Unipol Gruppo S p A : Corporate›InstitutionalWelfare Italia 2021

"WELFARE, ITALIA"

Projected welfare spending for 2021 grows (€632bn, +€56bn compared to 2019), €41.5bn in arrival for welfare from the PNRR (national recovery and resilience plan) by 2026: the new bases for relaunching work and tackling the great demographic transition.

THE 2021 REPORT BY THE "WELFARE, ITALIA" THINK TANK WAS RELEASED

TODAY

The Think Tank outlined the five priorities of action for the country:

• Digitalisation of the welfare services
• Active management of demographic changes
• Active policies to support the labour market
• Reform of the passive policies and welfare support system mechanisms
• Measures aimed at increasing female employment

Welfare Italia Index 2021: the gap in the ability of the welfare system of the Italian Regions to respond is increasing between North and South

Rome, 23 November 2021

The 2021 edition of the "Welfare Italia" Think Tank Report was presented today at the Palazzo Venezia in Rome, and could also be followed through live stream; it was supported by Unipol Gruppo with the collaboration of The European House - Ambrosetti and a scientific committee comprising Veronica De Romanis, Giuseppe Guzzetti, Walter Ricciardi and Stefano Scarpetta.

Demographic changes, the ageing of the public, new protection requirements following the pandemic, the transformation of the labour market, the healthcare system between digitalisation and geographic coverage, the resources of the PNRR and the role of the private sector and insurance to modernise the welfare system were just some of the issues debated at the annual Welfare Italia Forum meeting.

For over ten years, "Welfare Italia" has functioned as a place for the analysis, examination and reflection on welfare matters, open to discussion among the main public and private stakeholders in the sector: decision-makers, national and local government representatives, social partners, banks and pension and aid funds and representatives of companies, workers, universities and the voluntary sector.

The impact of the Covid-19 pandemic on welfare spending

According to "Welfare Italia" estimates, the COVID-19 crisis led to a widespread increase in all welfare spending, including the 3 "traditional" pillars (Healthcare, Social Policies, Pensions) and education: in 2021, it will amount to an estimated total of approximately €632bn, an increase of about €6bn compared to 2020, a year in which there was an increase of €50bn over 2019.

The crisis did not significantly change the allocation of the spending, confirming the imbalance in the pension component (49%) which however, is down 2.3 percentage points compared to the 2019 value, even lower than it was in 2009 (49.7%).

The PNRR resources will give a historic opportunity to relaunch Italy and allow it to gradually adapt its welfare system to a model of precision. Considering the total funds channelled through the Next Generation EU Recovery and Resilience Facility, Italy is its main beneficiary with a total of €191.5bn: "Welfare, Italia" estimates that the PNRR will allocate no less than €41.5bn to welfare, amounting to 22% of the Plan's budget, thanks to various actions ascribed to welfare provided for in Missions 4 (Education and Research), 5 (Inclusion and Cohesion) and 6 (Health).

The 5 priority actions for the Italian welfare system

Work and demographics are the two pillars needed to support the redistribution capacity of the welfare system, but, for Italian welfare, demographic changes pose a particularly complex challenge in a country with the highest percentage of over 65s to the total population (23.2%) in Europe, and second in the world after Japan.

ISTAT data presented show a continuous reduction in births for the past 11 years, a demographic winter that has continued to attain record lows since the unification of Italy. In 2020, the demographic balance range, which had already been fragile in the pre-covid era, widened further, leading the natural balance between births and deaths to -342,000 units (404,000 born compared to 746,000 who died). Additionally, in view of the negative migratory balance of 41 thousand units, the balance of residents fell by 384,000 individuals in 2020 which basically equates to the disappearance of the number of people living in a city like Florence, therefore with a net loss of 1,046 people every day.

"Welfare, Italia" has identified 5 priority actions, supported by specific operational guidelines, that the country will have to tackle to guide the system towards a welfare model of precision:

1. Achieve an effective digitalisation of the welfare services
   Through the PNRR, Italy will allocate €59bn towards the digital transition (actually equal to the amount of France, Germany and Spain). The proposal is to create a single digital point of access for welfare services so that the public can actively consult all their various options in the healthcare, pension, training and social policy areas.
2. More active management of demographic changes in the country
   With respect to the aging demographic and decline in birth rates, the rate of pension expenditure to GDP will reach 17.3% by 2040 (+1.0 percentage point compared to the figure of 16.3% in 2018) and other weaknesses will relate to the ability to guarantee adequate assistance to the elderly, and in particular, people who are not self-sufficient (which could amount to 6.3 million people in just 10 years, more than double the current amount).
   From this perspective, the position of the "Welfare, Italia" Think Tank takes a three-pronged approach, connected to the:
3. • promoting saving, especially through the introduction of forms of saving using supplementary pensions from birth using the Children's Saving Accounts model;
   • welfare culture through awareness-raising and information campaigns
   • capitalising on telemedicine, teleassistance of the best practices for private services, setting up territorial mixed public/private discussion forums.

