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The Italian Bust: Assessing Italian Sluggish Economy

Italy is the only country in the Eurozone where wages have fallen since 1990. The Organisation for Economic Cooperation and Development (OECD) reports a decrease in wages of 2.9%. This number seems even more shocking compared to other countries' wage growth. For example, between 1990 and 2020, Spain had a pay rise of 6%, and the Baltic States had over 200% growth.

A close-up view lets us point out the many economic and social difficulties that made Italy the most sluggish of the 19-eurozone economies since euro's launch in 1999. The so-called salary issue has been deeply linked to Italian history and economic choices since the 80s. Perhaps the major problem Italy has to take up is the country's inability to generate steady, well-paid jobs. Most of the jobs come with temporary, low-paid contracts. Moreover, to this point, many workers are paid under the table. This means no taxes, no contributions, and no rights. According to the Organisation Confartigianato, Italy can count on 3.2 million illegal workers. This vast underground world causes colossal damage to small businesses, state coffers, and the safety of the often exploited workers.

Furthermore, Italy is one of the six European Union countries without a statutory minimum wage. Despite the EU's June approval of a directive dictating common rules for minimum wages, labor abuses, and in-work poverty, the country has not yet solved one of its most urgent issues. Indeed, Italy has one of the highest proportions of "working poor," with wages below 60% of the average.

In the first quarter of the year 2022, European countries reacted to the consumer prices surging with rises in wages. Nonetheless, Italy was an exception to the overall scenario, considering there was only a 0.6% wage rise. The number seems ridiculous compared to Germany's wage growth of 4%.

Some of the most prominent Italian parties – in particular, the Five Star Movement and the Democratic Party – have stressed the urgency of the matter. On the other hand, the Italian right, several businesses, and trade unions opposed a statutory minimum wage. These matters will become more and more relevant during the current electoral campaign that will lead to the national elections on 25 September 2022.

As for unemployment, Italy has the EU's second-to-last employment. It can do even worse when it comes to young people. According to Eurostat, in 2020, Italy was the country with the lowest youth employment, coming even after Greece.

What is the reason behind major Italian economic problems? Economists hold that Italy reacted incorrectly to globalisation. The country tried to compete with emerging markets by lowering costs, causing underinvestment, low productivity, and weak economic expansion. This is why Italy needs to go for an alternative growth model, encouraging higher-quality production investments, especially in education and technology.  


Edited by: Ayona Mitra 

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