Young graduates do not accept jobs below a monthly salary of 1250 euros (net of taxes and charges). How can you blame them? It is no wonder that so many young graduates emigrate abroad. The problem of the low level of Italian wages has been debated for some time, both in newspapers and at an academic level, which becomes even more serious when referring to the market entry salary. What are the reasons for such serious wage stagnation? There are many explanations, but the most convincing concerns low productivity. Italy finds itself trapped in the “Balassa-Samuelson” effect, named after the economists who first highlighted this phenomenon: the country with high productivity in the export goods sector benefits from a higher level of wages, even for sectors not exposed to international competition. In other words, if productivity is higher in country A than in country B, not only will workers in exporting sectors enjoy higher wages than in country B, but also those who are employed in sectors that produce “non-tradable” goods. , or services. This explains why doctors, nurses, professors (university and otherwise), etc. they earn much less than in the rest of Europe.
Labor productivity depends on many factors: taxation, pension costs, the degree of efficiency of production processes and the degree of technological innovation. Italy’s productive specialization has gradually evolved towards sectors with a low rate of technological innovation. There are exceptions to this, but in relative terms on total exports, they weigh less. Furthermore, for some time now, many more companies have been exporting semi-finished products to the Euro area, unlike in the past when the product cycle entirely took place in Italy. Another explanation, however, is to be found in collective bargaining.
National employment contracts cover a very significant part of the salary and allow little freedom of adjustment for the variable part, which also takes into account territorial differences.
Collective bargaining is no stranger to wage compression, and creates significant inequalities within the country, generating an inverse link between real wages and productivity. The North-South productivity gap, combined with collective bargaining, has significantly favored wage compression, much more than in Germany, for example, with regard to the East-West Germany gap. If the nominal wage is constrained by rigid national contracts, the differences between real wages and housing costs turn out to be very marked between areas with different degrees of productivity. In Italy, in fact, there is a negative link between real wages and local productivity, which should never happen: given the equal nominal wage at the national level, it is more convenient to live where the cost of living is lower (in the South), but the probability of having a job is higher where productivity (and the cost of living, alas) are higher (in the North). And from here we see that the real wage is inversely related to productivity: if the nominal wage cannot follow productivity, in the North the real wage is lower than in the South.
The inclusion of a greater degree of adjustments in the nominal wage in function
of the cost of living and local productivity, would bring the real wage more in line with productivity, freeing the system from wage stagnation. Of course it’s not the only possible solution, but it’s a start.