1. Mobilise effective active policies to support the labour market
   To date, Italy allocates a good 85% of its spending in labour policies to passive policies (compared to 73% in France, 69% in Spain and 55% in Germany). Our system is also characterised by shortcomings in the training system and a limited impact of training programmes in companies. All this leads to a mismatch of skills, i.e., a higher percentage of workers (38.2%, almost 5 percentage points higher than the average EU figure) who are over-qualifiedor under-qualifiedwith respect to the actual job they carry out.
   "Welfare, Italia" proposes strengthening the dual training and collaboration between training and companies thorough incentive-based mechanisms in addition to the significant upgrading of Job Centres, starting from the creation of national databases to overcome the current regional fragmentation, and the integration of private intermediation agencies in the choice of job offers.
2. Reform of the passive policies and welfare support system mechanisms
   The COVID-19 crisis caused an increase in the number of families in absolute poverty, amounting to over 2 million families (accounting for 7.7%), for a total of over 5.6 million individuals. At the same time, the use of social inclusion instruments such as social welfare payments ("citizens' income") and pensions (as at September 2021, the average monthly number of people receiving citizens' income was 5.4% higher than the number receiving it in September 2020), but there are certain mechanisms that penalise the accuracy of the figure.
   The guidelines suggested by the Think Tank therefore recommend taking action to optimise citizens' income (reduction of the 10-year residency requirement in ltaly, revision of the equivalence scale, differentiation of the amount of support on the basis of the cost of living) and the revision of the welfare support system through implementation of a mechanism that makes use of the passive labour policy instruments dependant on participation in training programmes, refresher courses and re-skilling.
   In addition, with the aim of increasing the employment basis, the scope of the welfare support systems could also be extended to company plans that provide for early pension for workers and the implementation of a generational exchange (ratio of at least 2:1 between incoming workers, with permanent contracts and under 35s to outgoing workers).
3. Promote measures aimed at increasing female employment
   In order to reach equality in the world of work, two directions have to be followed: improve the participation of women in the labour market and promote their financial independence.
   With reference to the first direction, our country paints a particularly critical picture. Italy comes last among the EU 27 + UK countries in terms of the rate of female participation in

the labour market, with a percentage of 54.7% in 2020: 11.9 percentage points less than the European average (67.6%).

With regard to the second area of intervention - promoting the financial independence of women - Italy is actually ahead of the European average with a lower hourly gender pay gap compared to the average EU figure (5.7% compared to 11.2%).

According to the approach of the "Welfare, Italia" Think Tank, greater female inclusion at work would represent an opportunity for the economic growth of the country: the elimination of the gender pay gap and equating the female employment rate to the male employment rate could actually generate economic value of €110bn for Italy, equal to 6.7% of the GDP.

The actions to implement are as follows: the transformation of maternity and paternity leave into gender neutral leave, the adoption of measures to support maternity on a 360° basis (training courses for up-skilling or re-skilling), the introduction of tax breaks for natural persons also to encourage supplementary pensions for women and the adoption of measures aimed at companies, such as certificates, bonuses and/or incentive mechanisms.

The Regional "Welfare Italia Index"

The sharp differences between the country's regions were emphasised in the "Welfare Italia 2020" report, both with reference to the welfare system of the country, and as regards the impacts of COVID-19 and the related redistribution impacts linked to absolute poverty and unemployment.

The results of the Welfare Italia Index 20211 - the summarised rating that evaluates both the aspects linked to welfare spending and aspects linked to the results that this spending produces - show, compared to the 2020 data, an increasing regional polarisation in the welfare system's ability to respond in the Italian Regions. The gap between the first and the last Region in the classification increased from 28.2 to 32.7 points, increasing by 4.5 percentage points between 2020 and 2021.

More specifically, the Autonomous Province of Trento (85.0 points) has the highest score, followed by the Autonomous Province of Bolzano (80.4 points) and Emilia-Romagna (76.1 points). Additionally, the last 8 regions are all in Southern Italy and the Islands, and the first of these - i.e., Sardinia (14th with 62.5 points) - was over 22 points behind the Autonomous Province of Trento and about 10 points ahead of Calabria, which came last.

1 Monitoring instrument developed by Welfare Italia for the first time in 2020 and based on 22 KPI (Key Performance Indicators) that consider social policies, healthcare, pensions and training, and allows for the identification, at regional level, of strong points and weaknesses where intervention is necessary.