The worst salaries, the purchasing power of wages collapses: -7.5 percent in 2023

The summary of the OECD is a sentence that hurts: “Italy is the country that has recorded the sharpest drop in real wages among the main OECD economies” with a drop, at the end of last year, “of 7% compared to pre-pandemic period. But if somehow the black jersey worn in 2022 was already in the past, the current situation and the prospects for the immediate future are worrying: «The descent – continues the OECD in its latest report on employment – continued in the first quarter of 2023, a year-on-year decrease of 7.5 percent. And to start recovering something, in real terms, we will have to wait for next year: this year nominal wages will increase by 3.7% against inflation which should settle at 6.4%; in 2024, on the other hand, wage growth will be 3.5% against a price dynamic of 3%. Enough for the black link for wages among the major global economies to rest firmly – and sadly – on Italy’s shoulders.

The OECD report has also turned into a political battleground with the opposition returning to the attack on the minimum wage. On the other hand, the surveys of the international body based in Paris show greater resilience in the countries that have adopted it. Also because “often these are values ​​indexed to inflation”, explains Andrea Garnero, an OECD economist and one of the authors of the report on employment, who then adds: “In other cases it was the governments that approved increases that countered the race of inflation. Germany has raised the minimum wage to 12 euros an hour».

As to why Italy always struggles, Garnero has clear ideas. Starting with the limits of collective bargaining “which is reacting late to inflation”. On the other hand, it is enough to think that 50% of the contracts have expired for over two years and that of commerce – among the most important in terms of number of employees – since 2019. «In Italy – continues the economist – they should be renewed every three years, while in France every year and in Germany every two. This explains why our real wages are often lower.”

Added to this scenario is the fact that Italy never stops: “Abroad, from the United Kingdom to Norway, up to France, unions and workers are mobilizing for days to obtain the renewal of contracts”. As if to say that general strikes in their own right are almost useless, while other countries are capable of folding their arms for 3 or 4 days to force companies and governments to sit down at the negotiating table.

The elephant in the room, however, remains the twenty-year stagnation of GDP: “If the economy does not grow, wages will remain at a standstill”. Aren’t rising wages likely to inflame inflation? «If they increased by the same level of productivity yes but now we have to build a path of return of purchasing power in the medium term. A gradual path that passes from the increase in productivity».

On the other hand, if wages grew less than productivity, there would be no impact on prices, «but as long as productivity is zero or even negative, there is no room for maneuver. This, however, is not the time to give up, but to sit around a table to all give up something: the unions accept lower increases, the companies sacrifice a piece of marginality and an agreement is reached. But we must be aware that it is above all the micro enterprises that have productivity problems, the others are aligned with the large countries”.

Meanwhile, Istat foresees an improvement in the purchasing power of households, with an increase of 3.1% over the first quarter thanks to the “significant slowdown in price dynamics”. Industrial production also performed well, returning to growth in May after four consecutive declines, marking +1.6% on April.

In the report presented yesterday, the OECD first of all highlighted the “never so low” unemployment since the early 1970s. “Labour markets have shown considerable resilience over the past year and remain buoyant, even as high inflation and rising cost of living have eroded real incomes,” says OECD Secretary-General Mathias Cormann .

In Italy, according to the report, the number of unemployed “has fallen to 7.6%, two percentage points lower than before Covid-19, but still considerably above the OECD average of 4.8%”.