62 (as opposed to 67), provided they have made 38 years of contributions. It is estimated that the plan will lead to 1 million early retirements over the next three years, costing the state 22 billion euro in total. It will apply exclusively to people who are at least 62 years old, with pension contributions for at least 38 years. The measures include the right, regardless of age, to retire after 42 years and 10 months of pension contributions (for men), or after 41 years and 10 months of contributions (for women).

According to the government, the universal basic income for the poor and job seekers (the ‘citizens’ income’) is primarily aimed at Italian citizens. However, it will be accessible to foreigners who have been Italian residents for at least 10 years. Criteria for eligibility include equivalent financial situation indicators, such as an annual income lower than 9,360 euro and property (excluding the primary residence) worth more than 30,000 euro. Government sources estimate that around 1.8 million families, with some 5 million people, will benefit in total. In order to get the financial benefit, the ‘poor’ will have to work eight hours a week for ‘free’ (unpaid) ‘for the state’ and accept a job proposal out of a choice of three, in a three- years period, under threat of expulsion from the system. Employment agencies will have to offer the beneficiary a first job located within 100km from their residence during the 1st year, a second will offer be made within a 250-km radius of their residence. A 3rd offer, as well as any offer made after the first 18 months of receiving the financial benefit, can be for a job anywhere in the country.

Observers criticised the scheme on the grounds that it easily can lead to exploitation. The risk is that it will exert further downward pressure on labour costs and social standards. Those entitled to the benefit will be parked within commonly defined ‘socially valuable jobs’ within the services sector. The outcome will be ‘invisible’ or ‘unpaid’ work in community-based services. Critics talk about a workforce reintegration benefit of last resort for the unemployed and the poor, part of the authoritarian turn of the welfare state aimed at the creation of one or more parallel labour markets. The trade unions have also been critical of the planned policy. As the 2019 budget was approved in December 2018, the unions jointly spoke about a ‘wrong-headed, short-sighted, recessive’ budget, which ‘cuts growth and development, employment and pensions, cohesion and productive investments’; the Senate’s approval in a confidence vote represented ‘serious damage to parliamentary democracy.’

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