Wages started to grow again faster than inflation: +3.1% over the six-month period. Here is why

Again according to Istat, this phase of wage recovery in relation to inflation is expected to consolidate in the coming months, in the light of the completion of further renewals in the service sector.

ISTAT also projects year-end estimates: based on the contracts in force at the end of June, the hourly contractual wage index for the entire economy is expected to increase by 2.7 per cent in the six-month period July-December 2024 and by 3 per cent on average in 2024

The recovery, however, takes place against a background that sees Italy lagging behind the most industrialised nations. The 9 July OECD Employment Outlook report contains a focus on Italy, which is the country with the 'largest decline in real wages among the major OECD economies'.

In the first quarter of 2024, real wages were still 6.9 per cent lower than before the pandemic. 'Inflation has been at record levels in the OECD and wages in all countries have taken time to react,' explained Andea Garnero, economist at the Organisation for Economic Cooperation and Development. In Italy, not only has the reaction started late, but it is also decidedly slow. A loss of purchasing power has been created that will take time to be filled'.

According to the OECD report, real wage growth is expected to remain subdued over the next two years in Italy. Nominal wages (compensation per employee) in Italy are expected to increase by 2.7 % in 2024 and 2.5 % in 2025. Although these increases are 'significantly lower than in most other OECD countries', they will still allow some of the lost purchasing power to be regained, as inflation is forecast at 1.1% in 2024 and 2% in 2025.

The OECD report does not represent a thunderbolt, considering that between 1991 and 2022 real wages in Italy remained basically at a standstill with a growth of 1% compared to the 32.5% on average recorded in the OECD area.

But let us return to the ISTAT observatory: the loss of purchasing power of wages is linked to contract renewals. At the end of June there were 34 national collective contracts awaiting renewal and involving about 4.7 million employees, 36% of the total.

Not only that. The average waiting time for renewal in June 2024 is 27.3 months (an improvement since it was 29.2 in June 2023) for employees with an expired contract and 9.8 months when calculated on the total number of employees (it was 15.4 in June 2023).

As a result of major collective agreement renewals, especially in the service sector, the number of private sector employees covered by an expired collective agreement fell to 16.7 per cent in Q1 2024 from 41.9 per cent a year earlier. This helped push negotiated wage growth to 2.8% year-on-year.

Among the national collective contracts that were renewed in July, and thus not considered in the ISTAT observatory, which stops in June, it is worth mentioning the agreement of 23 July last for the renewal affecting 120,000 Poste Italiane workers with an overall increase of 230 euro for the period 2024-2027. Poste Italiane reached an agreement with Slp Cisl, Slc Cgil, Uilposte, Confsal Com, Failp Cisal, Fnc-Ugl Com. The contract had expired at the end of 2023.

Almost at the same time, an agreement was reached for the renewal of the national collective bargaining agreement for ceramics between Confindustria Ceramica and Filctem CGIL, Femca Cisl and Uiltec with an increase of 205 euro on the minimum wage for the 26,000 employees in the sector.

Furthermore, in mid-July, an agreement was reached for the renewal of the national collective contract by Assocalzaturifici and Filctem CGIL, Femca Cisl and Uiltec with an average increase on minimum wages of 191 euro for the 75,000 workers in the sector.

Completing the picture, at the beginning of July, was the renewal of the labour contract for the 36,500 bankers of the cooperative credit system, who will receive an average increase of EUR 435, in addition to EUR 1,200 in arrears under the agreement reached by Federcasse and Fabi, First Cisl, Fisac CGIL, Uilca and Ugl credito.