Between 2004 and 2024 there are only two countries in the European Union whose incomes will not increase in real terms, that is, taking into account what a person can actually do and buy with his income taking into account the cost of living: one is Greece, and the other is Italy. According to new data from Eurostat (the European Union’s statistical office), real per capita income in European countries increased by 22.3 percent, while in Italy it decreased by 3.9 percent and in Greece by 5.1 percent. Therefore, Italy’s condition is similar to that of a country, Greece, which is facing a major crisis, which is almost bankrupt, which is practically placed under the commissary of international institutions, and which of course, like Italy, is not one of the largest and most important economies in the European Union.
The premise: income doesn’t just mean how much you earn through work, such as employee wages or self-employed workers’ compensation, but also income from investments, rented housing, and so on. Income therefore measures how much money people can actually count on, and is a more general and complete indicator of an individual’s economic well-being than salary data alone. However, this turns out to be closely related to the last variable, which is perhaps the variable that most influences the economic conditions of society. This is why discussions about income cannot ignore salary developments.
From the graph we can see extraordinary positive peaks in Eastern countries, such as Romania, whose income increased by 134 percent in twenty years, and the Baltic countries, such as Latvia, whose population experienced an income increase of 95 percent. It is clear that comparing these countries with Italy is inappropriate: these countries started from more disadvantaged conditions, and whose economies have benefited from their recent accession to the European Union and the euro, which have provided a disruptive boost to growth and helped them to approach the living standards of other member countries.
But the comparison remains merciless even in relation to countries comparable in size and importance to the Italian countries, such as those of Germany, France and Spain: in Germany, real income grew by 24.3 percent, in France by 21.2 percent, and in Spain by 10.7 percent. In practice, this means that Germany, France and Spain are better off today than they were twenty years ago. But in Italy, things are worse.
The reason is of course related to several international problems and is therefore also experienced by all European countries, such as the three economic crises that occurred in a row (in 2008, 2011, and the crisis due to the pandemic which began in 2020). However, most importantly, this is related to the recent increase in the cost of living, which has reduced people’s purchasing power. Elsewhere, however, incomes rose, more than offsetting the crisis and inflation; But in Italy, this is not the case for reasons that are entirely related to Italian problems.
The first problem is that in the last twenty years the Italian economy has not grown, and as a consequence people’s incomes have not increased either: currently in Italy GDP – Gross Domestic Product, i.e. the best estimate of the economy’s performance – is only slightly higher than at the beginning of the 2000s.
It is true that the economic crisis does have something to do with this, but much depends primarily on the choice of industrial sectors in the country, which focuses more on traditional sectors (which are worse paid) than on sectors that are more innovative and have high growth potential: the cause of low salaries can be found, for example, in the choice to encourage sectors such as tourism or construction, which have poor development prospects and very low wages.
This can also be found in the widespread narrative of the so-called “small is beautiful”: the belief that small and medium-sized companies in Italy, which make up the majority, have better prospects and flexibility for growth than large companies. Economic research has shown over the years that this is actually more of a disadvantage, and that the benefits are reduced because of the little innovation taking place in these companies and a less developed entrepreneurial culture.
Another problem is that over the last twenty years, the so-called labor productivity, that is, the income that each worker generates in the company where he works, has not increased either: since 2004 the income has remained more or less the same, while in other countries it has increased. This is not a question of the laziness of Italian workers, but rather relates to the fact that they lack education and training, and that they are often forced to work in inefficient contexts, such as small companies unable to compete internationally, slow to innovate processes and technologies, helpless because of unclear laws and burdensome bureaucracy.
Then there is also the issue that is closely related to workers’ wages and concerns the chronic weakness of Italian trade unions, the organizations representing workers, which in the last twenty years have not been able to negotiate salary increases that would improve the actual economic conditions of workers. This can be seen from quite sensational figures, seen from the outside: in Italy about half of the workers work on contracts that have expired.
These agreements are referred to as national collective agreements, where there is one agreement for each profession and sector, and they are negotiated at the national level by trade unions and employers’ associations (representing companies): they set out the basic conditions of workers in various sectors, such as wages and working hours, regardless of where they live and whether they are members of a trade union or not. This contract is valid for a predetermined period of time, usually three years, after which the trade union and employers’ association must renegotiate its terms: it is precisely at this time that salary increases are negotiated and apply to all workers subject to this contract. But in Italy, several years pass between one renegotiation and another, during which wages remain stagnant: according to Istat, on average they wait two and a half years from the end of the contract.
The good news is that in recent years there has been more excitement about contract renewals, but this is because unions have had to respond to the real urgency of the workers they represent: namely recovering from the huge increases in the cost of living that occurred as a result of the pandemic and the war in Ukraine. However, according to OECD data, Italy is the third European country in terms of gaps still to be filled, after the Czech Republic and Sweden.
– Listen to Wilson: Because our income is small
