Opposing trends: the pension reforms of Italy and France

On the one hand, Italians waiting for the Meloni government's "Quota 103" reform. On the other, the French rediscovering the spirit of the Revolution to stop Macron's reform: what are the consequences for young people?

  Articoli (Articles)
  Ilde Mattei
  27 February 2023
  5 minutes, 36 seconds


Pension systems are complex and almost insignificant in the lives of young people, but, given recent developments, it is crucial that they become a new priority.

In this article, we aim to briefly illustrate the Italian pension system and compare it to the French system. Although both are undergoing major changes, economic management diverges profoundly, and public reaction is at the opposite ends of the spectrum. The results for us young people will not change much.

Italy

Although Italy introduced a very good system for calculating pensions (the calculation based on pension contributions) 25 years ago, the effective implementation of the contributory system is not yet total, as the calculation is still largely based on the retributive system (i.e., the calculation based on the last salary received). As a result, the benefits that the contributory system has brought are partial, not to say marginal. Instead, the accumulation of public debt that has resulted from the use of mixed calculation (both contributory and retributive) is far from insignificant. To this national inefficiency, one must add the debts caused by structural factors that have affected all developed countries: declining birth rates, rising life expectancy and the recent rise in inflation.

After years of trial and error, the situation was addressed by the Fornero Law (the increase in age and contribution requirements), which, in theory, would have led to greater intergenerational equity and to a more economically sustainable pension model, but in practice has not completely achieved its goals, further increasing the unpopularity of the reform.

For this reason, Salvini made "Quota 100" one of his workhorses, succeeding in implementing it during the Conte I government. Broadly speaking, the "Quota" system corresponds to adding up the retirement age and years of contributions to be made (for "Quota 100" it was 62 years of age and 38 years of contributions). Although this reform was highly unsustainable, as reported repeatedly by the OECD, the EU and the IOPS (International Organization of Pension Supervisors); voters, who are mostly close to retirement, expressed their support for Giorgia Meloni's party. One of its goals was to maintain continuity with "Quota 100." The Meloni government, indeed, did not break its promises and at the end of 2022 introduced "Quota 102" and "Quota 103" (being only an experimental basis for 2023). The first involves 64 years of age and minimum 38 contributions, the second, so-called "flexible early retirement," 62 years of age and 41 contributions. These minor changes, imposed by the gray economic situation in Italy, are not enough to reverse the trend of the Salvini system. In fact, all "quota" systems have such a low level of sustainability that the new and next generation of workers are at risk of not receiving a social security check. This is because "quotas" are currently financed with one of the highest public debts in Europe, making Italy's pension spending the second most burdensome among OECD countries.

France

The French pension system is considered sustainable, but the requirements to retire are virtually the same as those of "Quota 103," being a minimum of 62 years old and 41.5 years of contributions. How is this possible? In France, the pension system is fully contributory, and it is mandatory to have a complementary private pension fund in most cases. In recent years, however, the French economic situation has also begun to falter with high pension spending and public debt to GDP ratios, although consistently lower than those in Italy.

To try to reinforce this balance, since his first term as president of the republic, Macron has pushed to reform the pension system by choosing to raise the retirement age by 3 years, rather than raise taxes, the deficit, or lower pension checks. It should be noted, however, that other alternatives, such as increasing taxation on higher pensions, were not considered. As a result, there have been strikes and protests almost weekly in France since January 2023.

What are the consequences for us young people?

The most interesting question about these reforms is what consequences they will have on us, upcoming or just entering the workforce. The prospects are far from rosy. For today's 20-year-olds, it is estimated that the retirement age will be around 66 in France and 71 in Italy. Add to this the expectation of an ever-higher contribution rate (i.e., a lower salary).

Faced with this disarming situation, steps can be taken from the very beginning of one's career to reduce the problem. The main one is to start a private pension fund so that you can secure an adequate pension and, if possible, even reduce your working years. The main thing is to start investing in these funds as early as possible, in fact even a difference of two years can result in a 10 percent reduction on the earnings of one's savings.

In addition, in Italy, INPS allows people to redeem their undergraduate years (or equivalent degrees). It allows the taxpayer to pay INPS a sum equal to 33 percent of what he or she earned in the last year multiplied by the years of graduation, and thus be able to retire as if he or she had started working from the first year of the university course. Without these and other cushioning measures, our generation's retirement expectation is a sum that, in many cases, will barely touch 50 percent of final salary.

As recent years have shown us, we cannot trust the common sense of current policies. Unless we want to be left with complaining and despairing as our only option, we need to be more aware and more of an actor in our future by acting now.

Translated by Denise Praticò.

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L'Autore

Ilde Mattei

Laureata in Philosophy, International and Economic Studies all’Università Ca’Foscari di Venezia, sta collaborando con un’organizzazione no-profit francese a Strasburgo per creare ed implementare progetti volti alla sensibilizzazione dei giovani sull’importanza di essere cittadini europei.

Si interessa principalmente di migrazione e all’ambiente con l’intento di rendere accessibili a tutt* queste tematiche.

All’interno di Mondo Internazionale è autore per l’area tematica di Organizzazioni Internazionali.

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Fornero salvini Meloni Quota 100 Quota 102 Quota 103 pensions young people Italy France work pension system future European Union