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 report “OECD Employment Outlook 2023”, explains how “the loss of purchasing power” has “a stronger impact on low-income families, who have a lower ability to coping with rising prices through savings or borrowing”. The organization also proposes some solutions for our country such as more attention from the government on measures for low-income families. Meanwhile, the Italian employment rate remains well below the OECD average (61% against 69.9% in the first quarter of 2023). At the same time, the threat of Artificial Intelligence is advancing and Italy is among the most exposed countries with 30% of Italian workers employed in professions at the highest risk of automation, compared to an OECD average of 27%.
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More in detail, 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 inflation forecasts net of “imported energy goods” (IPCA-NEI), recently significantly revised upwards, suggests that the table minimums will be able to recover part of the lost ground in the coming quarters. However, the significant delays in the renewal of collective agreements (more than 50% of workers are covered by a contract that has expired for more than two years) risk prolonging the loss of purchasing power for many workers”.
Occupation
The labor market recovery after Covid19 was strong, but lost momentum between 2022 and early 2023 in a general context of economic slowdown. However, employment and unemployment have kept pace while job vacancies remain high in most OECD countries, despite some signs of slowing. As of May 2023, the OECD unemployment rate had fallen to 4.8%, a level not seen in decades.
Our country is bringing up the rear: in May 2023, the unemployment rate in Italy fell to 7.6%, two percentage points less than before Covid19, but still significantly above the OECD average of 4.8%. Total employment also increased in the last year, with an increase of 1.7% in May 2023 compared to May 2022. However, the Italian employment rate remains well below the OECD average (61% against 69, 9% in Q1 2023).
According to OECD projections, the labor market will remain broadly stable over the next two years, with total employment growth below 1% in both 2023 and 2024.
Active labor market policies are a key pillar of the National Recovery and Resilience Plan. If the initial objective of the number of jobseekers to be taken on has been achieved, it is now essential to guarantee effective and adequate support in all regions and to strengthen the verification of the training courses carried out.
Risks Artificial Intelligence
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 materialize,” the document reads. According to the analysis, when considering all automation technologies, including AI, the professions at the highest risk of automation remain the least skilled. 30.1% of workers in Italy are employed in professions with a higher risk of automation, compared to an average of 27%.