1. Assessing social protection needs for people with disability in Italy
This chapter discusses overall social and labour market outcomes of people with disability in Italy. It finds that people with disability face poverty and employment rates comparable to their counterparts in many OECD European countries. However, the difference in employment and poverty rates between people with and without disability is lower in Italy than in other countries, pointing to general economic and labour market challenges in the country. The chapter also finds significant geographical segmentation, indicating regional differences in social protection needs.
Assessing social protection needs requires understanding the risks people with disability are facing – the risk of falling into poverty or not being self-sufficient and therefore very vulnerable – and the extent to which social protection supports people in alleviating these risks. This section evaluates the poverty risks of people with disability in Italy and their labour market outcomes, including job quality aspects. The Italian context is highly segmented geographically; hence, this section also pays attention to regional differences in the needs for social protection.
While the risk of poverty is high in Italy compared to the OECD average, contrary to most other OECD countries poverty is not much higher for people with disability. Figure 1.1 shows that people with disability in Italy have a poverty risk comparable to the OECD average for this group. People without disability, on the contrary, have a comparatively high poverty rate in Italy. Accordingly, the overall poverty risk in Italy is large but the disability poverty gap, i.e., the gap between people with and without disability in the risk of living in an income-poor household, is smaller in Italy than in the OECD on average.
Note: The data show relative income poverty, i.e. the share of people living in a household with an income below 60% of the median income. Household income is equivalised for household composition by dividing by the square root of the size of the household. OECD represents the unweighted average of 32 member countries, excluding: Colombia, Costa Rica, Israel, Japan, New Zealand and Türkiye.
Source: OECD calculations based on European Union Statistics on Income and Living Conditions (EU-SILC, 2005-21) for European countries, the Household, Income and Labour Dynamics in Australia Survey (HILDA, 2005-17), the Canadian Income Survey (CIS, 2013-19) provided by Employment and Social Development Canada, Chile’s Encuesta de Caracterizacion Socio-economica Nacional (CASEN, 2006-17), Mexico’s Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH, 2010-16), the Korean Labour and Income Panel Study (KLIPS, 2008-18) and the American Community Survey (ACS, 2008-18).
Both in Italy and on average across OECD Europe, people living in poor households tend to be more often single, inactive or unemployed, and with low level of educational attainment and, if in work, more likely to have a temporary employment contract (Figure 1.2). This characterisation of poor households holds true for both people with and without disability, for both Italy and on average (Panel A compared to Panel B). In fact, socio-economic poverty differentials appear more pronounced for people without disability, reflecting the poverty alleviating role of social protection systems particularly for people with disability.
Note: The bars represent the weighted average of 26 European countries: Austria, Belgium, the Czech Republic (Czechia), Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.
Source: OECD calculations based on European Union Statistics on Income and Living Conditions (EU-SILC).
Regional differences in poverty risks are very large in Italy. Household survey data do not allow to look at regions, but only at broad regional areas at the NUTS-3 level (North-East, North-West, Centre, South and Islands). This regional split is meaningful, however, as it captures much of the regional differences in terms of wealth, labour market outcomes, and productivity. Figure 1.3 shows regional area poverty rates for people with disability and the gap in poverty rates between people with and without disability (Panel A). Poverty rates for people with disability in Southern regions and in the Islands are more than twice that of Northern and central regions. The gap in poverty between people with and without disability follows the opposite pattern, however: it is largest in Northern and central regions, and smallest in the South and the Islands. Or, in regions where poverty is high overall differences by disability are small, and vice versa when the overall poverty risk is low. These differences, again, also relate to the potential impact of social protection: it can lead to large absolute alleviation of poverty in poorer regions, while the effects act at the margin of closing the disability gap in regions with lower overall poverty.
Figure 1.3 also shows the share of people with disability who make ends meet with difficulty (Panel B), possibly a more robust measure of poverty. As poverty rates are calculated based on a national poverty line, poverty could be underestimated in the North of the country, where the cost of living is higher, while it could be overestimated in the South. Differences between regions indeed appear to be smaller when looking at the difficulty to make ends meet, with that share ranging from 25% of all people with disability in the North-East to about 50% on the Islands. The high shares across the country demonstrate the importance of universal access to social protection for people with disability, complemented with strong efforts to sustain better employment outcomes as the main path towards self-sufficiency.
Source: OECD calculations based on European Union Statistics on Income and Living Conditions (EU-SILC).
Employment rates are generally very low in Italy, for both people with and without disability (Figure 1.4). Echoing the poverty findings, people without disability in Italy have employment rates that are much lower than the OECD average, whereas the disability employment gap, i.e. the difference in employment rates between people with and without disability, is below the OECD average. The employment rate of people with disability fell over the past few years, however, quickly widening the gap to the employment rate of people without disability. Decreasing employment rates for people with disability since around 2014 seem to explain the increase in the poverty risk of people with disability in the years before the pandemic.
