Driven by the winds of inflation, the salary issue, on which both the need to protect purchasing power and the deep-rooted opinion that Italian wages are unjustifiably low converge. The latter narrative is particularly supported by the trade unions, which is somewhat surprising given that they are the authors of the Collective Agreements which apply to almost all employees. In fact, the first objective fact from which to start is that, according to CNEL data, the contractual coverage protects at least 12,9 million private employees plus 3,2 million public employees. The so-called pirate contracts concern less than 3% of workers and workers without a contract are, according to INPS data, between 500 and 700 thousand.
Wages: a comparison between Italy and the main European countries
Established that thinking about wages in Italy means thinking about National Collective Agreements, let's see the values, expressed in Purchasing Power Parity, compared with the European ones. Eurostat tells us that the Italian average gross hourly wage in 2021 it was of 15,55 € against 16,9 euros in the Eurozone, 19,66 euros in Germany and 18,01 in France. There gross monthly pay the same year it was 2.520 euros in Italy, in the Euro area 2.825 euros, in Germany 3.349 euros, in France 2.895 euros. The annual one in Italy 34.792 euros, in the Euro area 38.559 euros, in Germany 44.933 euros, in France 37.956 euros.
According to Job Pricing, which takes into account i OECD data, in 2020 Italian wages were ranked 25th out of 36 countries, equal to 80% of the OECD average wage. So wages are medium low, but it is worth breaking them down by analysis area to try to understand the causes.
The difference between high and low wages
First, despite the pauperist clichés, the difference between high and low wages is not at all high. Indeed, it is among the lowest in Europe: low wages, i.e. less than 2/3 of the median wage, are only 3,7% of the total, the lowest figure in the EU; the high ones, i.e. above the median by one and a half times are 19%, instead they are the lowest after those of Germany (18,7%). The bulk of wages is distributed fairly evenly in a central band.
The difference in salary depending on education
Aligned with this figure is that of the pay gap by education level: the difference in wages between the lowest (primary and/or lower secondary) and the highest (tertiary and higher) education levels in Italy it is between 27.806 euros and 44.104 euros per year; in Germany €27.005 and €68.144 respectively; in France 28.115 euros and 47.696 euros; in the euro area 25.518 euros and 51.200 euros. Once again we find that low wages are higher than the European average, while high wages are lower. Surprisingly, a picture seems to emerge in which average wages are on average low mainly due to the high ones, while the lower ones have a good performance.
Differences in pay across sectors
It is also important to examine how wages change according to the productive sector: excluding agriculture and family services, which are difficult to weigh because they border on undeclared work, the sectors in which wages (in fact) are lower are building (26.482 euros per year) e services (28.749 euros). But, apart from the finance/credit sector, also i industrial sectors they are not much higher: 32.000 euros for the process industry and 30.486 euros for the manufacturing industry (job pricing data).
Comparison with Europe
The comparison with the European data is very instructive: the delta between the salary in the process industry (normally the highest excluding financial services) and services excluding the public administration is 23,5% in Germany, 13% in France, 7% in Italy; and 14,5% in the Euro area (Eurostat data). This crushing of the Italian data is essentially due to a relatively high level of remuneration in services (only -8,7% compared to the Euro area, -7,5% compared to France, -24% compared to Germany) and rather low for the process industry (-17% with the euro area, minus 43,8% with Germany, -14,7% with France).
The tax-contribution wedge
It is also worth dwelling on the so-called tax-contribution wedge, which defines the net salary that can be spent for workers. A very recent research by the Catholic University tells us that the average tax-contribution wedge is worth 46% of labor costs, whereby a net salary of 23.948 euros actually corresponds to a gross income of 44.779 euros. I define this figure, which is actually the cost of labor for the company, as gross income because the wedge includes taxes payable by the worker (15,3% on average), contributions paid by the worker (about 9%) and paid by the employer (about 24%): the latter mostly finance the social security, which we can all in all consider as a sort of deferred salary, and other insurance-type benefits: Redundancy Fund, Unemployment Allowance, Sickness, Maternity , Family Allowances, etc. In essence, slightly less than half of the income generated in favor of the worker finances insurance and social security.
Comparison with Europe
It is not a common situation: in Germany, pension contributions, between the worker and the company load, are 16%, and obviously generate much lower pensions than the Italian ones. Therefore, all German workers pay themselves a supplementary pension separately. Not only that: the tax wedge of German workers also includes 14% which goes to finance public health; in Italy the worker does not pay it, because it is the responsibility of general taxation.
It should be noted here that for gross salaries that do not exceed 15.000 euros per year (there are more than 8 million), the tax levy is greatly reduced or canceled thanks to tax breaks and tax deductions.
In essence, the tax wedge at the level of the highest European wages compresses the average net wage, bringing it below the euro area average by about 900 euros per year. It is a choice, perhaps never explicitly declared, for which the insurance-social security purpose is privileged in remuneration.
The prevalence of low-skilled work
The weight of the wedge is not sufficient, however, to explain the crushing on the low values of Italian wages. Another cause is to be found in a professional curve which in Italy tends to be flat, with a prevalence, compared to the European partners, of poorly specialized work: in Italy the most present profile is that of skilled manual professions, while in Germany it is that of the intermediate technical professions, in France and in the euro area the intellectual and scientific professions. Obviously, the parameterization of salaries on the basis of this scale determines a low average salary.
Productivity in Italy and in Europe
But there are also reasons intrinsic to the productive structure, in particular to the productivity not only of work, but of all the factors that determine it. For a more precise picture, it is worth making a couple of comparisons between the Italian performance and that of our European partners: GDP produced per hour worked in Italy it is equal to 54,2 euros, against 60,5 euros in the euro area, 67,1 euros in France and 67,6 euros in France. The annual per capita GDP (per employee) is 41.995 euros in Italy, 47.133 euros for the Euro Area, 46.691 euros in France and 54.884 euros in Germany. Which also explains the pay differences.
To sum up Italian wages
We must acknowledge that in Italy the vast majority of workers are protected by the national collective bargaining agreements, but that the average contractual wages are low compared to European levels, not very diversified by profession, age and sector, with the low bands more in line with European levels and the high ones much less aligned. A wage system that is somewhat poor and inclined towards egalitarianism, aimed more at financing social insurance than spending capacity, with difficulty in stimulating productivity (and benefiting from it) due to a very centralized collective bargaining model centered on the groups weaker.
The charm of wage nationalization
However, the structural link between productivity and pay is viewed with great annoyance by some trade unionists, evidently convinced that wage levels should be decided by politics and not by the market: we are seeing that precisely in these salary days the union is not discussing with companies but with the Government, and the increases it is demanding are not in relation to a bargaining on the distribution of profits but to fiscal and parafiscal interventions. An old cultural legacy: if you don't get rid of it with the owner, you can turn to Mamma Stato. On the other hand, if the union is being fascinated by the nationalization of wages, Confindustria can do no better than to align itself with these demands. Evidently trade unions and companies are not in a position today to set in motion a major bargaining campaign through an exchange between wages and productivity to stimulate growth.
But if the definition of wages becomes the subject of negotiation between the union and the political-fiscal authority, the industrial relations system changes radically and everything that is the counterpart between work and results, with what it entails in terms of participation and responsibility, co-management , exchange between performance and remuneration disappears in the darkness of a state salary. Continuing on this path, the union runs the risk of greatly weakening its roots and its future.
