The relationship between working conditions, workers' health and pensions

Thank you for inviting me to participate to this meeting. For me it is an important occasion to rethink on the many implications of pension regulation and policies. I will speak drawing from my experience on these issues in the period from 1995 when Italy introduced the NDC system of pensions to 2011-2 when the Fornero reform raised the retirement age by five years to 67.

The increase of the retirement age, more or less rapid in different countries and periods, has been motivated mainly by the need to guarantee the financial sustainability of the pension system. This kind of decisions has been , not only in Italy, very controversial until now.

The most difficult choice has always been to balance the reasons of economic sustainability with those of social sustainability and of adequacy of pensions . This choice requires to take into account complex variables such as the major indicators of economic growth and inflation, the dynamics of the labor market, the demographic trends, life expectancy in the first place.

The increase of the retirement age has stressed the importance of considering the implications of pension choices on the health of workers and of pensioners, which were often disregarded in past periods of early pensions and short life span .

At the same time the rapid aging of the population in many countries has added emphasis on those aging  a policies which can facilitate longer working lives, ranging from changes in work organisation to promotion of healthy life styles.

A first set of measures taken by the Italian legislator directly concerned with the relations between pensions and the heath of workers has identified a certain number of activities, differently defined,  ,which deserved for their characters to benefit from a reduction of normal retirement age.

In a first period this reduction was allowed in general for a few sectors and categories of activities rather heterogeneous, including police and military forces, airline pilots and flight attendants, train operators, but also postal workers etc.

A considerable reduction of retirement age has been traditionally reserved to women workers, but it has been recently abrogated by the Italian constitutional court which has considered it discriminatory as against the principle of equal treatment . (in line with  the European Court of Justice). 

The reduction by general categories of activity has been progressively limited (but not completely abolished) because it included a variety of works many of which had no substantial reason to be exempted from the general rules on retirement age, but were admitted in the category due to tradition or to the negotiating power of the categories concerned.

Recent legislation, the last in 2017, has changed these criteria and reserved the derogation of  normal retirement age not to entire categories but to specific types of jobs, again rather heterogeneous and changed overtime (usually called heavy, disadvantaged or  hazardous wearing jobs ): e.g. night workers, assembly line workers, truck and bus drivers of a certain size, railway workers and engine drivers, but also teachers of kindergartens, nurses working on shifts, garbage collectors, steelworkers, seafarers on board, etc.

The choice of jobs to be included in this list has been subject to consultation and negotiations with the social parties, in particular with labor unions, as it is the case with most issues concerning social security. This method of decision contributes to explain why the list has not only changed in time but is heterogeneous and responds to different motives, often not made explicit, not only related to the conditions of work and to their impact on workers health but also linked to reasons of social adequacy or to the actual bargaining relationship among the parties.

Nevertheless, these legislative choices imply the important recognition that aging is not a uniform and exclusively biological process but is significantly influenced by the conditions of work and that this influence must be taken into account not only in the public regulation of employment relations but also in the decisions concerning pensions design.

The way in which the relation between working conditions and workers health is interpreted at least in Italy in defining the exceptions to retirement age has been justly criticised by experts; for the lack of factual evidence. and hHere decision makers need to be sustained by experts in correcting their choices.

One rationale of the age reduction is that the characters of the jobs make them not sustainable physically or psychologically beyond a given period of time. But the number of years fixed by the Italian law (7 or 10) is not supported by sufficient objective evidence. Moreover the fact that this number is common to many different types of jobs raises quite a few doubts on the rationality of the choice.

Furthermore the legal requisite that whereby the period for qualifying to the derogation must include the last year before retirement excludes in fact many of the potential beneficiaries because the longer is the duration of employment in these disadvantaged jobs the more likely is that the workers become unemployed (or disabled) and hence be excluded from the benefit.

Another regulation to be criticised is that the anticipation of retirement for these workers has been fixed in three years, while a more reasonable choice would be to make the reduction proportional to the duration of employment in the jobs (as was in the previous regulation).

A further legal requisite for qualifying to the derogation is that the employee has contributed to financing the system for a minimum of years variable according to the categories (30 or more) (30 ); this requisite has no connection with the impact of the working conditions on workers health, but is mainly due to the need to reduce the costs of this legislation on public finances.

The long and rather disappointing experience of this Italian legislation strongly suggests the need to redefine its design on different grounds. A major methodological decision should be is to identify and implement a set of objective indicators of the characters of the jobs to be selected relevant to prove their sustainability (physical, psychological and relational) in the course of employment.

Given the complexity of the factors involved in the decisions, the policy makers should be supported by groups of experts of different disciplines (doctors, epistemologist, labor markets experts, economists, lawyers) capable of analysing and evaluating the relevance of the different job contents for their sustainability in time and their impact on workers health. This commission of experts should be not only autonomous from government but stable in time or even permanent in order to adjourn its analysis and evaluations according to the changing working conditions and to the consequent changes in the risks for workers health.

The analysis and evaluations of this commission should be directed in basically two directions: 

a) identifying the sustainability indicators of the various jobs, based on their content and context, which are relevant to influence workers health and specifically to demand a reduction of the period of employment in the same positions.

b) finding the impact of the characters of these jobs on the life expectancy of the people employed

The two types of analysis (and of decision) should be distinguished because they are different although connected and possibly overlapping. Just to make a general remark in this respect, the life expectancy may be influenced not only by the characters and duration of a certain job but by other factors related to the personal conditions of the workers concerned, like education, personal and family income . For example  kindergarden teacher is a heavy wearing job, and  usually cannot be  performed continuously for a long time; but it may not have direct impact on life expectancy given the education level and life style  of these teachers.  