Note: OECD is the unweighted average of 32 member countries and excludes Colombia, Costa Rica, Israel, Japan, New Zealand and Türkiye.
Source: OECD calculations based on European Union Statistics on Income and Living Conditions (EU-SILC, 2005-19) for European countries, the Household, Income & Labour Dynamics in Australia Survey (HILDA, 2005-17), the Canadian Income Survey (CIS, 2013-19) provided by Employment and Social Development Canada, Chile’s Encuesta de Caracterizacion Socio-economica Nacional (CASEN, 2006-17), Mexico’s Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH, 2010-16), the Korean Labour and Income Panel Study (2008-18) and the US Current Population Survey (2007-18).
In addition to employment rates, understanding job quality characteristics of people with disability is essential to fully understand the labour market context they face. Table 1.1 shows a range of labour market outcomes for people with and without disability (including resulting disability gaps) for Italy and on average across OECD Europe. Labour market indicators and disability gaps are comparable between Italy and the OECD average, with inactivity being relatively slightly higher among people with disability in Italy, and employment and unemployment slightly lower. Other outcomes include the type of employment contract, firm size, and job and earnings quality characteristics. Findings are as follows:
People with disability tend to work more often in temporary and part-time jobs, both in Italy and on average across OECD Europe. Part-time employment, however, is relatively lower among people with disability in Italy than on average, which can be the result of social protection regulations that disincentivise work, or a lack of overall demand for part-time work, or both.
Italian workers with disability tend to work more often in larger firms and less often in micro and small firms than workers without disability. These differences are larger than on average across OECD Europe. The under-representation of workers with disability in small firms in Italy is possibly related to the strong disability quota system in Italy, which imposes substantial obligations to hire people with disability for large firms.
Earnings quality is higher in Italy than on average for both people with and without disability: the share earning low and very low pay is lower, and so is the disability earnings gap. The quality of the working environment, which is proxied by the incidence of long working hours, is also higher for both groups in Italy than on average.
People with disability in Italy face a high risk of unemployment (Figure 1.5), higher than for people without disability, although comparable to the OECD European average. Some countries stand out in terms of excess unemployment risk for people with disability, like Norway and Germany, but in most countries, including Italy, people with disability face a 40% higher risk of unemployment. At the same time, they also face a lower probability of being hired once they are unemployed, implying a higher risk of long-term unemployment for people with disability.
In Italy, people with disability face a risk of leaving the labour market that is comparable to people without disability (Figure 1.5). For both groups, the risk of exiting the labour market is comparable to the OECD European average. On the other hand, the probability to re-enter the labour force is relatively higher in Italy for people with disability, suggesting that exits from the labour force might often be temporary. These results need to be interpreted with caution, however. They represent observed transitions between states (unemployment, employment, labour force), meaning that comparisons across countries and between people with and without disability could be biased. On the one hand, there are potential misclassification errors, as survey respondents may frequently misclassify unemployment and inactivity (Samaniego de la Parra and Viegelahn, 2021[1]). This misclassification is even more likely in the case of people with disability because disability also fluctuates substantially over time. On the other hand, different countries have different labour market dynamism and thus different rates of transition between unemployment, employment, and inactivity. Different countries also have different requirements for people receiving disability benefits. In some countries, disability benefit recipients must register with the Public Employment Service as being unemployed. In other countries, disability benefit recipients are not allowed to work and classified as inactive. All these nuances make cross-country comparisons in labour market transitions difficult.
Note: The white bars represent the weighted average of 26 European countries shown in the panels.
Source: OECD calculations based on the longitudinal European Union Statistics on Income and Living Conditions (EU-SILC).
Overall, this chapter finds that in Italy poverty and labour market outcomes are quite similar for people with disability and people without disability, more similar than in many other OECD European countries. This is the result of two effects: first, people without disability generally have poorer outcomes in Italy than in other OECD European countries, and second, people with disability in Italy face outcomes comparable to those of people with disability on average. In relative terms, people with disability in Italy therefore appear to be faring better. What does this mean in terms of social protection needs and effectiveness? It could mean that people with disability meet a social protection system that is well placed to prevent poverty without jeopardising labour market outcomes. However, it could also mean that people with disability receive more informal support from their family than people without disability and thus require less state support.
Over 4% of the Italian working-age population receives disability-type benefits (Figure 1.6). This share is below the OECD average of 6% of the working-age population but comparable to other Southern European countries (Spain and Portugal) and countries like Switzerland and Germany. Generally, across the OECD, however, there is substantial variation in the share of disability beneficiaries, ranging from 0.5% of the working-age population in Mexico, to 12% in Estonia. Over the last decade, the share receiving disability benefits has remained stable in Italy. Again, there is substantial variation across OECD countries in the change of this share over time. Some countries experienced decreases of more than 2 percentage points, like the Czechia, Hungary and Sweden. Others saw an increase in this share, including Belgium, Estonia, Iceland, Ireland, Latvia and the Slovak Republic. These countries have experienced substantial increases in the disability receipt rate of over 1.5 percentage points.
