Italian Wages Stagnant, More Unequal Since 1990: Budget Office

Wages for private sector employees in Italy have stagnated and grown more unequal since 1990, with real wages declining by an average of 6.6%, according to a note from the Parliamentary Budget Office (UPB). The report highlights that while income tax (Irpef) reforms have provided some relief to low and middle incomes, their capacity to further support wages is limited, suggesting that direct spending measures would be more effective.

The UPB's analysis indicates a significant increase in wage dispersion, partly attributed to the rise in part-time employment and the growing segmentation of the labor market based on sector, contract type, and qualifications. The report acknowledges that Irpef has played an increasing role in compensating for the dispersion of gross labor income. However, it cautions that a direct causal link between wage dynamics and tax reforms cannot be definitively established, as fiscal support for lower incomes might have influenced negotiation outcomes.

The current distributive model, which has strengthened redistribution primarily by reducing taxes on low and middle incomes and increasing the burden on higher incomes, faces limitations. This approach has made the system more susceptible to fiscal drag and created disparities between employees and other taxpayer categories. While these interventions have mitigated the growing dispersion of gross incomes, they do not address the structural causes of wage stagnation and job precarity.

To enhance redistribution further, the UPB suggests complementary interventions. These include revising preferential tax regimes that reduce the ordinary tax base, broadening the tax base by combating tax evasion, and implementing structural policies to counter wage stagnation. Income support measures operating through spending could also be considered. The UPB points out that selective progressivity, which treats certain taxpayer categories like employees differently from self-employed individuals and pensioners, raises horizontal equity concerns. The effective tax burden can vary significantly for individuals with the same total income, depending on the type of income received, due to both special tax regimes and specific support measures for employees.

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A parità di reddito complessivo, infatti, il prelievo effettivo differisce sensibilmente in funzione della tipologia di reddito percepito