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Italy in Focus: What a Proposed Minimum Wage Could Mean for Your Company

by Enrica Massalin, Global Policy Analyst, FiscalNote Professional Services

Delve into Italy's proposal for a minimum wage, its potential implications for businesses, and the socio-political factors driving the conversation.

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Unlike the majority of European countries, Italy does not have a set minimum wage. While some sectors do have strong collective bargaining, the lack of a minimum wage leaves some workers in large parts of the economy exposed to potential abuse, especially considering the impact that Italy’s high unemployment rate has on wage growth.

The establishment of a contractual minimum would benefit those workers, as well as those currently not covered by collective bargaining. At the same time, raising wages could lead to higher labour costs for companies, likely to be passed on to the final consumer. It could further result in the exclusion of low-skilled workers from the legal labour market, potentially leading to companies struggling to hire manpower, among other effects.

This is all on the balance as a new legislative proposal on a minimum wage was introduced in parliament. Set for further deliberations today, 17 October 2023, this proposal has stimulated divergent views among both opposition and coalition parties over the potential implications for businesses and employees.

Unpacking the Italian Minimum Wage Bill

Bill C. 1275 on the provisions for the Establishment of the Minimum Wage, was introduced in the lower house of parliament on 4 July 2023. Since its introduction, Italy’s political attention has been focused on the proposal, which would institute a minimum gross wage of 9 euros per hour in the country. This threshold value would have to be revised annually by a designated commission.

The bill also proposes a temporary relief for employers. This gradually decreasing aid would be a part of the Budget Law for 2024, designed to offset the employer's burden associated with adjusting wage scales to the new minimum wage.

Bill C. 1275 is not the first legislative attempt to introduce a minimum wage in Italy. The previous legislatures saw the introduction of S. 658, S. 310, and S. 1132, with the momentum continuing during the current government (C. 141, C. 210, C. 216, C. 306, C. 432, and C. 1053).

Why, then, has C. 1275 become one of the most discussed legislative files of the first year of the new government? Why is the proposal holding the political stage and the national debate? And finally, what could be the implications of a minimum wage in Italy? Read on to find out.

Decoding the Debate: What Lies Beneath the Proposed Minimum Wage Law?

To fully understand the significance of this proposal, it is crucial to consider the content of the bill, the current political dynamics in Italian politics, and relevant developments at the European level.

The significance of Bill C.1275 is three-pronged:

  1. It would introduce a statutory minimum wage in Italy

  2. It has emerged as a rare symbol of unity among the various Italian opposition parties, with every party bar one — Italy Alive (IV) — signing the proposal

  3. The political discussion on the minimum wage regained momentum following the introduction to parliament of a bill to transpose Directive (EU) 2022/2041, on adequate minimum wages in the European Union.

At the Crossroads of European Mandates and National Legislation

Directive (EU) 2022/204, formally adopted on 19 October 2022, established the framework for promoting collective bargaining on wage-setting across the EU. Member States are to adopt all necessary measures to comply with the Directive by 15 November 2024, except for countries with a high rate of collective bargaining coverage, such as Italy.

At the national level, the right to fair remuneration is already emphasised in art. 36 of the Constitution, reading that “workers have the right to a remuneration proportional to the quantity and quality of their work and ... sufficient to ensure ... a free and dignified existence.” Additionally, during the government of then PD Secretary Matteo Renzi, the Italian Parliament approved the country’s latest job reform (law No. 83/2014, or Jobs Act), paving the way for a minimum wage.

The Jobs Act conferred on the government the authority to introduce a minimum hourly compensation for those sectors not covered by collective bargaining. It also provided the government with a six-month window to issue the necessary legislative decrees. However, these were never published, once again stalling the discussion.

The Intricacies of Domestic Politics: The Push and Pull of the Minimum Wage Debate in Italy

​​Fast-forward to 15 March 2023, Elly Schlein, the incumbent secretary of the Democratic Party (PD), reignited the minimum wage discussion during the parliamentary Question Time — sessions dedicated to seeking immediate answers. MP Schlein urged Prime Minister Meloni to “immediately approve a minimum wage and an equal leave,” underscoring her party’s support for these initiatives.

