Italy’s vulnerabilities, from the underground economy to the working poor, and the answers to be found in the development of quality industry
Employment in Italy is growing, exceeding the ceiling of 24 million people with a job that is more or less stable, more or less in line with their needs and expectations. The unemployment rate is just 6.2%, the lowest it has been since at least 2009. All in all, the financial markets are not showing any particular concern about the resilience of the Italian system and public accounts, without increasing the spread. And the Meloni government is right to see the economic glass as half full, even if the chances of achieving the 1% GDP growth predicted by Palazzo Chigi at the end of the year (the Bank of Italy reasonably estimates +0.8%) are diminishing.
“Paradoxes (and records) of employment”, writes Ferruccio de Bortoli in the Corriere della Sera (20 October), highlighting the “anxieties” linked to a situation in which the Italian employment rate is 62.3%, while in the other major EU countries it is around 80%, and young people and women remain largely outside the labour market. Low wages that have not kept pace with inflation in recent years. Growing dissatisfaction with the companies and public administrations in which people are employed. Labour shortages, exacerbated by the prospect of a “demographic winter”. And a general climate that makes one fear that the dynamism that Italy, more than other European regions, has shown in the post-Covid period may be waning.
However, if we look closely at the news of recent weeks, we can see that, beyond the economic trend, there are elements of fragility that must be taken into account, precisely in order to be able to design economic and social policies capable of revitalising the economy and triggering a more solid and lasting recovery. And those elements are both the growing weight of the underground and illegal economy and the increase in poverty, including among workers.
The President of the Republic, Sergio Mattarella, has sounded the alarm. Speaking at the Stars of Merit ceremony for those who have distinguished themselves in their work (Il Sole24Ore, 18 October), he said that “Pockets of low wages tear the social fabric apart”. It is not just an economic issue. But a wound in the body of the country, with serious consequences for the closeness of relations and the very stability of the national community. Social cohesion is fundamental to democracy. And without this cohesion, the possibility of building robust hypotheses for the future and sustainable development for new generations is also at risk. A solid democracy is one that manages to hold together political, social and civil liberties, the market economy and thus enterprise and economic growth, welfare and widespread prosperity. Otherwise, the crisis will worsen.
President Mattarella therefore stressed, “It is true that the growth figures are comforting. But it is also true that employment is fragmented, between an upper end where quality and professionalism translate into good pay, and a lower end where pay is inadequate, fuelled also by involuntary part-time work and precariousness. This is a worrying tear in the social fabric.”
Let’s look at the data, then. In Italy, according to ISTAT (2023 data), there are 5.7 million people in absolute poverty (4.1 million ten years ago) and 2.2 million households, with a rate of 8.4%, up from 6.2% in 2014. Poverty is also a problem for families where the primary breadwinner is a worker: their rate rose to 16.5% from 14.7% in 2022. Southern Italy is the worst affected area. It is true that employment is rising, as Istat repeatedly tells us, but inflation has wiped out the positive impact of wages on spending power: a decrease of 1.5% in real terms in equivalent expenditure. And more generally, real wages have lost 10% since 2019 (Inps data, Il Sole24Ore 18 October).
There is another factor to consider: the incidence of absolute poverty among minors, which is 13.8% and affects 1.3 million children and young people. These generations see their future in jeopardy and risk being marginalised from economic development and civic life, with dramatic discrimination in education, health and quality of life. A fundamental departure from the constitutional requirement of equality of opportunity for citizens.
These conditions are greatly affected by the existence of a “black”, underground or illegal economy: poor jobs, low security, high precariousness, lack of rights, poor prospects. This is the second vulnerability. This is not sufficiently addressed (the historical tendency towards social security and tax amnesties is certainly not conducive to economic development and transparency).
“The underground and illegal economy: record high at 202 billion (+9.6%)”, wrote Carlo Marroni in Sole24Ore (19 October). The underground economy is worth 182 billion, and the illegal economy, the basis for the power and violence of the ‘ndrangheta, the Camorra, the Mafia and the various other criminal organisations, is worth almost 20 billion. The data comes from Istat and confirms that this “black” economy is worth 10% of GDP. A growing imbalance in economic and social equilibrium, another landmine that seriously threatens the country’s social cohesion and severely limits its potential for sustainable environmental and social development.
What should be the political response to that? In addition to the indispensable measures to alleviate extreme poverty and the initiatives to combat undeclared work and tax evasion (funds are being recovered, but little and slowly, with a tax system that continues to burden regular employment and businesses), what is needed is a radical, far-reaching economic and fiscal policy that promotes growth and the modernisation of the country. And a Europe-wide industrial policy that encourages investment in the sectors with the most future. Starting with the quality industry. And therefore raise wages by linking them to productivity (and this would require favourable taxation).
As an indication, it is worth reading the words of Mario Carraro, one of Italy’s best and most far-sighted entrepreneurs, 95 years old, with a quality metal business in Campodarsego (Padua) and a great passion for culture: “Love for the factory and constant reflection give birth to the future,” he said in an interview with Paolo Bricco (Il Sole24Ore, 20 October). Research, productivity, international outlook, reform policy, focus on innovation and the energies of the younger generation.
