the largest drop among the large countries – Corriere.it

The OECD today presented the Employment outlook 2023. Italy is the country that has recorded the sharpest drop in real wages among the main OECD economies. At the end of 2022, real wages were down 7% compared to the period before the pandemic. The decline continued in the first quarter of 2023, with a year-on-year decrease of 7.5%. According to OECD projections, the labor market will remain broadly stable over the next two years, with total employment growth below 1% in both 2023 and 2024. Total employment has increased over the last year, with an increase by 1.7% in May 2023 compared to May 2022. However, the Italian employment rate remains well below the OECD average (61% against 69.9% in the first quarter of 2023).

Union-agreed payrolls drop by 6%

The 7.5% drop concerns all wages, both contractual and non-contracted. But the OECD also provides more precise information on negotiated wages. In Italy, wages set by collective agreements decreased in real terms by more than 6% in 2022. This is a particularly significant drop if we consider that, unlike in other countries, collective bargaining covers, in theory, all employees.

Expected recovery of 0.5% in 2024

How was it in the past? And how will it go for the near future? Our country is the only one in the OECD area in which, from 1990 to 2020, the real average annual wage decreased (-2.9%) against increases of over 30% in France and Germany. According to OECD projections, nominal wages in Italy will increase by 3.7% in 2023 and 3.5% in 2024, while inflation should settle at 6.4% in 2023 and 3% in 2024. In other words , real wages will continue to fall this year and will only begin to recover next year.

Profits rise more than labor costs

The OECD also highlights how in most countries profits have increased more than the cost of labour. This also happened in Italy, albeit to a lesser extent, for example, than in Germany, Spain, Poland and Hungary. Among the countries where real wages have grown more than profits are France and the United States. «Inflation is a kind of tax that companies have managed to pass down and workers have not. It is not a matter of identifying the culprits and increasing the conflict between the parties, but of being aware of mechanisms that allow certain actors to discharge downstream, others not – explains Andrea Garnero, OECD economist -. In any case, I don’t think we can talk about a profit issue in the Italian case. Of course, low wage growth becomes more problematic in a context that does not have great growth potential in the immediate future». But is our bargaining system up to the moment? «In France contracts are renewed every year, in Germany every two, with us every three, this doesn’t help. It would be necessary to find a way to share the burden of inflation fairly among all actors. Ciampi’s lesson is still valid. Agreements involving the social partners have been reached in Portugal and Spain. Sitting around a table is the only way forward. A table from which everyone loses because the point is to divide the burden of the price increase generated by the upstream rise in raw materials fairly».