In her first face-to-face meeting in Parliament with Prime Minister Giorgia Meloni as the new leader of the Democratic Party, Elly Schlein retracted the issue of introducing the minimum wage in Italy. “Precarity is bad business, a minimum wage should be set by law because below a certain threshold it’s not work but exploitation,” Schlein said. Increasing wages is correct, but the minimum wage is not the “solution,” Meloni replied. Who is right between the two heroes of Italian politics?
What does the EU directive say?
Before we try to answer this question, let’s take a step back. Last October, the EU gave the final green light to the minimum wage directive. Countries will have two years until 2024 to implement the new rules. What are they guessing? In general, the law gives states two options: either set a minimum wage or reach at least 80% of the wages set by collective agreements. It does not meet the first option, as do Italy, Austria, Sweden, Finland and Denmark (the other 22 EU countries do). The Directive proposes a set of parameters that must be followed if they are to be complied with; one of these (a threshold equal to 60% of the average gross salary) can lead to a minimum wage of around 1,000 euros.
The trick of collective agreements
But the debate over the second option continues. On paper, Italy is already compliant with the directive: according to recent estimates, Italy’s coverage is over 85%. However, many economists point out that this share may be due to an incorrect calculation method and may be revised downwards with the implementation of the directive. The reason should be sought in the strong presence of “pirated” collective agreements and expired agreements. The first concerns contracts signed by chambers of commerce not recognized by Cnel, covering around 33,000 Italian workers: how will these be counted under the directive? Second, there are expired contracts: At the end of last year, as many as 62% of the 955 collective agreements submitted to Cnel, the National Economy and Labor Council, expired, most of which lasted more than 5 years. Will the European Commission accept expired contracts to calculate the 80% threshold? Here, too, the situation is not clear.
Where wages rise the most
In any case, the government has almost two years to pass on the directive and decide whether and how to comply. According to Meloni, “the goal the government has set for itself is to raise wages”, which has come to a standstill in Italy for 30 years. What is the best tool to do this? Minimum wage or collective bargaining (hence choosing to compromise between unions and companies)? It’s hard to say, given that even economists are divided. But looking at the wage dynamics in EU countries in 2022, it becomes clear that, in the face of record inflation, payrolls in places with minimum wages have increased significantly more than in the few states of the bloc that do not. .
For example, wages in the EU increased by 2.8% in the third quarter of 2022 compared to the same period in 2021, according to Eurostat data. In Italy, the increase was 1.8%. When we look at other countries where there is no minimum wage, we see Finland and Denmark, whose employment growth is below the EU average. The quarterly correction was 3.3% (slightly above the EU average) in Sweden and 6.1% in Austria. The Austrian example, more striking than the Swedish example (growth had been more moderate in previous months), is striking: Vienna seems to contradict minimum wage advocates by showing that it is possible to raise wages even through collective bargaining. Will the Austrian exception also apply to Italy? We’ll see in the coming months.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
