Wages, the alarm from the OECD: “Italy is the country where they drop the most. In one year, a drop of 7 percent”

MILAN. The labor market has kept pace, despite the “significant” slowdown in economic activity. But Italy is the country that, most of all, has seen real wages fall. This is the alarm of the OECD which, in its photograph, explains how “the loss of purchasing power” has “a stronger impact on low-income families, who have a lower ability to cope with the increase in prices through savings or borrowing.

According to the organization, at the end of 2022, real wages had fallen by 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%. The projections are not reassuring: “In Italy, nominal wages 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” they write the economists.

The solution? Collective bargaining, which can “help mitigate workers’ loss of purchasing power and ensure a more equitable distribution of inflation costs between firms and workers, avoiding a price-wage spiral”. Data suggest that there is room for profits in OECD countries to absorb wage increases, at least for low-wage workers. Governments should also refocus the support set up in the last year to be more targeted on low-income families. “In Italy, wages set by collective agreements decreased in real terms by more than 6% in 2022. This is a particularly significant drop when one considers that, unlike in other countries, collective bargaining covers, in theory, all employees”. The indexation of collective agreements to the Istat forecasts of inflation excluding “imported energy goods” (IPCA-NEI), recently significantly revised upwards, suggests that the minimum tables will be able to recover part of the lost ground in the coming quarters. However, the significant delays in the renewal of collective agreements (over 50% of workers are covered by a contract that has expired for over two years) risk prolonging the loss of purchasing power for many workers”.

The OECD also launches an alert on artificial intelligence. “Artificial intelligence (AI) has so far helped highly skilled workers get their jobs done rather than replacing them, but the employment effects may take time to materialise,” the document reads.