Measuring Social Welfare in Government Objectives

Measuring Social Welfare in Government Objectives


by Francesco Daveri, SDA professor of practice

After a decade spent mired in crisis, Italy understands welfare under the traditional rubrics of income, work, and poverty. And this should come as no wonder. On the eve of the recession that hit in the second half of 2018, per capita gross domestic product measured after inflation – the most commonly used measure to assess a country’s average well-being – was at the same level as it was in 1999, and 9 percent less than it was at the 2007 peak. The portrait is in chiaroscuro for employment: a recent report by ISTAT, the national statistics agency, indicates that, thanks to the 2014-2018 recovery, there are now about 23.3 million people who are employed in Italy, 58 percent of the working-age population in working age. But the unemployment rate – the share of people actively seeking employment but who cannot find it – remains stubbornly above 10 percent: four points above early-2008 values. And available employment is not “very intensive” and also precarious.
Italy’s low employment intensity can be measured by looking at total hours worked, which is 5 percentage points lower than the 2008 maximum. A sign of the fact that the 23 million people who do work, do it less intensively than before. While increased job precarity driven by globalization more than legislation translates into an increase in the number of involuntary part-timers – people who work part-time because they cannot find a full-time job – equal to 1.5 million people. Last, but certainly not least, households in a condition of absolute poverty, i.e. which cannot afford a standard of living above a minimum threshold depending on geographical area and socio-economic status (€1,300 for a family of two parents and one kid in the North, and €1,000 euros for the same kind of family in the South), had reached the number of over 1.8 million, or 6.9 percent of total households. Considering these families represent five million people, 9 percent of the Italian population is poor.

Faced with such stark data, the public debate on social welfare should not only focus on the growth of incomes and GDP, but go beyond to consider various aspects of societal well-being. To do this with greater precision, following an amendment introduced in the 2016 budget law, a special committee was set up to study the problem. It includes senior officials of the Ministry of Economy, ISTAT, and Bank of Italy, as well as two experts with proven scientific reputation, and has the mission of proposing a set of indicators measuring “fair and sustainable welfare” (Benessere Equo e Sostenibile – BES, in Italian) to be included in official budgetary documents that must be presented to Parliament. Thus since 2018, the DEF, the economic and financial document that precedes the actual drafting of the government budget in Italy, presented in the month of April each year, includes an additional section aimed at formulating objectives and monitoring results in terms of fair and sustainable welfare.
Due to this small accounting revolution, from now on Italian governments will have to assess expected policy results not only in terms of public accounts and traditional macroeconomic variables (GDP, consumption, investment, export, inflation, and unemployment), but also according to a new set of twelve social indicators. These include disposable income after government intervention (therefore net of taxes, but including the value of services provided by public institutions and NGOs), the share of people languishing in absolute poverty, and the ratio between the share of total income going to the richest 20% and the share of income received by the poorest 20% of the population (the latter clearly being an indicator of inequality). But the focus also extends to more social variables such as life expectancy at birth, the proportion of overweight or obese adults, and the share of NEETs (young adults who have stopped studying too early, but are not in employment since they don’t have professional qualifications). Finally, there are indicators on personal security, access to civil justice, CO2 emissions, air pollution, and illegal construction whose introduction is a novelty.
It was about time, some would say. Provided that the large number of indicators to be considered does not end up producing the undesired effect of giving a confused picture of what is going on in the economy, thus obscuring, rather than clarifying, the perception of the country's ability to generate well-being along the dimensions traditionally measured by economics.

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