Like in a Skinner Box: External Constraints and the Reform of Retirement Eligibility Rules in Italy

WP-LPF 4/12

Italy is among the European countries which have proceeded the farthest in reforming
old age protection arrangements in the last two decades. Not only the
pension architecture has been remodelled since the early 1990s by launching a
transition to a multipillar structure (1993), also the introduction of a NDC system
in the first paygo pillar was legislated in 1995 to replace the traditional earningsrelated
schemes. Despite these incisive changes, reforms of eligibility (age and
seniority) conditions for retirement have lagged behind.
Various contributions have showed how, on the one hand, reforms in the 1990s
were made possible by exogenous pressures—and specifically the external constraint
(vincolo esterno) posed by EU fiscal rules; on the other, external pressures
were filtered by the domestic policy-making thus leading to a strong protection of
so-called acquired rights in order to appease the unions. Due to the weaker “Eurogrip”
since the early 2000s, changes in eligibility conditions for retirement have
become contradictory, ambivalent when not expansionary (e.g. in 2007).
Things have suddenly changed, however, when the economic crisis and the “debt
agony” have broken into the stage. Between 2009 and 2011 several measures included
in the austerity packages adopted by the cabinets led by Berlusconi and,
then, Monti have repeatedly aimed at tightening eligibility conditions to be entitled
to both old age and seniority pensions. The consequence of these interventions
are a steep increase of pensionable age, the full harmonization of requirements
across genders and economic sectors to be implemented in the next five
years, as well as the automatic link of eligibility requirements to changes in life
expectancy.
By revisiting the vincolo esterno thesis, the paper argues that, first, European constraints
actually represent irresistible forces only when they are coupled with pressures
exerted by financial markets. Second, differently from the past wave of
reforms (1992-97), recent pressures have led policy-makers to adopt measures
which will be implemented in the short-run. This represents a novelty which
proves the enhanced disruptive potential of exogenous pressures on national social
security arrangements after the 2008-09 economic crisis, also capable to affect
previously (quasi)immovable objects such as retirement age by overcoming resistance
by the “insiders”.