Most governments are now dealing with ageing by increasing the age requirements for retirement. Even though the stricter requirements may keep the workers longer in the labour market, however they raise concerns about firms profitability as older workers tend to be less productive and, at the same time, costlier.
Then firms have to rebalance productivity and labour costs of a workforce which is getting older and older.
Recent years have witnessed a large spread of what is currently named "company welfare" (CW) or "welfare aziendale", that is benefits provided by employers to the employees as a result of a unilateral initiative or of a firm-level agreement with unions.
This project focuses on the possible role of CW to help firms to cope with the ageing of the workforce.
The first, theoretical research question is "which reasons make the firms willing to bear the costs of a CW scheme? and how the benefits and costs of CW are actually shared, through wage bargaining or other mechanisms, with the employees?". This question is approached through a theoretical, model-based analysis.
The second, empirical research question is about the determinants of CW "which firm's and workforce characteristics increase the likelihood of adopting a CW scheme"? does an older workforce increase the firm's propensity to CW?".
In particular we verify whether the 2011 Pension Reform (Legge Fornero), which caused a sudden increase in the share of older employees in many firms, motivated these firms to introduce a CW scheme as a response to this change.
The underlying assumption is that the CW schemes may be helpful in increasing productivity of older employees.
A counterfactual analysis is applied as the increase in the share of old employees caused by the reform represents the treatment. The following techniques are implemented to cope with possible endogeneity issues: probit model with instrumental variables, propensity score matching (PSM), diff-in-diff.
The project is inspired by the view that it is important to pay attention to the effects of pension reforms on the firms, but we substantially add to the existing literature as we extend the scope of it by investigating whether the provision of CW may represent a strategy to cope with the effects of ageing.
While sociologists and industrial relations scholars have began to study the implications of company welfare (CW) for the welfare systems and for the relationship between employers and workers' unions we still lack an analysis of its economic rationales, its implications for fiscal policies as well for labour productivity and the other labour market outcomes.
Theoretical models that may be useful to develop this economic analysis may be found in the literature on company-provided benefits and payroll taxes (Gruber and Kruger 1990, Summers et al. 1993, Goerke 1996, Gruber 1997, Alesina and Perotti 1997, Daveri and Tabellini 2000, Ooghe et al. 2003, Arpaia and Carone 2004).
The existing empirical researches are so far very limited and mainly based on sporadic, cross-section surveys (Boeri et al. 2001, Pavolini et al. 2013, Natali and Pavolini 2014).
With respect to this state of art, this project brings three main innovations.
First, at the level of theoretical analysis it is the first attempt at providing an economic investigation of the motivations and effects on the labour market of CW. This may represent a valuable contribution to better understand the nature of the CW as a way to cope with ageing, and to design and evaluate public policies which are increasingly devoted to it. From the results of the theoretical analysis policy implications are derived about the possible role of company welfare as a strategy to cope with ageing.
Second, as for the empirical research this project adds to a recent and promising literature on the effects of ageing, and the related pension reforms, on the labour demand side.
While the largest part of the literature is concerned with the labour supply effects of pension reforms, this project represents an original contribution as it focuses on the demand-side and considers the adjustments made by the firms to react to an increase in the retirement age established by the law and, more broadly, to adapt to an ageing workforce. Besides the direct effects of the reforms made by governments to raise the retirement age, an increase of employment rates of the elderly may only happen if firms are actually willing to employ them (Vandenberghe 2013). The Economist (4.2.2010) wrote that while "governments are raising retirement ages and making more difficult for companies to shed older workers, in a desperate attempt to cope with their underfunded pension system, (...) companies will have no choice but to face the difficult problem of managing older workers". The attempts at postponing the retirement age can be effective to the extent that employability and productivity of older workers are actually preserved and fostered (Skirbekk 2008). Bloom et al. (2010) have stressed that proper strategies should be taken by companies to cope with the effects of ageing and to take advantage of them. In their view employers may get a competitive advantage by enhancing the productive contribution of an older workforce. Bloom and Sousa_Poza (2013) argue that "firms can actively choose to take advantage of an older workforce by implementing retraining programs, adjusting to different capabilities and schedules, investing in worker health and promoting early detection of disease and fostering work environments that encourage the continued productive participation of older workers". The need to consider actions on the demand side to increase labour participation of old population is also exposed by D'Addio et al. (2010) and Clark and Sandler Morrill (2017).
Third and last, this projects provides a unique analysis of the effects of the last Italian pension reform (Riforma Fornero) on the choice of CW by the firms. This allows to bring new evidence about the lively debated issue of complementarities between public reforms and private strategies in the welfare policies.
The potential of the empirical analysis comes also from the large and representative micro dataset on workers and firms built on the basis of the surveys conducted by Istat and Inapp (ex Isfol), namely Labour Force survey and PLUS / RIL surveys, which are designed to evaluate public interventions and provide a rich and detialed information.
This data should provide the information needed to detect firms where the share of older employees has increased suddenly or whose labour turnover has fallen in the aftermath of the reform, and test whether, as a consequence of the reform, these firms were more likely to adopt CW schemes. To the best of our knowledge this analysis is an absolute novelty in the international research which allows us to take an important step forward in this literature.