I tell you what the real wage issue is in Italy

I tell you what the real wage issue is in Italy

Claudio Negro's analysis of the Kuliscioff Foundation

The wage debate is on fire! In reality, as often happens in this country that loves staging (on talk shows it matters that you argue, not what you argue about) the question is not focused in order to identify the problem and hypothesize solutions, but it becomes the object of controversy for the show. We have already written about Italian wages, the reason for their asphyxiated dynamics, the problems of their legal genesis: it is appropriate to do it again, and we will do it as soon as possible. At the moment, however, the problem on the agenda is that of the revaluation of Italian wages to protect purchasing power against inflation, and that of the introduction of the legal minimum wage based on upcoming EU resolutions.

These are two completely distinct problems, even though both ultimately concern a hypothesis of a wage increase. However, they have no causal or intervention connection between them.

The adjustment of contractual wages is obviously a real need. Less evident seems to be the way to achieve it. Let's take a moment from what appears to be natural, that is, collective bargaining. Net of the more traditionally open negotiating tables inspired by co-determination, such as that of chemists, a big problem arises: the interconfederal agreements that regulate the negotiation of the National Collective Labor Agreement provide, as we know, that as a reference to the increase in the cost of living use the European inflation index adjusted for energy costs. A shared choice to prevent inflation generated abroad, and therefore not controllable by us, from disrupting the Italian wage system. But between saying and doing… In fact, as soon as the conditions envisaged by the agreement are determined (increase in energy costs, which are generated outside of Italy) Landini and Bombardieri announce that the agreement is no longer valid. You can see that they signed it under the illusion of the future, or perhaps (as an old companion of certain agreements said) with the fox in the armpit.

So it seems to the holders of collective bargaining that the invoked increase in wages must take place in other ways, and the privileged and shared way seems to be to take over the increases to public spending. Confindustria urges to cut the contributory tax wedge; Landini is quicker and is content to point out that the resources to generate the increases will have to come from substantially compensatory taxation and retaliation of assets, large fortunes, increased profits, financial income. Leaving aside for a moment the question of how to finance the increase in public spending that a decisive cut in taxation on labor would cause, it is important to concretely understand how the cut could take place. The most popular hypothesis is the cut in IRPEF. However, as it is known ( Previdenzial Itineraries – IRPEF Observatory) 8,250,000 employees (38% of the total) declares taxable at € 15,000 per year, which thanks to the Renzi Bonus ensures that they pay nothing of Irpef, indeed in many cases have negative tax. Between € 15,000 and € 20,000 in taxable income, there are 3 million employees, who pay an average tax of € 1,260 per year: a little less than € 100 per month, which has been further filed with the hateful Draghi reform. So for 52% of employees there are no taxes to cut or very modest amounts. To obtain concrete results, the tax cut should concern income from € 20,000 upwards, ie essentially repeating the tax rate reform measure so criticized only a few months ago.

For a more tangible and effective result for all employees, it would be to cut contributions, with an advantage of approximately 8.5% (net of the relief already in effect for 2022) on the gross salary. It would be necessary, but it is a technicality, to sterilize the increase in the personal income tax generated by the higher gross. That said, there is no doubt that an increase of more than 8% in the net wage would be a very concrete measure: the downside is a roughly equivalent increase in the requirement for social security expenditure. Or, alternatively, a reduction in pension expenditure (not future, but the current one, because the contributions pay the current pensions). It can be done? In Germany, social security contributions are 18.6%, divided equally between employer and employee, but the replacement rate (ie the pension received as a percentage of gross salary) is 45%, compared to 75% in Italy. Would we be willing to accept such a solution? Obviously not, in a country where the pension seems to be at the top of the expectations of the workers and of the priorities of the union.
The intermediate bodies tend to get by elegantly, putting the amount of the missing contributions (and to be actually paid, not to be "marked") at the expense of public expenditure. What is the bill? The incoming contributions for compulsory social security are (2020 data) almost 200 billion. With the elimination of contributions to be paid by employees, approximately 12-14 billion would be missing (assuming that the self-employed continue to pay), which would add up to the 2670 already recognized. Little, you will say, but since they are needed "immediately" they imply immediate issuance of government debt securities or equally rapid taxes. Other than budget variance ..!
The hypothesis that the increase in wages can be produced by collective bargaining seems to be difficult for the social partners, although they are normally so jealous of the negotiating prerogatives!

The other piece of wage debate concerns the introduction of the statutory minimum wage. In the Italian reality it is a measure intended essentially for irregular work. As stated by the Employers' Associations, the minimum hourly contractual agreements, including the additional elements, therefore the actual wages, are around € 10. Nothing to do with the 3 or 4 Euros reported by the media. Pirate contracts exist but, as recently certified by Cnel, they do not apply to more than 2% of regular workers. The problem then is that of "irregular" workers. To understand, the legal minimum wage does not solve the problem of part timers or casual workers, who although paid regularly have low wages due to the few hours worked. Least of all that of interns, who, ope legis, are entitled to a simple reimbursement of expenses. Now is not the time to talk about these employment relationships, except to emphasize that the establishment of a minimum hourly wage does not mean anything for them. In a very useful research, Natale Forlani estimates that the subordinate workers are "submerged" at 2,500,000: for them a minimum wage obligation could have a positive effect, provided that the perceived black does not equal or is even higher than the regular net. The effectiveness of the provision will then depend on the inspection skills that the State will be able to deploy.

The decisive factor could instead be in that “gray” area which can be traced back to job offers at 3 or 4 Euro per hour, which often imply further black pay. However, it would not resolve the fact, denounced with great emphasis, that these job offers, regardless of salary, do not provide for regular rest periods, holidays, etc. The point is that this is a matter regulated by the Collective Agreements: at the state of the art, the ope legis introduction of a minimum wage does not oblige employers to comply with the other regulations provided for by the Collective Agreements, whose erga omnes effectiveness is part of a different discourse, which also implies choices to which the trade union is held.

In essence, the introduction of a statutory minimum wage would be useful to at least partially re-emerge undeclared and "gray" work, but would have no effect on the wages of workers with regular contracts. For which, despite the trend that seems to attribute mainly to the legislator the ability to intervene on wages, we believe that the logical and sustainable path is that of bargaining, perhaps bringing it closer to the place where wealth is created and perhaps supporting it, not replacing it, with interventions tax.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/vi-dico-qual-e-la-vera-questione-salariale-in-italia/ on Sun, 12 Jun 2022 05:43:09 +0000.