Pension Policy and Poverty in Italy: Recent Developments and New Priorities

Ensuring adequate living standards to a growing number of elderly while restraining the growth of pension spending represents the main challenge for Italian pension policy. There is a need for an in-depth analysis of the economic conditions of the elderly which can help targeting resources in the coming years to the more needy groups. Using micro-data from the Bank of Italy Survey of Household Income and Wealth (SHIW), we document that the incidence and intensity of poverty among pensioners in Italy are far below those concerning other citizens. This is mainly attributable to the generous rules which governed, until very recently, the public pension system. However, the economic conditions of pensioners vary a lot with age, gender, region and family characteristics. Some groups present high poverty risks. Moreover, the pension reforms implemented since 1992 will curb the benefits paid to younger generations, which also suffer from relatively low wages and increased job flexibility. As a result, for such cohorts the poverty risk after retirement has sharply risen. Changes in the social insurance pension schemes can mitigate some of these risks, but the goal of poverty reduction should be primarily pursued through other expenditure programs. JEL Classification: H55, I32, I38