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ECONOMY

Italy records biggest wage drop in the EU amid pandemic downturn

Italy's comparatively low pre-pandemic salaries have now fallen even further, a new report revealed.

Wages have plummeted in Italy more than any other EU country during 2020.
Wages fell in Italy by more than any other EU country in 2020. Photo: Nighthawk Shoots on Unsplash

The average salary of a full-time employee in Italy dropped more than any other EU country amid the pandemic-induced economic downturn, according to an Italian research institute.

That means that, on average, workers in Italy took home 1,724 euros less in 2020 compared to the year before, marking an overall drop of 5.8 percent in wages.

The EU salary average also declined, but much less steeply, recording a drop of 1.2 percent. The eurozone instead noted a 1.6 percent reduction in earnings.

READ ALSO: Italy loses almost one million jobs in a year to the coronavirus crisis

The report highlighted Italy’s large number of workers on part-time and short-term contracts and noted how this impacts the country economically.

There are currently around 3 million temporary workers and 2.7 million ‘involuntary’ part-timers, which means those who work part-time not by choice, the data showed.

The percentage of involuntary part-time workers in Italy is the highest at European level, with two-thirds (66.2 percent) of the total number of workers in Italy employed in this way. This is much higher than the eurozone average of 24.7 percent.

Photo: Vincenzo PINTO/AFP

Overall, the number of people employed part time in Italy and the number of hours worked is around the European average.

The study pointed out that short-term contracts should, in theory, be a way to fill gaps temporarily but are in many cases often assigned to those with “low qualifications”.

Italian part-time wages are also more than 10 percent lower than the average in the EU.

Even before the economic slump caused by the pandemic, in Italy in 2019, around five million people earned under 10,000 euros gross per year, the study found.

SURVEY: Foreign residents rank Italy one of ‘worst countries in world’ for finances and working abroad

The institute also calculated what it claims are the ‘true’ figures of unemployment in Italy, which for 2020 stands at 14.5 percent compared to the official figure of 9.2 percent.

That corresponds to almost four million more unemployed people than the recorded 2.3 million, making the number of people out of work in Italy at over six million, according to the research firm’s estimates.

“It is clear that the issue of work concerns the quantity of employment but also many aspects of its quality,” the organisation’s president, Fulvio Fammoni, told reporters.

Referring to the government’s plans for the 2022 Budget, he indicated that the question should be how much these funds solve Italy’s fundamental problems, rather than simply how to use them up.

Their findings also looked at the work market in the previous decade, which revealed that between 2010 and 2019, average earnings in Germany increased by 5,430 euros per year compared to Italy’s decline of 596 euros annually.

EXPLAINED: What changes in Italy’s new budget?

Italy also records some of the longest working hours, while productivity lags behind the EU average – including behind other major economies such as Germany, France and Spain.

Foreign nationals who move to Italy have also reported problems with pay and working conditions, with those moving to Italy less satisfied with their financial situation than in any other country, a 2021 survey found.

A third of foreign residents in Italy said their disposable household income is not enough to cover their expenses.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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