Gabriel

This is eye-opening, Italy’s real wages have stagnated for a generation. OECD data show real gross wages per employee down 1.6% from 1990 to 2024, while the OECD average rose 35%, the US 50.5%, the UK 48.4%, France 33.4% and Germany 32.9%. Joining the euro removed Italy’s long-used Lira devaluation escape valve. With the exchange rate locked, the only options were faster productivity growth or lower relative wages. Italy has largely failed at the first. Labour productivity growth has been near zero since the late 1990s, far below peers. Unit labour costs rose relative to Germany as wages outpaced meagre productivity gains. Industrial production is now roughly 23% below its 2000 level, with sharp losses in textiles, clothing and intermediate goods. Manufacturing remains important, but much lower-end capacity that thrived on periodic devaluations has been squeezed or closed. The result is prolonged internal devaluation, with stagnant or falling real wages containing costs. Some firms upgraded into higher-value niches and exports held up better than volumes, but workers and large parts of industry have stagnated. Without higher productivity, the euro’s rigidities continue to force adjustment onto wages rather than the currency. Will politicians ever admit that introducing the euro in Italy was a huge mistake?