Italian welfare – a curate’s egg

I have just returned from a visit to Italy where I spoke to quite a lot of interesting people about the welfare state there. I learned too much to put down a fraction of it here. But this, in ultra-brief, is a picture of Italian welfare. It is a mixture of three concepts in the world of welfare:

1. The Bismarkian insurance-type system with contributions and earned benefits. This applies to pensions and to unemployment benefits.

2. Universal benefits – or, to put it more bluntly, tax funded benefits or services. This is the system for healthcare.

3. The Mediterranean system. This is centred around the ideal of the family as the first resort for welfare. Children and the elderly are considered firstly as the responsibility of the family. The state’s role is only to assist the family in doing this task.

So the costs of the Italian system are very different from those in Britain. In Italy, pensions are the biggest item. Social assistance or tax-fund benefits for the unemployed, lone mothers, children etc are very small compared to the UK. Low benefits for lone parents surely has had a major influence in the very low rate of lone parenting. (There are Catholic countries which have far higher rates.) In fact  a professor told me, “The lone mothers are wealthy”. He did not mean they get high benefits. Only wealthy women can afford to be lone mothers.

Another other way of looking at Italian welfare is this. It is very regionally based. This applies to healthcare and social assistance and, I think, the very limited social housing.

The healthcare is centrally funded but administered by the regions who do their work in very different ways. Lombardy has used more private hospitals. Emilia-Romagna less. The effectiveness is a matter of dispute between Left and Right. But both agree that the use of private services has involved some corruption in certain other regions and that has been a waste of public money. The idea of using the private sector is to increase competition involving more effort and innovation. Obviously it does not work if circumvented by bribes.

There is a major problem in Italy with workplace contracts. These have been liberalised and the unemployment rate has been  brought down. But the reforms created two tiers of contracts and those on the new flexible contracts are the ones who have been sacked in the downturn.

Another problem that may be contributing to the unemployment is that the high social insurance plus the taxation mean that there is a huge gulf between the cost to a company of employing someone and the amount in cash that the worker actually receives.

Then there are the perennial students. I met a man who said he was completing his PhD at the age of 28. He said this was young compared to the average of 29/30. It is apparently normal to do five years at university. This is obviously incredibly wastefu. Many drop out. The youth unemployment is as high as 44 % in one region.

Another problem still is the lack of competition generally – even within the private sector but this seems enabled by the public sector. For example,  established companies pressure the local government not to give a licence for a competitor to open a shop.

A further problem is that many small companies do not want to become large. They want to keep a low profile in order to avoid the heavy taxes. I guess, too, that perhaps some regulations affect large companies but not small ones. Or else that if you keep a low profile, the inspectors may not call…

One interviewee remarked that the post-war growth of Italy would not have taken place without the black market. That may be an exaggeration, but it is clear there are serious governance problems and that is without even mentioning the still substantial drain on growth caused by organised crime.

UPDATE 24/5/11

A friend in Italy has written to add his comments about healthcare in Italy (which I have slightly edited):

The big difference is not in the number of private hospitals. The key point is that Lombardy decided to make the “accreditation” of private suppliers within the system basically “automatic”, and not related to the “need” for more or less hospital beds in any geographical area, .

In other Regions, private clinics (more often than “hospitals”: by clinics I mean therapeutic structures with far less complexity) are allowed to enter the game, only when local planners allow.

Lombardy decided to abstain from planning the hospital landscape, and private actors became a growing force. They supply full-fledged hospitals: providing highly complex care (orthopedics, health, surgery…) and e/r too (53% of e/r in Milan is supplied by private hospitals).

The net effect is very similar to that of a voucher system: when you have a problem, you go to this or to that hospital, bringing your money with yourself (ok, we don’t have a voucher, and it is all about reimbursement, but you get the idea). The system is highly successful, as is kind of clear looking at migrations: Lombardy has a +60,000 patients from other regions a year (the +60,000 value is after subtracting migrations out of Lombardy).

You should come to Milan and see the system working. It is not perfect, but it is much better than everywhere else in Italy – and than most other European systems, I would say.

  1. Britain has the highest proportion of single mothers in the European Union and, surprise, surpise, one of the highest rates of benefits for single mothers
  2. Why are there so few Japanese unmarried mothers?
  3. And some people think that the USA does not have a welfare state!
  4. Ten welfare failures of the Labour administration
  5. Japan has an old-fashioned contributions-based welfare system. It works pretty well but it is probably moving towards a worse model
This entry was posted in Care for the elderly, Education, Healthcare and the NHS, Housing, Parenting, Pensions, Tax and growth, Welfare benefits, Work on the new book and tagged , , , , , , , , , , , , , , , , . Bookmark the permalink.

One Response to Italian welfare – a curate’s egg

  1. Brendan McNeill says:

    Family centric welfare is our past, and it will be our future. The State system will ultimately collapse under the weight of the cost burden and the downstream social dysfunction it causes.

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