MNI: Italian Pay Rises Seen Moderate By Unions, Business

Wages negotiations in Italy over the next few months should lead to pay rises averaging between 1.5%-2.5%, significantly below inflation and lower than elsewhere in Europe, officials at business lobbies and unions told MNI.

Unions accept that recent high inflation has been largely driven by surging energy prices which are now reversing, while structural characteristics of Italy’s labour market are also restraining pay claims, Italian General Confederation of Labour (CGIL) Deputy Secretary General Gianna Fracassi said.

Unions are focussing on trying to improve pay for the 50% of Italy’s workforce earning no more than about EUR20,000-22,000 a year, said Fracassi, who called on the government to extend moves to reduce employers’ contributions for lower-paid workers and to alter regulations to promote more permanent labour contracts.

Italy’s core IPCA harmonised inflation index, which excludes energy if not food and is used as a benchmark for salary negotiations is “no longer useful” to measure the cost of living, Fracassi said.

The head of the studies centre at business lobby Confcommercio Mariano Bella was also confident a wage-price spiral will be averted thanks to moderate pay requests from employees in a labour market where there is still more supply than demand.

GREATER PAY PRESSURE ELSEWHERE

This will be good news for the European Central Bank, which is monitoring wage increases across the eurozone, with some countries seeing bigger jumps than others. (See MNI INTERVIEW: German Wages, Gov't Spending, To Fuel Inflation).

Italian inflation will drop quickly in the spring, with core inflation retracing its gains from higher energy prices more quickly than widely anticipated, said Confcommercio’s Bella.

“We will see the real picture of inflation in the spring,” he said.

Nonetheless, despite moderate wage pressure, Italian companies are reporting difficulties in hiring enough high-skilled workers. Skills shortages are made worse by a lack of mobility across regions and are particularly acute in the south of the country, where unemployment is higher and services wages are low, .

This problem is set to get worse, Bella said, noting that the number of people aged between 16 and 50 fell by 3.5 million between 2012 and 2022.

“We will soon see a shrinking labour market, with a practically unchanged employment rate,” he added.

Negotiations for new contracts for two million retail workers and for the tourism sector, two less well-paid sectors with interlinkages throughout the economy, will be essential for setting the tone for wage increases around the country over the next few months, Confcommercio’s head of Labour and Relations with Unions, Guido Lazzarelli, told MNI.

Moves by the country’s governing right-wing coalition to cut taxes on labour, which it has already temporarily reduced for employees on less than EUR35,000 a year, and to be flexible in its interpretation of European minimum wage directives will also help employers, Lazzarelli said. CGIL’s Fracassi, though, said she was confident that the directive would boost pay in a country currently without minimum wage regulations.