MILANO – Italian salaries at the stake, but considering the cost of living, who is better off than us? After months of inflation at levels that several generations have never known, the purchasing power of families has emerged with broken bones. The slowdown in prices expected for this 2024 offers a hope of relief, but in the meantime a blow has arrived on an already fragile framework, marked by a salary dynamic that has been asphyxiated for some time.
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If you take it the latest Salary Outlook from the JobPricing Observatory, which is based on OECD datawe see that (year 2022) the average annual salary in Italy remains one of the lowest in the area and in Europe. Reasoning in terms of purchasing power parity, with 44,893 dollars we are in 21st place among the 34 countries observed by the Organization. The average is at $53,416 and we are closer to Mexico (last) than to Iceland first.
“Of the 17 Eurozone countries included in the graph – says the Salary Outlook – Italy ranks 10th, below countries such as Luxembourg, Germany and France, while Greece is last in the ranking (25,979)”.
The findings of the European Commission
That Italy has a salary problem has now been a refrain that has been coming back for years. Among the various official sources that have certified it, you can take it the European Commission report on social convergence just published. The document that pointed the finger at the boomerang effect of the inclusion allowance (the one that sent the citizen’s income into the attic) in the fight against poverty. That focus on Italy lays bare the structural fragilities of the labor market, which go beyond the recent employment gains. There we read, for example, that “nominal wage growth was not sufficient to make up for the loss of purchasing power caused by the recent spike in inflation linked to the energy crisis generated by the Russian invasion of Ukraine”.
And shortly after that “Italian wages are structurally low: between 2013 and 2022, growth in nominal wages per employee was 12%, half the European growth (23%). And if we think in terms of purchasing power, here is the spin with Italy going into the red by 2% while the EU grows by 2.5%.
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The Salary Outlook itself, returning to the OECD data, extends the analysis to the medium-long term, highlighting “an Italian wage situation that has not shone”. Real wages since 2000 for Italy, as well as for Spain, “have remained at the same level for the last 23 years (-0.9% and -0.3% respectively). The Lithuania recorded the highest growth, equal to 156% (practically tripling the average salary), while some countries taken as reference and often compared to Italy, namely France and Germany, show growth rates of 21% and 14.8 respectively %”.
The hope of recovery in 2024
If we take only the most recent years, nominal income from employment increased by 4.7% in 2022 and 3.8% in 2023, mainly due to the growth in contractual wages. But real ones decreased by around 2.3% in 2023, after having dropped by as much as 4% in 2022, precisely due to high inflation. It is true that only very few countries such as Iceland, Switzerland or France have managed to keep prices at bay, but now we are relying on the hope of recovery identified for this year, with the projection of an increase of 1.6% in real terms thanks to the slowdown in inflation.
The same European Commission report puts it close the negative dynamics of wages to that of productivity. Between 1995 and 2022, ours was stagnant (+0.4%) against an albeit minimal European push (+1.6%).
Comparison with the cost of living
These structural problems then fall into people’s real lives. And then we need to “weigh” wages against the cost of living. Salary Outlook comes in handy again, which offers a comparison between the indices of net wages – therefore considering the different tax wedges – and the cost of living. “With very few exceptions, it can be stated that, although a relationship between the two indicators appears evident, each country has its own particular dynamics, different from that of our country,” we read in the document.
The graph gives a clear demonstration of this. If we take Switzerland, for example, it is true that it is a country with very high wages compared to Italy (index 162.6), “but if we compare the cost of living index we discover that it is almost double that of Italy (191.8)”. And so, all things considered, it’s behind us. The worst balance – between salaries and costs – is that of Greece.
France, Spain, the United Kingdom and Germany, on the other hand, offer three different dynamics. All of them, however, are positioned to our right, that is, with an advantageous balance sheet. “In France, the two indices are quite aligned, so if net wages are proportionately higher than in Italy, the cost of living is equally higher; in Spain, net salaries slightly lower than ours are more than compensated by a significantly lower cost of living than here; finally, in Germany and the United Kingdom, wages are higher than those of Italian workers, but the cost of living is only slightly higher than ours”.