Italy. Continuity and change in welfare state retrenchment

Three interacting conditions explain the characteristics of the Italian economic and social model and its recent evolution: the economic and territorial divide, the huge public debt and the political instability. The paper argues that the policies implemented in the crisis mark a continuity with the reforms implemented in the two previous decades in the fields of welfare and labour: further cuts in social investment and social expenditure, privatization and higher co-payments for social services, unfair tax and pension reforms, more labour market flexibility, changes in social dialogue and weakening of national collective bargaining. The collapse in families’ incomes and in employment opportunities has made the lack of a universal safety net socially unbearable. Hence the increase in poverty among lower income families and the impoverishment of the middle class. Two case studies – the pension and the labour market reforms - were chosen to illustrate how the crisis has offered the occasion to take the process of privatization and de-regulation a step forward. The paper concludes that Italy needs to develop a growth model that leads to substantial job creation capable of promoting social equality. Investing in welfare – in an innovative way – can create more jobs than investment in traditional infrastructure: it is indispensable for the effective development of human capabilities, it is critical for the pursuit of gender equality and it is essential for long-term sustainable growth.