Indeed the relationship between the two types of analysis is itself a matter for research, which to my knowledge has not yet been conducted in depth, at least in Italy.

The policy choices required in the two groups of questions are also in part different.

Under the first question the decisions to be taken are not only to determine the maximum sustainable duration of employment in a certain job, but also, and indeed in the first place, to identify the measures which can possibly reduce or cancel the negative impact of the given jobs on workers health, such as ergonomic adaptations of work contents, flexible or reduced work time, changing pattern of work organisation and careers, improvement of health and safety at work, prevention.

These Indeed this range of measures are called into question anyway, in so far as they are useful or necessary to improve in general the relation between work and health, both during employment and in view and after retirement.

The connection between the two approaches needs to be clarified, because the same working conditions may be often, but not always, relevant for deciding both the duration of employment and the amount of pension due to the worker after retirement, which in the defined contribution systems is linked to life expectancy of the pensioners.

Not clarifying this connection may lead to inconsistent or paradoxical solutions as those adopted by the Italian system. In fact the reasons which command the reduction of the retirement age of workers employed in the jobs mentioned above, whatever their rationality, are not taken into account in determining the amount of pension of the same workers, because the coefficients which determine this amount are calculated according to the general rules, namely on the basis of the average life expectancy of the cohort.

This solution goes to the detriment of the workers employed in these jobs, at least in the case and to theh e extent that their employment implies not only a reduction of retirement age but also a reduced life expectancy.

A link between the two aspects of the question has been recognised by a recent Italian law (2017) which has excluded most of the jobs mentioned above from the general rule which raises automatically retirement age in line with the increase of average life expectancy. But again the law makes no mention of a a parallel change in the coefficients relevant to determine the amount of pension.

A considerable number of international research has demonstrated that life expectancy is influenced by a variety of factors linked not only to the working position of the person, but also to many social and economic conditions.

These research finding are not taken into account by those pension systems, including the Italian, which determine life expectancy relevant for deciding both the retirement age and the coefficients which fix the amount of pensions on the basis of the average life expectancy (sometime,  if disability free) of each age cohort.

The adoption of this ‘average’ criterion contradicts the logic and the merit of the defined contribution system which is (or claims to be) characterised by actuarial equity and intergenerational fairness whereby pensions benefits to the individual workers are strictly proportional to the contributions paid during their working life. This choice goes to the  detriment of workers characterized  by lower life expectancy. 

The need to amend this weakness of the system by considering the variations of individual life expectancies has come to be acknowledged also in Italy . The complexity of the factors which determine different life expectancies is also commonly recognised. This complexity poses serious challenges both to researchers and to policy makers, which are well known to this audience.

A basic condition necessary to reach research findings useful for public policy making is the availability and access of complete, possibly longitudinal, data concerning the indicators relevant to for  draw reliable conclusions on life expectancies. Providing this condition, which is far from being given in many countries, is a responsibility of public authorities, national and possibly Eeuropean.

A second important condition is to select the factors best able to capture the variations and gaps of different life expectancies. This selection should take into account many aspects, such as the stability over time of the various indicators, the availability of data, the social and economic relevance of the various indicators and not least the practical feasibility of the research .

The decisions on these issues should result from analysis and discussions involving the various researchers and the public institutions competent in the matter. Here too a commission composed of interdisciplinary experts should be set up and stably consulted by decision makers.

A selection of too many detailed aspects, e.g. concerning all the occupational groups present in the Italian legislation on disadvantaged jobs mentioned above, may be impracticable.

Prior attention might be given to those factors which have been held most influential on life expectancy by international research, such as on the one hand levels of education, lifetime income (individual and of the family), and on the other broad occupational groups like those resulting from collective agreements (managers and executives, white collars and office employees, manual workers ). These variables  have  the advantage that  data on their trends are usually available, which is not the case for data on specific jobs. 

Instead theThese latter categories may be capable of capturing many factors which influence life expectancy and have great social relevance, but they present the shortcoming of being less stable than in the past since a growing number of individuals can hold several occupations during their working life.

Anyhow the results of this kind of research must be tested in practice because, given the complexity of factors involved, it is not certain that they can give precise indications for pension policy making on the major social and occupational positions.

For this reason it has been suggested to maintain, or reintroduce in the case of Italy, some moderate progression in calculating the amount of pensions aimed at compensating (particularly) workers with low levels of income for their reduced life expectancy which is widely documented.

To the same end in some countries, including Italy, it has been proposed to redesign the NDC systems by introducing a two tier scheme, i.e. adding to the contributory pension, a floor of pension socially financed guaranteed to all pensioners who do not reach with their contributions a sufficient level of benefits.

Another set of proposals and legislative innovations worth mentioning in this respect aims at avoiding direct passages from the status of worker to that of pensioners, which may be negative for personal life balance, particularly if the passage is abrupt and implies a considerable change of the retirement age, like in case of the Fornero reform mentioned above. A common objective of these regulations is to promote forms of gradual retirement often supported by fiscal incentives.

The questions mentioned here have just begun to be properly confronted by researchers and even less by policy makers. Further investments in research,  in systems of data collection and treatment, and better informed policy choices are necessary .

A lesson which I can draw now is that answering to these questions requires the combination of multiple approaches and initiatives in different areas. I mention two in particular: the need to improve not only the general health services but also specific measures of prevention and care in the process of aging; the importance of active employment policies and not only of passive measures (like diffused early retirement) aimed at promoting the quality of aging at work and at changing the working places so as to make them more sustainable to workers and more age friendly.

Thank You for Your attention. Hope Your discussion and  research  will be usefull for future policy makers.