| Timebomb? |
27 October 2003
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Italian Unions Strike to Protect Pensions
The Italian peninsula was frozen solid on Friday -- not by the weather with 14°C for the high, but rather by a four hour general strike. Three of the biggest unions are upset about President Berlusconi's plans to make them work for more years before qualifying for a pension. It looks like a rerun of 1994.
The Italians currently can qualify for a pension at the age of 57 if they have 35 years of service during which time they have paid into the system. The president wants to change that to 40 years' of paying and the pension would be available to men at the age of 65 and women at 60.
Leaving aside the sexual discrimination, which is indefensible in both actuarial and moral terms, some sort of reform is needed. Italian life expectancy, according to the CIA Fact Book, is estimated at 82.63 years for women and 76.08 years for men. For a country with a population growth rate of only 0.05% (estimated by the same source), this is a demographic problem. Add to it an unemployment rate of 10%, and it is clear that Italy can't afford its current system.
Rather than jam the changes down the throats of the electorate, which caused Mr. Berlusconi's previous attempt at governing the country to collapse in 1994, he ought to try catching flies with honey. Increase the pay outs for those who work longer, reduce the payouts for those quitting with the bare minimum. After all, what is the point of a social program if a society can fund it?
The great distinction between Europeans and Americans is in the trade off between leisure and money. Europeans, in general, are more willing to give up money for time off. Any traveler in Italy will attest to the fact that the Italians, in this regard, are quite European. The results will not be as dramatic with a more modest reform, but there won't be any reform at all if Mr. Berlusconi stays on the current path.
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