Wages, the first increases are not enough: the cost of living can cost Italians 6% on their paychecks

Wages, the first increases are not enough: the cost of living can cost Italians 6% on their paychecks


«Some recovery of the purchasing power of wages, after the losses suffered, it is physiological and will be able to support the economy», says the governor of the Bank of Italy Fabio Panetta. The good news is that this recovery has begun, in Europe and also in Italy: 2024 will be the first year, after three years of erosion, in which the growth of pay slips will exceed that of prices. The problem is that during the super inflation the impoverishment of Italian wages, which had already been at a standstill for decades, was among the most serious in the advanced economies. And the road to full recovery, which can already be glimpsed in other Eurozone economies, appears far from obvious in our country: due to the large quantity of expired contracts, the tensions regarding renewals in this phase of stagnation, the chronic productivity delays. Thus in 2026, the Prometeia economists estimated, Italian real wages could emerge from the inflationary wave lower by 6%. Confirming and indeed accentuating the divergence from the rest of Europe, that is, the progressive impoverishment of Italian workers.

The timid inversion

The bill of the blow is in the difference between pay slips and inflation for the last three years. In 2021 wages in Italy grew by 0.6%, against 1.9% for prices; in 2022 by 3.6%, against 8.1 in prices; in 2023 by 3.1% against 5.6% in prices. The loss is the most decisive of the OECD countries, wrote the Organization, estimating it from pre-pandemic to March last year – therefore still partially – at 7.5%. In the tail end of 2023, the sharp slowdown in inflation brought the differential back in favor of wages. But the reversal has been much less decisive than in the rest of Europe, where pay slips have galloped, on average more than 5%. And even if the dynamics of Italian wages could strengthen this year, Bank of Italy hypothesizes in its latest bulletin, the “spread” with Europe will remain.

The contracts hanging

One reason is the limbo dei collective agreements, which in the absence of a minimum wage remain the only trench of wages. Despite recent generous renewals, such as that of banks, and the advance on future renewals for public employees, at the end of last year over half of Italian employees remained covered by an agreement that had expired, on average for two and a half years, therefore with levels salaries that photograph the world as before. “In 2024, a wage curve higher than that of inflation will recover, but the problem is how much has been lost so far,” says Maurizio Del Conte, professor of Labor Law at Bocconi University.

Precisely the issue of full “recovery”, requested by the unions, will make the negotiations very difficult chemists and metalworkers, agreements expiring in the next few months which now provide for “ex post” adjustment mechanisms. And it keeps the negotiations of the crucial and long-expired contracts of the tertiary sector, such as trade and tourism, at a standstill, which do not provide for mechanisms of this type and where over 3 million workers have only received “holiday” allowances. «Here the situation is complex – continues Del Conte – companies are not very willing to make concessions at this stage, they are fine with keeping the contracts firm».

Sacrifice margins

Because the Italian economy is now at a standstill, and will remain so at least until the middle of the year. The European Central Bank’s belief is that after having defended margins during the inflation phase, unlike their workers, companies have room to increase wages (without raising prices, something that is important to central bankers). Panetta adds that this would also support consumption and GDP, which is also of interest to companies. But whether this “redistribution” of the costs of inflation actually occurs remains to be seen. Also because after having hired a lot, companies find themselves facing these months of stagnation with higher costs.

More optimistic than Prometeia’s forecasts, Del Conte says that with the next renewals we could also get closer to a full recovery of inflation for workers. But even if this happened, there would remain “the structural divergence of Italian wages with those of other European countries that have focused on value-added activities, increased productivity and profitability”. Maybe not impoverishment in an absolute sense, but still relative. To grow, Panetta also said, we need to “stimulate investments in innovation and productivity”. The real turnaround in Italian wages comes from there.

The lifesaver of work

With paychecks eroded, what has kept the finances of many Italian families going in recent months, especially the poorest, has been the boom in employment. Only in 2023 were they created 456 thousand new jobs, mostly on permanent contracts, bringing the number of people employed to record levels: for many families this meant an extra salary. The great demand for labour, often difficult to find, is a trend that has affected all of Europe, but which, unlike other countries – and the United States – in Italy does not seem to have increased the bargaining and salary power of those who work offers it.

The fact that the number of people employed has increased more than the GDP, and more than the hours worked, suggests that in many cases it is a “poor” occupation, in less productive sectors such as construction and tourism, or in any case with a high incidence of part -time. And the other bad news is that with the economy at a standstill this lifeline could also deflate: it is possible that the difficulties in finding workers have pushed companies to “retain them beyond their needs”, said Panetta. Warning that if the weakness continues “they may have to significantly reduce headcount”



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