Minimum wage in Italy, with 8 euros per hour there is no objection to it

Minimum wage in Italy, with 8 euros per hour there is no objection to it
Minimum wage in Italy, with 8 euros per hour there is no objection to it

On Thursday, the European Parliament gave a first positive vote to the Commission’s directive establishing common criteria among member states for the statutory minimum wage (at least 60 per cent of the median wage, below which there are half the workers, and 50 per cent percent of the average salary) and to cover trade union bargaining (the share of employees who have a national collective agreement: at least 80 percent).

It is an important double step towards the construction of a social Europe: it would lead many countries to take steps to raise wages and strengthen the role of trade unions.

In Germany, even more is being done: the new government, led by the Social Democrats, plans to raise the legal minimum wage from 9.35 to 12 euros gross (about 70 percent of the median wage).

What is missing in Italy

Italy is one of the few countries in the European Union that does not yet have a legal minimum wage. Together with us are Cyprus, the Scandinavian countries and Austria: apart from Cyprus, the others have higher collective bargaining coverage rates than ours. We are around 80 per cent, the threshold indicated by the Commission, but with profound differences between companies, territories and sectors, also because we do not yet have a law on trade union representation.

It is therefore appropriate that the law on trade union representation, which has been under discussion for some time, and that on the minimum wage go together, to avoid that in some sectors or regions, where trade unions are weaker, the introduction of a minimum will then lead to a lowering of real wages (towards the minimum, in fact).
We badly need a statutory minimum wage law, and a law done well. In Italy there are about 1.8 million poor workers: almost 12 per cent of the total employed. We are three points above the European average. And it is a figure that has grown considerably over the past 10 years.

A well-calibrated measure could also help improve productivity: thus helping to solve one of our historical evils, which has plagued us for almost thirty years, at the origins of our decline. The German case demonstrates this. There the minimum wage was introduced in 2015 (Merkel III government, allied with the social democrats), at 8.5 euros per hour. At that time, several catastrophic forecasts predicted the loss of up to 900,000 jobs. Today we know that this was not the case.

The empirical evidence tells us that that measure not only did not decrease employment, not only did it increase wages, but also favored productivity growth by promoting the relocation of workers to more efficient and larger firms.

The point, however, is that that minimum wage was set at a very low level: about 55 percent of median income in Germany.
This is the problem. Not the “if”, but the “how much”. Italian politics should discuss this.

What minimum wage?

Here, the median wage is much lower than in Germany: as of 2018 (most recent data available), 12.5 euros gross per hour, compared to 16.8 euros. The 12 euros of the new German government would translate, at Italian values, into the 9 euros gross proposed by the 5 stars: about 70 percent of the median salary. And 10 points above the Commission threshold.

That threshold would instead lead to 7.5 euros gross, which would rise to 7.8 including the average income (the increase is due to the fact that we have greater inequality, which lowers the median wage compared to the average one).

Acting up to 2021, and taking into account that these are minimum thresholds to be calibrated also with respect to poverty, a reasonable level could be 8 euros per hour (always gross, including thirteenth and severance pay).
Economists have shown that at least up to 60 percent of median income the impact on employment is negligible, while in some cases it can be as high as 80 percent. Considering the number of poor jobs and the average income, 8 euros gross is therefore a rather safe measure. About 1 million poor workers would benefit.

On the other hand, of 9 euros gross would benefit in theory about 2 million workers; but if the threshold is too high, we risk a decline in employment and an increase in black, which would nullify the benefits.

The 8 euro threshold, on the other hand, has no serious contraindications: it would help to reduce working poverty and raise average wages, probably also productivity. It should therefore be adopted immediately, together with the law on trade union representation. Just as is happening in Germany, if the experiment is successful, it could then be evaluated to quickly move to 8.5 and therefore to 9 euros.

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