Financing Demographic Shifts: Pension and Healthcare Scenarios to 2030: Italy deep-dive

The future of pensions and healthcare in a rapidly ageing Italy

While Italy is ranked by Datamonitor as the eighth largest economy in the world and the fourth largest in Europe, it is distinguished in demographic terms by simultaneously having one of the lowest fertility rates (1.4 children per woman in 2007) and one of the highest life expectancies (according to ISTAT, around 78.6 years for men and 84.1 years for women) in the world.

These trends are set to continue – the UN projects that life expectancy in Italy will rise even further to 82.2 for men and 88.1 years for women by 2050. The combination of low fertility and increasing life expectancy implies significant population ageing. Indeed, Italy currently has the world’s highest percentage of “old old” – persons aged 80 years or more – and the EU’s highest percentage of population aged 65 and over.

Given a host of other significant factors in its economic and political environment – such as large levels of public debt, regulated labour and education markets, high levels of immigration, a decentralised national healthcare system and high levels of pension expenditure – Italy is a highly interesting case study for an ageing, developed country. Indeed, out of all the OECD countries, Italy will likely feel the effects of ageing the soonest.

The scenarios currently being developed for Italy will focus on the following factors:

Immigration
At the country level, many economic, social and political factors could combine to produce varying environments in terms of the stock and flow of immigration into Italy. Given current trends and the range of possible policies, levels of immigration could have a significant impact on population and labour force structure, as well as catalyse shifts in social and political attitudes towards the provision of welfare for citizens over the next 20 years.

Inter-generational equity
A major consequence of the current financing environment and medium-term outlook for Italy's pension implies that younger generations will bear the brunt of financing the continuing rights of older workers, while receiving fewer benefits themselves. Depending on how the uncertain drivers described above combine and influence the Italian economic and social environment, there could be serious consequences of significant inter-generational inequity.

Labour market and education reform
A critical aspect of the Italian environment is the development of the labour market in terms of its flexibility, ability to drive economic growth and the relative power of firms, unions and individuals to influence government policy on benefits. Given certain sets of drivers (described by one participant as “catastrophic”), it is possible that major labour market reforms could occur in Italy, although not without the added effect of significant disruption to the current social and political systems. Of particular concern is the need to improve labour market participation, particularly among women, without further depressing fertility and adversely affecting overall supply of elder care (most of which is provided through informal channels).

Healthcare system equity and efficiency
Participants discussed at length the need for improvements in efficiency in the Italian health system, in terms of restoring equity across the regional dimension, reducing costs and improving health outcomes. Of particular interest were mechanisms by which competition, innovation, low-intervention technologies, improved utilization rates, the impact of regional inequalities in health and widespread regional wellness and prevention schemes could contribute to efficiency.

Attitudes towards retirement
The manner in which populations will respond to different economic drivers, government policies and regulatory environments was another key discussion point, related to potential behavioural shifts for saving and political pressures. This links closely with financial education, an important aspect in encouraging the Italian population to face the financial implications of the current demographic changes and future challenges of the pension and healthcare systems.

Contact

For more information about this project, please contact the World Economic Forum's Financing Demographic Shifts: Pension and Healthcare Scenarios to 2030 team:

Bernd Jan Sikken, Associate Director
Programme Manager, Financing Demographic Shifts
World Economic Forum
E-mail: berndjan.sikken@weforum.org

Chiemi Hayashi, Global Leadership Fellow
Project Manager, China Scenarios
World Economic Forum
E-mail: chiemi.hayashi@weforum.org

Nicholas Davis, Global Leadership Fellow
Project Manager, Italy Scenarios
World Economic Forum
E-mail: nicholas.davis@weforum.org