Salaries, taxes and inflation are discussed again in Italy. Between tax reform and the early clashes between Giorgia Meloni and Elly Schlein, the theme of wage levels resurfaces, especially if put in historical context: inflation hit record highs in 2022, but the same cannot be said for wages. which has now been at a standstill for decades and has actually decreased compared to the cost of living. The tax reform carried out by the Meloni government is based on new personal income tax rates, which will be cut to three, which, among other things, will significantly affect salaries (although it is not yet clear who earns). But what is the starting level of salaries in Italy in 2023? There are some points to consider.
There is a salary problem in Italy
Considering the unprecedented increase in the cost of living for 30 years, the wage debate in Italy is once again in full swing. We know that salaries remain lower than in other countries and that in Italy it is stuck thirty years ago. Indeed, while taxes on labor and inflation have increased, they have decreased somewhat. To get a clearer idea of the situation, by comparison, Italy is the only EU country among OECD countries where wages have not increased since 1990. low efficiency levels.
Along with the generally low wage level, they contribute to unprecedented inflation and the fourth-highest tax wedge among OECD countries. Although it fell slightly in the last survey (-0.4 percent), the tax burden on payroll in Italy – equal to 46.5 per cent of the salary on a single worker – is the fifth highest among 38 OECD countries. The OECD average is 34.6 percent.
Corporate profits are increasing
In a document prepared by the European Commission and quoted by the Spanish newspaper El Pais The EU government argues that “the evolution of corporate profits shows that companies have room to assume wage increases”. Simplifying, the Commission is asking companies to expand the range of dividends, as well as distribute them to employees, thereby increasing their salaries. According to the latest estimates by the European Central Bank, wages in the eurozone have risen much more slowly than inflation, resulting in “a 5 percent decrease in the standard of living of the average worker in the eurozone compared to 2021”.
According to the European Trade Union Confederation, real profits of companies in the EU increased by 1 percent in 2022. Real wages – that is, those calculated by purchasing power – fell 2.5 percent. Things should improve in 2023, but not by much: overall, wage growth for the ECB is accelerating and could reach almost 5 percent by the end of the year. And in Italy?
Salaries are fixed in Italy.
In Italy, the situation is clear: salaries did not follow the rise in prices or the increase in company profits. According to the European Trade Union Confederation, real gross operating margin of companies in Italy increased by 0.8 percent in 2022, while wages decreased by 2.1 percent.
Brussels also explains that in the European Commission’s autumn forecasts, there is a problem for Italy that “salary dynamics are still under control, given the slow renewal process of collective agreements and the very partial indexation mechanism”. The hope – not just for Italy – is “stabilization of raw material prices” in 2024. The initial support for the job market with the Irpef reform will come from the Meloni government, but it will be necessary to understand for whom it will be appropriate and who will suffer instead.
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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.
