Pensions and the Dynamics of Inequality in Italy: Initial Evidence, 1987-2014

As certified by Eurostat, in 2015 Italy was among the European countries with the most pronounced income inequality, with a “20:20 ratio” of 5.8. That is, the income share of the richest 20% of households is 5.8 times that of the poorest 20%. Only Serbia, Romania, Lithuania, Bulgaria, Spain, Greece, Latvia, Estonia e Portugal displayed a higher inequality ratio that year. Even in the broader group of all OECD countries, including the US and the UK, Italy is among the most unequal. The main difference between Italy and the US or Britain is that in Italy inequality had gradually decreased through the 1980s, scoring a minimum in 1991, before then rising dramatically (Fiorio, 2011; Brandolini and Smeeding, 2008). In the US and the UK, by contrast, inequality has increased steadily. The social costs of income inequality can be substantially aggravated or mitigated by a country’s welfare system, so it is important to analyze the structures that the various nations have adopted. The main differences concern both amount of expenditure and the form in which benefits are delivered. For Italy, between 2000 and 2008 the bulk of social expenditure went for old age pensions (59.1% compared with an average of 43.7% in Europe). The article examines trends in inequality in Italy from 1987 to 2014 and analyzes the changing distribution of individual incomes by source (payroll employment, self-employment, pension) and by geographical area.