Salaries farm for at least 30 years and the rich are getting richer. This is the worrying picture that emerges from the workshop on wages and productivity organized by the National Institute for the Analysis of Public Policies (Inapp). Italy is the only country in the OECD area in which, from 1990 to 2020, the average annual wage decreased (-2,9%), while in Germany and France it grew respectively by 33,7% and 31,1%. “In these three decades the gap between the average growth of wages in OECD countries and the growth of wages in Italy has increased progressively from -14,6% (1990-2000) to -15,1% (2000-2010) and, finally, to -19,6% (2010-2020)”, writes the institute in a note. But why are salaries so low in Italy?
Many factors played against the salary increase, starting with the competition with countries exporting products with low added value, together with the use of cheap labor and low qualifications which have crushed both wages and the level of productivity in our country. Not by chance productivity of work has recorded a much slower dynamic in Italy than in other European countries. Basically, according to the Inapp, i Italian wages they are "in a cage" trapped between low productivity and the need for cost reduction on the part of companies.
"Certainly the reduction of the tax wedge included in the budget law is an important step," explained the professor Sebastian Fadda president of the institute, “because it increases the net salary without increasing the cost of labor for companies. However, a vigorous industrial policy is now needed aimed at removing the causes of productivity stagnation and stimulating wage dynamics, with benefits for the growth of aggregate demand and the level of economic activity”.
Italian productivity: the double mismatch
During the workshop it was underlined how many are the causes of low productivity and how among these plays a decisive role mismatch, understood in the double sense of the lack of skills required by companies but also of under-utilization of available skills. This bears witness to the weakness of our productive fabric which does not sufficiently value the workers' skills educated: Italy is the only G7 country where most of the graduates is employed in routine activities. Solving this problem could produce 10% productivity growth in Italy.
For the purpose of stagnant productivity the characteristics of our entrepreneurs are also relevant. A recent work carried out in the Inapp headquarters demonstrates that the characteristics of entrepreneurs are fundamental for the adoption of innovative technologies and for the possible increases in productivity that would derive from them. In particular, younger, more educated and female entrepreneurs are more sensitive to the evolution of the technological frontier. Family businesses whose leader is a family member are less inclined to adopt innovations.
Low wages in Italy, the result? Increase in inequality
In Italy, low productivity and low wages in the last thirty years have accentuated the inequalities. Taking as a reference measure the Gross Income, i.e. the sum of market and pension incomes, without considering taxes and non-pension money transfers, the data made available by the World Inequality Database (WID) show that in the period 1990-2021, in Italy, the share of total income held by the poorest 50% of the population is constantly decreasing: it went from 18,9% in 1990 to 16,6% in 2021. In contrast, the share of income held by the top 1% has increased by about 60%. What does it mean? That the poor are getting poorer and the rich are getting richer.
Is the minimum wage the solution?
“There are those who argue that introducing a minimum salary would constitute an element of rigidity - concluded Fadda - but the minimum wage, despite the complexities to be resolved, should rather be considered as a basis from which to start to build a system of rights and decent working conditions, which can very well coexist with measures and agreements that increase productivity and free up resources for an increase in wages. This is even more urgent with inflation marching into double digits and purchasing power increasingly eroded.
For this reason, the institute underlines the need to review the agreements that regulate collective bargaining starting from "Ciampi protocol” of '93 – both at national level (first level) and at company level (second level) – scarcely used. It is also necessary to monitor the "regressive" effects of inflation on taxation, both through VAT and through the so-called "fiscal drainage” caused by the exceeding of tax rates following the increase in income in nominal value.
