Where does Italian income come from?
I incomes of Italians not only derive from employment, but also from sources such as theentrepreneurial activity, financial investment, rental of property e other activities that generate income. The Observatory of Italian public accounts led by Giampaolo Galli has tried to give an answer by analyzing the income received by Italians showing how this has evolved over the last fifty years.
The income of Italians
In Years' 70, more than half of the income Italians came from employment. Today that is no longer the case. The percentage of compensation for employees increased until the XNUMXs when it stopped growing. After the sharp decline, it has returned to recover in recent years without however returning to the levels it was before.
This phenomenon has also occurred in other countries, but in Italy the percentage of income from employment has always been lower than in other countries. On the other hand, the percentage of self-employed workers is higher (19,6%) and their incomes are included in the calculation of capital income.
An important weight on the share of income is given by real estate rents, which have grown over time and which today represent 12,7% of GDP.
GDP analysis
To explain well the incomes the Observatory analyze the GDP and how it is structured.
Il GDP (Gross Domestic Product), is the measure of the wealth produced by the economy in a year and corresponds to total distributed income to its components. GDP can be considered as aggregate income and it is consisting da 4 items: income from employment, from capital, taxes on production and imports and contributions to production.
A-I employee income include wages and social security contributions, excluding pension income
B- I capital income are divided into gross operating profit Rlg) and mixed income. The Rlg for companies is the profits, for households it comes from the value of the properties. Mixed income, on the other hand, also includes income produced by sole proprietorships, self-employed workers and freelance professionals
C- The taxes on production and imports are the mandatory withdrawals in cash or of a different nature made by the national Public Administration (examples of these are VAT, duties or taxes and levies on capital
D- I contributions to production they represent the only negative component, which must be subtracted from taxes on production and imports to obtain the net revenue for the State relating to domestic production.
GDP represents the sum of all these components GDP = a+b+(cd).
The evolution of income
Nellanalysis of income from employment and capital only the sum of the two incomes (a+b) while the other two points (C and D) represent only a variability. The study shows that since the 70s there has been a marked reduction of the weight of income from employment until the beginning of the new millennium. From the 2000 to date there is a slight increase almost 3 percentage points from 42,7% to 45,9%. Instead, i investment income shows a specular trend. It therefore appears that since the mid-80s, income from work has been less than half of the total income that Italians have received in a year.
Taking into consideration the analyzed period 1995-2019, the evolution of income from labor and capital is compared, excluding from capital income the portion deriving from so-called “imputed rents”. These rentals are estimated by the Istat as "the hypothetical value of the monthly rent that families who live in owned, usufruct or free-use homes or who own a secondary home could obtain by renting the home".
La share of GDP due to rental income has increased over the years. This means that the reduction in the share of capital income was higher for capital net of imputed rents than for gross capital. The value of rental income has grown significantly, reaching around 14% of GDP.
In Italy, from 2000 to 2007 there was high growth in real estate assets and rentshigher than that of total income. After the 2008 recession, home values declined but the actual rentals, to which they are related those accused, have continued to grow due to the segmentation of the rental markets and the strong development of new contractual forms. This, together with the stability of the Italian income, has made it possible to keep the quota higher than real estate rents on total income. Excluding imputed rents, capital and labor income have had the same percentage in the last decade, with a slight increase (from 2008 onwards) in the component due to labour.
La recovery of income from employment takes place starting from the XNUMXs. The exact dimensions depend on the definition of the different income aggregates, such as the distinction between public and private, the inclusion of self-employed income and the choice of denominator. According to the Bank of Italy, considering only private sector employees and adding an estimate of the incomes of the self-employed to their incomes, the share of value added attributed to work in the private sector reached the levels of the 70s in 2015.
The trend of income from work
In ITalia, from the late 70s until the early 2000s, the share of total income going to workers has decreased then lift without, however, reaching the initial levels.
A trend present not only in Italy but also valid for many other advanced European countries.
are the structural elements, common in developed countries, which influenced the functional distribution of incomes in the same direction. However, there is much debate about what the determining factors are, but there is no unanimous economic literature.
Possible explanations are for example technological progress, the automation of some tasks, participation in global value chains, the different regulations of the labor market and foreign investments.
In our country, the share of income deriving from work on total income received is lower than in other European countries due to a minor participation in the labor market date frompopulation ageing. "Other incomes", on the other hand, play a more significant role in the overall distribution of incomes than in other EU countries.
THEevolution of labor income compared to total income varies between countries, but with a similar trend. There were a significant decline from 1995 to 2007, an increase during the Great Recession, and then a steeper decline in Italy than in other countries except Spain. However, labor incomes appear to have recovered in all countries in recent years.
here for download the analysis in detail.