Note: Disability benefit receipt over population aged 20-64. Disability benefits include contributory and non-contributory programmes specifically targeted to people with disability, including transitional disability programmes. OECD is an unweighted average excluding Colombia and Costa Rica. Data for 2007 refer to 2009 (Chile) and 2018 refer to 2016 (Estonia, Germany, the United States). For Italy, data include the contributory disability benefit programme (Pensione/Assegno di invabilità previdenziale ordinaria), the non-contributory disability benefit programme (Pensione/Assegno di inabilità per invalidi civili), and the early retirement programme for people with disability (Pensione Sociale).
Source: OECD (2022[2]), Disability, Work and Inclusion: Mainstreaming in All Policies and Practices, https://doi.org/10.1787/1eaa5e9c-en, Figure 4.1. Data for Italy has been updated using the Eurostat dataset Pensions beneficiaries at 31 December [SPR_PNS_BEN].
Like in most OECD countries, disability benefit receipt prompts a decline in employment rates in Italy, although comparatively more so for people with moderate disability. It is a well-established fact that the receipt of disability benefit (or in fact any benefit) can discourage work (Autor and Duggan, 2006[3]; Maestas, Mullen and Strand, 2021[4]; Ruh and Staubli, 2019[5]). The extent of the decline in employment can reflect the disincentives to work that the social protection system creates. Figure 1.7, Panel A shows the employment rate in the months leading to and following disability benefit receipt for people with disability in Italy and on average across the OECD. The employment rate of people with disability is slightly lower for people with disability in Italy than on average in the OECD even before the receipt of disability benefits. Differences are quite small, however, consistent with Figure 1.4 shown earlier. Figure 1.7 shows that the moment of disability benefit receipt is associated with a drop in employment. This drop is of similar size in Italy and on average across the OECD but slightly smaller in Italy, since the average OECD employment rate of people with disability converges to that of Italian people with disability in the months following disability benefit receipt.
Interestingly, the drop in employment appears to be relatively larger for people with moderate disability in Italy (Figure 1.7, Panel B). On average across OECD Europe, the receipt of disability benefits does not cause a drop in the employment rate among people with moderate disability, who seem to experience a rather continuous decline in the employment rate. This is consistent with the observation that disability may become more invalidating as time passes, or their labour market detachment may become stronger, making it more difficult to continue engaging in employment. The additional impact of benefit receipt seems muted in comparison with this continuous trend, suggesting a limited impact on employment from benefit receipt. This is not the case in Italy, where the employment rate of people with moderate and severe disability drops the moment disability benefits are granted. Many reasons can be at play here, including as one explanation that disability benefits may have relatively larger disincentives to work for people with moderate disability in Italy than on average across OECD Europe.
Note: Data are pooled for 2010 to 2020 on the months relative to the start of disability benefit receipt. As the precise month of the start of benefit receipt is unknown in the survey, it is assumed to start in January of any given year (solid line) for people reporting to receive benefits in the given year but not in the year before. Effectively, however, benefit receipt can start at any point during that year (area shaded in green). Benefit receipt most likely occurs within the first six months given that close to 80% of the surveys are conducted in the first two quarters of any given year. Employment probability is calculated using the monthly labour market status indicator from the labour force survey component of the survey. OECD Europe is the weighted average of 26 European countries: Austria, Belgium, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.
Source: OECD calculations based on European Union Statistics on Income and Living Conditions (EU-SILC).
Using self-assessed information on disability status, this chapter suggests that people with disability in Italy experience relatively low poverty rates, although their employment prospects may not allow for economic self-sufficiency. One critical link between these two findings is the disability benefit system: a substantial share of people in working age are receiving disability benefits in Italy, as elsewhere, which could be generating disincentives to work particularly for people with moderate disability. Understanding the social protection system is essential to understand how these factors interact and to answer essential questions on the functioning of the system for people with disability.
References
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[4] Maestas, N., K. Mullen and A. Strand (2021), “The effect of economic conditions on the disability insurance program: Evidence from the great recession”, Journal of Public Economics, Vol. 199, p. 104410, https://doi.org/10.1016/J.JPUBECO.2021.104410.
[2] OECD (2022), Disability, Work and Inclusion: Mainstreaming in All Policies and Practices, OECD Publishing, Paris, https://doi.org/10.1787/1eaa5e9c-en.
[5] Ruh, P. and S. Staubli (2019), “Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design”, American Economic Journal: Economic Policy, Vol. 11(2), pp. 269-300, https://doi.org/10.1257/pol.20160076.
[1] Samaniego de la Parra, B. and C. Viegelahn (2021), “Estimating labour market transitions from labour force surveys: The case of Viet Nam”, ILO.