Economics and Sociability in new tools for Integrated Welfare

By Maria Teresa Bianchi

The reflection that has stimulated the present work could be summarized in the expression: “the State withdraws progressively from welfare, as it fills that void?”. The answer to this question is fragmented and uncoordinated and comes often from civil society. The work is concerned, after the analysis of the current situation, to verify the role of business in response to the vacuum of welfare and the compatibility of such a role with the cost of the business.

MARIA TERESA BIANCHI. Professor at Economics Faculty of La Sapienza in Rome. Writer of many books on Management administration and financial subjects. She holds courses in Bachelor and Master in the Faculty of Economics and the course of Business at the Faculty of Pharmacy. She is a member of the Commission for the reform of company law in the National Board of Accountants and Public Accountants. Member of the Scientific Institute for Corporate Governance. Member of the Scientific Committee of the Roman Academy of Accounting. Member of the Team for the reform of the corporate law. Qualified as Chartered Accountant and Auditor. Member of statutory auditors of listed companies also. ​

• Language: English
• Publisher: Società Editrice Esculapio
• Release date: Nov 15, 2013
• ISBN: 9788874886746

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Maria Teresa Bianchi

ECONOMICS AND SOCIABILITY

IN NEW TOOLS FOR INTEGRATED WELFARE

INTRODUCTION

Scope of Research

This present work is the result of research that stems from an empirical observation of certain phenomenon, due to the global economic recession, but already in progress before 2008. The empirical indepth study from which this reflection stems from can be summarized in the expression: The State is progressively pulling out of welfare, how can we fill in the gap created?. Often the answer to such a question comes from the so-called civil society that, using spot interventions and, normally, on a voluntary basis, tends to cover this or that void. At the moment, it seems that there aren’t, any complete forms of interventions available.

The forethoughts that proceed in this paper have developed into this research which runs on two different tracks: the first is an analysis of the actual situation of the welfare state, in order to better understand the significance today of social status and what is, in this moment, after all the recent reforms, offered by the state in terms of: social security, income support, permanent training and female job employment. It is very cleat that such an analysis is very broad and could also involve health care, education, safety, however being difficult to summarize on the individual sectors.

The second research track is constituted by an analysis of the company’s role in this panorama. The intent is to verify if the company could have an active role in this welfare void or should they be considered a passive operative, or again is it necessary to distinguish between small, average, large, public or private companies. Such a research is carried out also taking into consideration foreign experience.

From the data gathered for such research, we have tried to summarize, in order to hypothesize possible solutions, which allow, on one hand, a better-structured coverage for workers needs, on the other hand a more active participation from companies. This postulates an assessment of realization possibilities for the binomial economics- sociability and to quantify such effects. At this point, we shall analyze the different methods for social reporting that are accredited, in order to verify the best way to respond to actual needs.

Our research concludes with a first forethought on the possible synthesis between sociability and economics and, therefore, on the companies role in the new welfare reality.

Chapter I - WELFARE IN ITALY

1.1 Analysis of the actual situation of the welfare state

The social state is a complex system that is founded on the principal of substantial equality and is directed towards reducing inequality by means of synergic interventions such as Health Assistance, Public Education, unemployment insurance, access to cultural resources (libraries, museums, free time, etc.), old age and invalidity assistance, defense of natural environment. All of this is guaranteed by article 2 of the Italian Constitution stating that the Republic guarantees: the fulfillment of mandatory obligations with regards to political, economical and social solidarity.

The most recent demographic and socio-economic changes have determined significant transformations in social security systems around the Western world. Globalization and a strict interdependency of economies on an international level have rendered the scenarios with which governments are called upon daily to protect the citizen even more complex. The impact of economic recession seems to have risked the fundamental solidarity principal on which the entire social state relies on, not only in our country.

Necessity to save money on public spending, that at the same time has an influence on its services, furthermore renders necessary the identification and activation of tools and intervention for the improvement of the quality of life of citizens. In this view, we must place importance on- both in a legislative and business prospective- for subsidiary welfare, intended as all services that can be offered by public and private institutions to support new needs in social policies.

1.2 The social security situation

The term welfare is translated into wellness and consists of, all those services rendered by different actors in the economy, such as: the State, market, family and third sector, to spread amongst all social levels the wellness intended as education, defense, health assistance, social security, etc.

The first to design a form of welfare state (social protection plan executed by the State) was the German statesman Bismarck. In 1898, he enacted the first law for worker’s rights protection. The State began to promote the quality of life of its citizens through the establishment of specific institutions. As a result numerous other states started adopting social protection policies, in particular, the Beveridge plan was established as an answer to the financial crisis in 1929 that registered a strong expansion in state duties for social protection¹.

The welfare system, as previously specified, contains many components, but in the past years, above all in Europe and Italy in particular, the welfare crisis has been heavily felt especially with regards to social security. Therefore, it seems necessary to deal with the welfare phenomenon starting from this topic.

The health and pension systems, within the realm of a welfare state, absorb the most part of social spending² and nourish, up until reaching unsustainable levels, the public debt. From this point the necessity to intervene in a substantial manner, even due to the financial crisis and the increase in the retired population.

The concept of pension can be intended as: suitable to sustain the individual in terms of work life up until their death³. This service (economical, continuous and periodical) is granted by law thus establishing the rules to obtain access to it. In Italy, there are 2 types of pension:

social security pension (with preventive payment, such as old age pension);

assistance pension (without any form of previous payment, which includes social pension, invalidity and that for reversibility).

Social security systems⁴are meant to insure to the passive worker the maintenance of his same life style held during his working years⁵. This means that a parameter is created (directly and/or indirectly) for a pension cheque based on the salary gained previously⁶.

The pension system is characterized by different forms: the public one which is paid by public social security entities (such as INPS) and the private one, paid by private social security institutions (such as professional categories) that provide for obligatory contributions. Then there are Common pension funds both opened or closed that provide for contributions that are either voluntary or complimentary.

The most relevant problem with regards to pensions is the demographic drop and the progressive increase in the average age. It is enough to think that in 2011 the over 65 were 33,31% of the Italian population, whilst in 2065 they will become 63,95%⁷, with 10% who will be over 85.

At the moment this implies two consequences: the first, is that an allocation system can no longer work, being that the active population is no longer capable of sustaining the pension load as well as the passive one. But it also means that health welfare expenses tend to increase to support the needs of a population that is growing older.

The Italian pension system was founded on the allocation model, however the needs of today make it obsolete. Without having any pretenses, it is useful to remember how the pension models have been alternated and substituted in Italy.

Over the years, three types of pension systems were used in Italy⁸:

Allocation system: pension obligations were covered by the contributions paid by the workers. The yield is equal to the growth rate for aggregate production. In other words, we are in front of a pact between generations: the contributions paid by workers are immediately transferred to those who are actually retired. A system like this necessarily needs at least three workers to pay contributions to cover the needs of retiree⁹. It is