Much is said about working poverty, yet no concrete measures are being adopted to address it. On the contrary, the Meloni government opposes the introduction of a minimum wage, and its most significant economic policy measure has been the abolition of income support for working-age people without dependent family members. Meanwhile, the return of inflation has made workers poorer. Restoring the value of work is essential in a country facing demographic decline. In this issue, we propose several measures to achieve this.
Since the very first issue of eco, which appeared on newsstands a year and a half ago, we have sought to place the issue of poor work and impoverished work at the center of public debate and on the agenda of the government and social partners. We have succeeded in the first part of this goal, but not in the second. Today, wage issues are at the forefront of public discussion and are widely covered in newspapers and on radio and television. Yet nothing has been done in recent months to tackle the problem. Nor are any measures forthcoming. For this reason, we feel it is our duty to return to the subject with new analyses and proposals.
Poor Work
The most significant economic policy measure adopted by the Meloni government in its first three years in office was the abolition of the Citizens’ Income scheme. Working-age individuals (between 18 and 59) without minor children, disabled family members, or people over 60 living with them were deprived of any form of long-term social support. According to Giorgia Meloni, these were “employable people,” who should only be offered temporary support conditional on active job search, because “work is the only way to fight poverty.” Unfortunately, the data do not support this claim.
Often, having a job is not enough to escape poverty. Almost 10% of employees (15% among manual workers) and more than 5% of the self-employed in Italy are poor, in the sense that their household’s average income falls below the poverty line. In other words, they cannot afford the minimum level of spending needed for essential goods. Among employees, the share of the working poor increased by 10% between 2021 and 2024. Among workers aged 20 to 29, the proportion at risk of poverty rose by 50% over the past three years.
International comparisons usually define the working poor as those whose income is below 60% of the median worker’s income—the worker who has half the population earning less and half earning more. As we document, Italy performs poorly even by this standard. The country is above the EU average in terms of relative poverty among workers, and its share of working poor is rising.
Moreover, defining “employability” based on family characteristics is virtually unique worldwide in anti-poverty policies, and for good reason. First, people with minor children are more than employable: they need to work to support their families. Second, among those aged 18 to 59 without dependents, many do not work—despite having no significant income or assets—because of relational, psychological, or mental health problems that distance them from employment. These problems are rarely certified, in order to avoid stigma. Italy, moreover, holds an unenviable record for NEETs—young people who neither work nor study—many of whom suffer from psychological and mental distress. Third, limiting access to anti-poverty measures to those living with people over 60 encourages young people to postpone forming families and having children, instead continuing to live with their parents.
Impoverished Work
Since August 2021, inflation has surged worldwide, a phenomenon not seen since the 1980s. In Italy, consumer prices have risen by 17% over four years, while the so-called “shopping basket” (goods most relevant to low-income households) has increased by 24%. Unlike in other countries, Italian wages have failed to keep pace with inflation and have not recovered lost purchasing power. Today, average real wages are nearly 10% below their 2021 level. Italian workers have become poorer.
How to Restore the Value of Work
A country in demographic decline, losing nearly half a million working-age citizens each year, should make supporting labor incomes an overriding priority, in order to encourage labor market participation and slow the decline in income earners.
It is often argued that working poverty stems from low productivity and can only be addressed through growth-oriented policies. But supporting wages is not incompatible with promoting productivity growth. Everything depends on how purchasing power is protected.
Moreover, the idea that wages can rise only with productivity is based on a textbook assumption that wages equal marginal productivity—that is, the value of what workers produce. But here we are talking about the lowest wages. At those levels, there are many reasons why workers may be paid far less than the value they generate, starting with their weak bargaining power. The measures discussed in this issue of eco, summarized below, aim precisely to counter employers’ excessive bargaining power.
1. The Minimum Wage
Almost all OECD countries (including the United States and the United Kingdom) have a minimum wage to prevent workers with little bargaining power from being paid starvation wages. The Meloni government stubbornly opposes such a measure, arguing that nearly 100% of Italian workers are covered by collective bargaining and therefore already benefit from minimum standards.
In practice, it claims, a minimum wage already exists. But minimum wages are designed to protect relatively small, marginal segments of the workforce. In many countries, they affect no more than 2–3% of employment. Thus, widespread collective bargaining does not eliminate the need for a statutory minimum wage. It is needed precisely for that 2–3% of workers. And the fact that they are mostly young people, women, and immigrants does not mean they matter less.
2. The Representation Law
In reality, many workers in Italy are not adequately covered by collective bargaining. The failure of wages to keep up with inflation shows that the system does not function properly. Contracts are signed with long delays, preventing workers from recovering lost purchasing power.
So-called “pirate contracts,” signed by compliant unions, are proliferating. These often set minimum wages below the poverty line, as documented in the first issue of eco. Recently publicized Esselunga logistics workers—classified as security guards and paid €5.37 per hour for 173 hours per month, earning €650 net—were covered by one such contract.
Although these agreements affect a minority of workers, they depress the entire wage structure, as employers can threaten to abandon negotiations and switch to them.
Reforming collective bargaining is mainly the responsibility of unions and employers’ associations, but the government can help by introducing a representation law. Unions and business groups refuse to measure their representativeness. They provide self-reported data that systematically overstate their real presence, as shown in the first issue of eco. A representation law would encourage unions to strengthen workplace presence and decentralized bargaining, rather than acting mainly as national political actors. It would also reduce the current proliferation of national contracts.
3. Neutralizing Fiscal Drag
When prices rise and taxes are progressive, many people end up paying more taxes even if their real purchasing power has not increased, simply because their nominal wages rise. For this reason, all Eurozone countries except Cyprus, Greece, Croatia, Hungary, and Italy have indexed tax brackets to inflation.
Italy itself did so in the 1980s during periods of high inflation. Notably, the five countries that failed to index brackets all have large informal sectors. The impression is that their governments use inflation to raise revenue, not by fighting tax evasion, but by taxing compliant taxpayers more heavily.
In recent years, the Italian government has reduced the tax wedge, partly offsetting fiscal drag for low wages. However, workers earning over €35,000 gross annually (about €2,300 net per month) have suffered both delayed contract renewals and higher taxation. Some moved into higher tax brackets; others, though poorer, did not benefit from lower rates.
This helps explain why Italy’s tax burden rose by 3%, from 41.4% to 42.6%, generating €26 billion in additional revenue. There has been no real tax cut on labor, contrary to government claims—at most, a partial refund of what was taken.
According to the Parliamentary Budget Office, neutralizing fiscal drag at 2% inflation (the ECB target) would cost around €3 billion. We should do it.
4. Helping Those Below the Tax Threshold
No tax cut can help those who do not pay taxes because their incomes fall below the taxable threshold. People aged 18 to 59 who lost their Citizens’ Income support and failed to find stable employment must be helped.
No country in the world excludes working-age people from last-resort social assistance solely because they have no dependents. We are not calling for the reinstatement of the Citizens’ Income, which did not sufficiently encourage job search. But support must be provided, as in all other EU countries (see the “Sovereigns in Europe” column).
These people cannot be abandoned. This is a matter of fairness, social cohesion, and public order.
P.S. The next issue of eco, on newsstands on December 13, will be dedicated to irresponsible corporations.
