The COVID-19 pandemic saw unprecedented global reliance on welfare states, from emergency health care expansions to stimulus checks. While an unanticipated event, the pandemic perhaps accelerated a global welfare state convergence that was already starting. Contrary to what one might think considering the relevant public resources mobilized for rescue plans, the pandemic crisis unearthed the importance of a multi-stakeholder approach in welfare systems. In the convergence process, what we see is that many countries are grappling with the ideal balance between multiple parties: governments, private businesses, and nonprofit organizations.
In a country like the US, where benefits like health care and paid leave are exclusively available through your employer, private insurance markets attempt to fill the gaps. Conversely, in a country like Italy, such benefits are typically more universal in nature and granted by the institutions, whether at national or territorial levels. Yet, more recently, private resources belonging to companies and nonprofit organizations are combined with public programs to fill the voids left by the Italian welfare state in terms of equality, efficiency, and effectiveness.
We believe there should be a balance between benefits provided by private organizations and public ones, as the risks are too high when a country heavily relies on one only for everyone wellbeing. To make our point, we will first briefly outline the welfare states of the United States and Italy, focusing on the engagement of corporations. Then, we will further discuss the major considerations for welfare state design in a post-2020 world.
The United States heavily relies on private businesses to provide benefits like health care to employees (and their families). Thus, Americans self-select into jobs that provide the benefits they value or need. Historically, only in extreme circumstances would the government step in to provide benefits. For example, the Fair Labor Standards Act (FLSA) of 1938 provided minimum wage and overtime benefits among other employee-centric items in the height of the Great Depression.
Since the 1930s, the United States has (relatively) slowly adopted a handful of other federal government sponsored benefits, such as the Civil Rights Act, which bans discrimination based on race, color, religion, sex, and national origin, or the Pregnancy Discrimination Act, which outlaws pregnancy-related discrimination in the workplace. Furthermore, as the American labor market has become more diverse in the past 60 years, the demand for and variety of benefits have adjusted. In addition to the “standard” of health insurance, vacation, and retirement savings or pensions, benefits have expanded – i.e. flexible working arrangements of remote work, gym memberships. But again, the onus falls on employers to provide such benefits and for prospective workers to seek out such companies.
In the 2000s, company behavior has fallen under harsher scrutiny than previous periods in American history. In competitive, highly visible industries (i.e. tech and finance), companies compete to attract the best candidates through trendy benefits (i.e. unlimited time off). Yet, such generous benefits apply to a shockingly low percentage of American workers. For example, according to the US Bureau of Labor Statistics, in 2022, approximately 47 percent of private industry workers participated in medical care plans – a stark contrast from the universal healthcare programs prominent across OECD countries like Italy. While universal access is largely nonexistent in the US at a federal level, select cities and states have laws to assuage the demands of local workers. For example, California was the first state to implement a paid medical and family leave program in 2005; by 2026, only 12 (of 50) states will have similar policies in place, accounting for about ⅓ of the US workforce.
Another important aspect of note in American benefits is that most employees must be classified as full-time to receive benefits. While the designation between part-time and full-time employees is up to the company, with various protocols in place by state (i.e. under 30 hours in New York is considered part-time), most US employers do not extend the same benefits to part-time workers, or further, independent contractors. The COVID-19 pandemic highlighted a demand for flexible working arrangements, which employers generally grant to non-full-time workers (without full-time benefits). Not unsurprisingly, if more people opt for flexible work options, we may see an increase in workers who are ineligible for benefits through their employers, and a strain on the few existing government programs, in addition to further pushback for new universal state programs.
Since the twentieth century, several Italian entrepreneurs have been adopting a way of doing business where employees’ and, more generally, people’s wellbeing is prioritized alongside productivity, in full compliance with today’s sustainability challenges. The entrepreneurial, humanistic attitude of Adriano Olivetti does represent one exemplary case of such an alternative. Among the investments for his workers and families, we find a library inside the Olivetti factory, several on-site cultural events, a trial for full salary payment to employees on sick leave, parenthood packages, dental care, and other specialized services.
More recently, Italian enterprises have been opting for corporate welfare initiatives to foster their employees’ wellbeing, including flexible work arrangements, supplementary healthcare, extra-professional training, sport activities, community markets and laundries in workplaces, together with companies’ nurseries or paid internships for employees’ daughters and sons. Corporate welfare even improved significantly as a reaction to the COVID-19 emergency: for the first time, more than 50% of enterprises actively implemented corporate welfare measures, while 79% confirmed initiatives already in place and 28% introduced new initiatives or boosted existing ones (as highlighted by the Generali report on welfare services provided by the Italian SMEs).
Also, a favorable regulatory environment in Italy supported business strategies for the wellbeing of their employees and greater, shared benefits. Starting from the 2016 Budget Act, favorable tax measures were introduced for the corporate welfare system, such as production bonuses, which are “tax-free” in the form of benefits rather than in monetary credits. The advantages of corporate welfare for companies, especially if aggregated in specific networks, are multiple: lower labor costs, tax advantages, or higher productivity. For their part, workers declare, to a large extent, that they value corporate welfare initiatives and want as many company benefits as possible. Further, public institutions benefit from corporate welfare plans, even for newly available resources in times of public welfare retrenchment and recalibration. Corporate welfare could then be considered a win-win game.
However, the experiences of Italian corporate welfare keep open at least two problematic fronts: the dualism between workers of large and small enterprises, and that between Northern and Southern Italy communities. More precisely, workers in large companies are better protected by national social policies and further supported by corporate welfare, while small company employees are more weakly protected by institutions and left without further support within the enterprise. Furthermore, workers and related communities in Southern Italy cannot rely on particularly effective social policies at the territorial level, much less on corporate welfare initiatives.
The risk is, therefore, to propose provisions which lead to further distortions of the Italian welfare state. Perhaps, the danger is to develop a leopard print version of American welfare capitalism in Italy. In that case, the challenge is to encourage more and more companies to promote corporate welfare plans that impact their entire community while supporting public welfare so that no one is left behind.
The welfare state convergence mentioned here is not unique to the United States and Italy, rather we use the two countries as an example of what seems to be a larger global trend, no matter the design of a country’s welfare state before the COVID-19 crisis.
While the experiences of the two countries are unique, the risks are similar and both countries should develop balanced welfare states, leveraging existing public and private systems. The problems associated with a one-institution heavy welfare state are apparent in both the US and Italy cases, where both systems are failing to make sure necessary benefits are accessible for everyone.
With respect to opportunities, instead, both the contexts can develop corporate strategies in line with employee experience initiatives, sustainable development objectives, and corporate social responsibility plans. These aspects are anything but distant, they are synergic. In fact, employees are part of the enterprises as much as they are part of a family, community, and society. Their well-being goes beyond the enterprise boundaries, reaching out to their homes or their city.
Indeed, corporate welfare can be combined with a rethinking of economic models, heading to stakeholder capitalism, in which corporations are oriented to serve the interests of all their stakeholders (instead of only shareholders), or to a civil economy which believes in one alternative market and still finds there, in the market, solutions to economic, social, and environmental problems.