However, the PM reiterated her opposition to a minimum wage in Italy, proposing instead to focus on the expansion of collective bargaining. Meloni argued that a legislated minimum wage might inadvertently benefit significant economic conglomerates by enabling them a chance to revise workers' rights downward.

However, the government demonstrated a subtle shift in its stance by withdrawing its amendment aimed at quashing the proposal. Instead, it submitted a suspensive matter, effectively postponing the discussion until 17 October 2023.

Before the summer parliamentary recess, PM Meloni announced her intention to involve the National Council for Economics and Labour (CNEL) to draft an alternative, consensus-driven proposal ahead of the next Budget Law. Falling in line with the governing coalition's perspective, on 4 October 2023, the CNEL issued a first comment on the opposition proposal, which echoed the suggestion of pursuing broader collective bargaining rather than a statutory minimum wage.

What Could a Minimum Wage Mean for Italy?

The topic of instituting a minimum wage in Italy has stirred intense debates among various parties. Critics argue that it could diminish the role of collective bargaining and result in higher labour costs for firms on all wage levels. Additionally, it's viewed by some as a simplistic solution that might not necessarily alleviate the plight of the “working poor”. This is because the minimum wage provisions would likely not extend to cover the less regulated areas of employment.

On the other side of the debate, some argue that it would not only be a measure to protect workers, but also an opportunity to urge business productivity by correcting market failures, as minimum wages in Italy have been decreasing since 1990.

According to a study by the Italian National Institute of Statistics (ISTAT) based on data from 2021, Italian workers earned 3,700 euros less than the European average. At purchasing power parity, their average gross annual wage was 12 per cent lower than the European one. From 2013 to 2022, annual gross wages per employee in Italy grew by only 12 per cent, which is about half of the European average. Meanwhile, studies have shown that minimum wage increases in OECD countries between 2020 and 2023 allowed them to keep pace with rising inflation.

What Could a Minimum Wage in Italy Mean for Companies?

The introduction of a statutory minimum wage is expected to determine higher labour costs for companies, with Small and Medium Enterprises (SMEs) likely to be the most impacted by the measure, increased inflation, and a tightening of the labour market.

With higher salaries increasing expenses, a statutory minimum wage would only be beneficial for companies if accompanied by a net increase in productivity. Otherwise, businesses may react by raising the prices of their products and services, which could impact their competitiveness, particularly in international markets.

Confcommercio, Italy’s largest business association, foresees risks such as wage compression, reduced workers’ purchasing power and consumption, and a negative effect on companies’ economic resilience.

The need to reassess salaries could also lead to outsourcing or delocalisation as businesses scramble to counterbalance increased labour costs in Italy. The government aims to prevent this from happening with a recent initiative that would fine and forfeit benefits for large companies receiving state aid for productive investments if they relocate within the first 10 years.

Conversely, empirical evidence from the U.S., UK, and other developed nations suggests that minimum wage policies have a minor impact on employment while noticeably elevating low-wage earners' income. Similarly, countries such as France, Spain, and the Netherlands have shown that robust collective bargaining and statutory minimum wages don't necessarily conflict.

A legally set minimum wage would also eliminate existing inequalities between self-employed and employed workers, with the former currently not covered by collective bargaining. This could potentially make Italy a more attractive destination for qualified expatriate workers.

Ultimately, this is a big test for the relatively new government of PM Georgia Meloni and could see the first major labour reform in Italy since Renzi’s 2014 Jobs Act. Additionally, the discussion on the bill could represent a testing ground for opposition parties.

Stay Ahead of the Latest Developments

The minimum wage proposal in Italy could have a great impact on the national and regional business environment. As the debates continue, the business community will be asked to evaluate its own practices and strategies. This will certainly entail new legislation and regulations in all of the key industries and sectors in the country.

To follow these processes, organisations will need to have a system in place that focuses on what is truly important to their business. FiscalNote’s global policy analysis and reporting surfaces the insights that matter most to your organisation. Our policy experts act as a force multiplier to identify opportunities, risks, and trends across the globe, and back them up with in-depth analysis.

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