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Minimum wage, a law is not enough to raise wages: a lot of confusion and a lot of demagoguery

A law is not enough to raise wages in a country like Italy which, barring the rebound in 2021, has grown less than the others but, if well designed, the minimum wage law can stimulate the reform of bargaining and the labor market

Minimum wage, a law is not enough to raise wages: a lot of confusion and a lot of demagoguery

 “Do it amuina”. The ancient order of the Bourbon Navy, which served to demonstrate that the warships were bustling with activity, is well suited to the debate that has developed in Italy on the minimum salary following resolution passed by the European Parliament which recommends its introduction. 

On the Italian minimum wage: 4 analysis plans 

They get confused various plans of analysis: social justice, the role of trade unions, the weight of the Government in intervening in a matter that should largely be left to free bargaining, and finally the need for a profound fiscal review to reduce the burden of taxes and contributions weighing on on labor income. 

It is striking that none of the many politicians and numerous commentators who took part mentioned the main cause on which depends the fact that Italy is the only European country where in the last thirty years wages have not increased, indeed they have fallen by about 2%, while in more advanced countries such as Germany and France they have grown by 30-20%. And that is no one remembers that In Italy, the GDP has not grown for over two decades and that we have not yet managed to fully recover the fall of 2008-2009. And if the gross domestic product does not grow, how do wages grow? 

In cascade it follows that productivity has been stagnant, that the tax burden has remained almost the same, while the resources to finance public and private investments have diminished. In short, it is evident that the Italian system fails to guarantee adequate jobs for all and salaries capable of meeting the expectations of workers. To change this state of affairs it is necessary to do those changes in the functionality of our system, starting with school, to stimulate growth that we have been missing for too many years. 

What should the minimum wage amount be in Italy?

And instead demagogic to think that it is enough to make a law to raise wages, help the most disadvantaged workers, and perhaps also support the incomes of all the others by sheltering them from the risk of inflation. 

On the other hand, the introduction of the minimum wage, if well calibrated, can represent one incentive to change the rules of bargaining, and therefore of the labor market, contributing to that increase in productivity which is preparatory to the growth of wages. 

In the first place, the minimum wage must be set at an average level not too close to the contractual one and not too high compared to the many de facto wages that exist in the most marginal sectors of our economy. In fact, if compared to the 4-5 euro per hour of the current lowest wages, it suddenly reached 9 euros there would be a risk of stimulating a flight to "black", or many places would disappear altogether.

 Instead we have an indication that can be placed at the basis of our reasoning and that is the maximum level of the redundancy fund which is 1200 euros per month. Consequently, the minimum wage should be fixed between 6 and 7 euros per hour

The role of trade unions, industry and parties 

This way you would also save the role of the social partners which would have ample space for the negotiation of the 5 or 6 euros which already today in the largest contracts exceed the minimum level. But to do this we need a law on the representation of trade unions and employers, and in parallel a reform of the contract to shift the weight from national category contracts to company or territorial ones, where in fact it would be easier to exchange salary increases with improvements in performance and therefore productivity. It seems strange that neither the president of Confindustria, Carlo Bonomi, nor the trade unionists appear willing to innovate the rules of industrial relations, but limit themselves to defending the current practice of national contracts which leave little room for company bargaining. 

The minister of labour, Andrea Orlando, adds further confusion by saying he wants to make a interconfederal agreement to fix the minimum wage close to the salaries established in the major contracts. However, in this way, the role of the union would be weakened, since companies could limit themselves to applying the law without wasting time negotiating with the unions. Of course, on the political side, everything is based on the promise to reduce social security contributions. Confindustria would like a cut of 16 billion (one third to companies and two thirds to workers), but the CGIL replies that if the money comes from the state, it will all have to go to the workers, since the companies have already had enough. 

But where does the State get all this money? Nobody says that. Yet responsible parties and unions should take into account the fact that monetary policy is changing direction and that interest rates are already rising. So for an indebted country like Italy it is not prudent to increase its public debt.
In the run-up to the electionsthe parties ride the theme of the minimum wage leading to believe that in this way it will be possible to suddenly raise the wages of a few million workers and that perhaps more jobs will also be found for young people who are going abroad today, especially the more qualified ones, to find higher wages and above all more attractive career prospects because they are largely based on merit and not, as we do, on nepotism or political clientele. We spread illusions, while the ruling classes are consumed in equivocal debates without ever touching the real problems that we have to face as a country, if possible with unity of purpose.

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