By Valentina Za, Giuseppe Fonte and Elisa Anzolin
MILAN (Reuters) -Elena has a seven-month old baby and is about to quit her job, unable to overcome the difficulties of combining motherhood and work in Italy, where both women's employment and the birth rate are among the lowest in the European Union.
Getting more women into the labour force is an imperative for the central bank, which has said the change is needed to support long-term economic growth and ensure that Italy's 2.8 trillion euro ($3 trillion) debt pile is sustainable.
Dealing with gender inequality - a subject that won Claudia Goldin the Nobel economics prize this week - could also ease a demographic crisis that threatens the pension system, five economists including Italy's former chief statistician told Reuters. Research shows women in richer economies are more likely to have children if they work.
Prime Minister Giorgia Meloni - Italy's first female premier - has said women are "an untapped resource" that lessens the need for immigrant labour. Yet her conservative government's 2024 budget, to be presented on Monday, is not expected to include measures to drive change.
"Italy really is a very interesting case, because female participation is extremely low, against the backdrop of worrying fertility rates," said Claudia Olivetti, an economics professor at Dartmouth College.
Speaking on condition of anonymity because she has yet to submit her resignation, Elena told Reuters she could not get a spot at a local nursery and can't afford a full-time babysitter.
Her small company employer denied her request for flexible working arrangements, she said, including some mandated by law.
According to a government report relating to 2021, nearly one in five Italian women aged under 50 left their job after having their first child.
Over half said they found it impossible to combine work and childcare. Another 29%, however, said they had been fired or not had their contract renewed, the report showed.
Enza Guzzo returned from her second maternity leave in October 2011 to find a dismissal notice waiting.
"They called me in and gave me the letter. I refused to take it and they sent it to my home address," she told Reuters.
She found another job and sued her former employer - motivated, she said, by a desire for justice. She won the case.
"I'm raising two daughters: they too could become mothers one day. I had to do it for them: you can't have kids and be forced to stay at home," Guzzo, 50, said.
UNTAPPED RESERVES
Italy's female employment rate hit a record high of 52.6% in the second quarter, national statistics bureau ISTAT said, but is still the European Union's lowest, 14 percentage points below the average for the bloc.
The Bank of Italy estimates closing that gap would boost both the workforce and gross domestic product by around 10%.
Births, meanwhile, are expected to decline further from 2022's record low of 392,600, according to academic and former ISTAT President Gian Carlo Blangiardo.
Current trends entail a drop of roughly 7 million in Italy's working age population by 2042, he said. All else being equal, that alone would drive a GDP loss of 339 billion euros, Blangiardo told Reuters, based on his simulation.
Pensions already eat up more than 15% of GDP, and the government expects spending to reach 17% of output in 2042. "With the current birth rates our pension system doesn't hold up," Economy Minister Giancarlo Giorgetti warned this week.
The birth crisis and women's employment nominally sit high on the agenda of Meloni, herself a working mother.
While campaigning, her coalition pledged to close the gap with the EU by doubling spending on families and children to 2.2% of GDP - an extra 22 billion euros.
But with Italy's debt costs at their highest in 11 years after Rome hiked its 2024 deficit goal, money is tight.
The government has said it will invest EU COVID recovery funds to boost nursery and pre-school places. Italy currently provides 26.6 nursery spots for every 100 children under three, below a goal of 33 per 100 set for 2010 by the EU's Barcelona agenda for women's rights.
Despite that pledge, it recently cut a target for new EU-funded childcare places by 2025.
Italy spends 0.1% of GDP on care services for children aged 0-2, against France's 0.6% or Denmark's 0.8%, OECD data shows.
SPANISH SUCCESS
Meloni's government could learn from Spain, whose female activity rate lagged Italy's in the early 1990s but is now above the EU average.
"Spain has achieved tremendous results first with tax policies which removed the disincentives for women, who typically earn less than men, to work, but then they invested in childcare: that really made all the difference," Olivetti said.
One simple change might be the removal of tax benefits that can pull low-earners, typically women, out of the workforce. These include unemployment benefits for parents who resign before their baby turns one, taken up by 37,662 mothers in 2021 - a 47% rise from 2015 when the measure was introduced.
"Italy's tax and welfare systems currently provide no incentives for women, and mothers in particular, to work," said Paola Profeta, economics professor at Milan's Bocconi University and director of the AXA Research Lab on Gender Equality.
Ahead of Monday's budget, the Treasury has said only that it will support households with more than two children - just 10% of the total, according to ISTAT.
Some politicians have said a tax scheme may be boosted that most benefits single-income households, where it is typically the man who works, potentially creating an additional disincentive for women to stay in the labour force.
Katharine Neiss, chief European economist at PGIM Fixed Income, a $776 billion investor in bonds including Italy's, calculated that raising female participation to the EU level by 2030 would add 300,000 workers.
"Increasing participation would completely alter the trajectory of Italy's labour force from one that is shrinking to one that is growing over the next decade," she said in a study.
"The challenge is not the demographic change itself, but the policy response to it. In the absence of policy evolution however, the outlook is much more gloomy."
($1 = 0.9476 euros)