Social Security and Inequality in Italy: The Role of Pension Reforms

This paper discusses in which direction and to what extent the public pension system reforms of the past three decades may have altered the redistributive role of the public pensions in Italy.
Using detailed individual data from the regular and retrospective waves of the Survey on Health, Ageing and Retirement in Europe we describe the distributions of the average lifetime earnings, of the pension benefits as well as those of the social security wealth, financial and real assets of the Italians. We construct and compare several inequality measures for workers and for retirees and show their trends along time.
In a second step we explore the role that the pension reforms have had in determining the evolution of inequality along the individuals’ lifecycle. Several elements contribute to generating and/or amplifying inequalities. First, the differences in the earnings from employment together with the length of the working life and the potential interruptions in the working career directly determine the amount of the pension benefit an individual will receive when retired. Second, inequalities in later life are also influenced by the retirement age and the life expectancies. The public pension system reforms impacted both these elements, through (i) the changes in the benefit computation rules (direct effect) and (ii) the variations in the retirement age induced by the tightening of the eligibility requirements (indirect effect). Our analysis reveals that the reforms enacted in the recent years in Italy increased to some extent the redistributive role of the public pensions, by reducing more the SSW of more educated individuals.