From contracts to inflation: why Italy is improving in household incomes

In the first quarter of 2024, real per capita household income in Italy grew by 3.4%, marking the strongest increase among all G7 economies. This result is well above the OECD average (+0.9 per cent), driven by an increase in income from employment and social transfers in kind (thus reversing the decline recorded in the last quarter of 2023, -0.4 per cent, against growth in OECD countries of 0.5 per cent).

In short, more employment, lower inflation (compared to the flare-ups of the past few years), the first interventions on the Irpef tax, a greater propensity to save on the part of families, the renewal of the Ccnl, the reinforced wedge cut (up to 6/7 points, in force until December), and the decontribution for working mothers, seem to have contributed to the good Italian income figures for the beginning of the year, highlighted yesterday by the OECD.

That confirms the picture taken at the beginning of July by Istat, with a recovery in household purchasing power after some setbacks in previous quarters. In nominal terms, in fact, households' disposable income increased by 3.5% compared to the previous quarter, while final consumption expenditure grew by 0.5%. The propensity of households to save increased by 2.6 percentage points compared to the previous quarter, to 9.5 per cent, our Statistical Office reported.

There is also a role for services and goods provided by the state not in cash but in the form of public benefits, such as loanable medicines or the health service. "Italy grows and it does so through work. The OECD data confirm the goodness of this government's choices,' stressed Labour Minister Marina Calderone.

However, the trend is mixed: real household income per capita recorded by the OECD in 2022 fell by 0.8% in the first quarter, rose by 0.3% and 0.1% in the second and third quarters, and fell by -3.5% in the last three months; last year, the OECD recorded a rebound of 2.2% in the first quarter and a decline of 0.5% in the second quarter, the third quarter regained the plus sign with growth of 0.9%, the fourth quarter was down by 0.5%. The scenario remains not without uncertainties. The OECD itself, last month, recorded for Italy (third last, only Czechia and Sweden did worse) a -6.9% drop in solar wages compared to the pre-Covid period (Q1 2024 compared to Q4 2019).