Indeed, the country’s balanced growth depends on its best industry. With the promotion and fiscal support of a “Made in Italy” that does not only focus on the well-known “typical” (clothing, furniture and agri-foodstuffs), but also on the most competitive and productive sectors: mechatronics and robotics, chemicals and pharmaceuticals, shipbuilding and aerospace, rubber and automotive components, i.e. all those industrial productions that are the pillar of those 630 billion exports that keep the country’s system on its feet and feed a long line of innovative services for businesses. Quality, innovation and development, in short. Wages and welfare. Industry is also the cornerstone of the social cohesion that President Mattarella and the most responsible Italians rightly hold dear.
Employment in Italy is growing, exceeding the ceiling of 24 million people with a job that is more or less stable, more or less in line with their needs and expectations. The unemployment rate is just 6.2%, the lowest it has been since at least 2009. All in all, the financial markets are not showing any particular concern about the resilience of the Italian system and public accounts, without increasing the spread. And the Meloni government is right to see the economic glass as half full, even if the chances of achieving the 1% GDP growth predicted by Palazzo Chigi at the end of the year (the Bank of Italy reasonably estimates +0.8%) are diminishing.
“Paradoxes (and records) of employment”, writes Ferruccio de Bortoli in the Corriere della Sera (20 October), highlighting the “anxieties” linked to a situation in which the Italian employment rate is 62.3%, while in the other major EU countries it is around 80%, and young people and women remain largely outside the labour market. Low wages that have not kept pace with inflation in recent years. Growing dissatisfaction with the companies and public administrations in which people are employed. Labour shortages, exacerbated by the prospect of a “demographic winter”. And a general climate that makes one fear that the dynamism that Italy, more than other European regions, has shown in the post-Covid period may be waning.
However, if we look closely at the news of recent weeks, we can see that, beyond the economic trend, there are elements of fragility that must be taken into account, precisely in order to be able to design economic and social policies capable of revitalising the economy and triggering a more solid and lasting recovery. And those elements are both the growing weight of the underground and illegal economy and the increase in poverty, including among workers.
The President of the Republic, Sergio Mattarella, has sounded the alarm. Speaking at the Stars of Merit ceremony for those who have distinguished themselves in their work (Il Sole24Ore, 18 October), he said that “Pockets of low wages tear the social fabric apart”. It is not just an economic issue. But a wound in the body of the country, with serious consequences for the closeness of relations and the very stability of the national community. Social cohesion is fundamental to democracy. And without this cohesion, the possibility of building robust hypotheses for the future and sustainable development for new generations is also at risk. A solid democracy is one that manages to hold together political, social and civil liberties, the market economy and thus enterprise and economic growth, welfare and widespread prosperity. Otherwise, the crisis will worsen.
President Mattarella therefore stressed, “It is true that the growth figures are comforting. But it is also true that employment is fragmented, between an upper end where quality and professionalism translate into good pay, and a lower end where pay is inadequate, fuelled also by involuntary part-time work and precariousness. This is a worrying tear in the social fabric.”
Let’s look at the data, then. In Italy, according to ISTAT (2023 data), there are 5.7 million people in absolute poverty (4.1 million ten years ago) and 2.2 million households, with a rate of 8.4%, up from 6.2% in 2014. Poverty is also a problem for families where the primary breadwinner is a worker: their rate rose to 16.5% from 14.7% in 2022. Southern Italy is the worst affected area. It is true that employment is rising, as Istat repeatedly tells us, but inflation has wiped out the positive impact of wages on spending power: a decrease of 1.5% in real terms in equivalent expenditure. And more generally, real wages have lost 10% since 2019 (Inps data, Il Sole24Ore 18 October).
There is another factor to consider: the incidence of absolute poverty among minors, which is 13.8% and affects 1.3 million children and young people. These generations see their future in jeopardy and risk being marginalised from economic development and civic life, with dramatic discrimination in education, health and quality of life. A fundamental departure from the constitutional requirement of equality of opportunity for citizens.
These conditions are greatly affected by the existence of a “black”, underground or illegal economy: poor jobs, low security, high precariousness, lack of rights, poor prospects. This is the second vulnerability. This is not sufficiently addressed (the historical tendency towards social security and tax amnesties is certainly not conducive to economic development and transparency).
“The underground and illegal economy: record high at 202 billion (+9.6%)”, wrote Carlo Marroni in Sole24Ore (19 October). The underground economy is worth 182 billion, and the illegal economy, the basis for the power and violence of the ‘ndrangheta, the Camorra, the Mafia and the various other criminal organisations, is worth almost 20 billion. The data comes from Istat and confirms that this “black” economy is worth 10% of GDP. A growing imbalance in economic and social equilibrium, another landmine that seriously threatens the country’s social cohesion and severely limits its potential for sustainable environmental and social development.
What should be the political response to that? In addition to the indispensable measures to alleviate extreme poverty and the initiatives to combat undeclared work and tax evasion (funds are being recovered, but little and slowly, with a tax system that continues to burden regular employment and businesses), what is needed is a radical, far-reaching economic and fiscal policy that promotes growth and the modernisation of the country. And a Europe-wide industrial policy that encourages investment in the sectors with the most future. Starting with the quality industry. And therefore raise wages by linking them to productivity (and this would require favourable taxation).
As an indication, it is worth reading the words of Mario Carraro, one of Italy’s best and most far-sighted entrepreneurs, 95 years old, with a quality metal business in Campodarsego (Padua) and a great passion for culture: “Love for the factory and constant reflection give birth to the future,” he said in an interview with Paolo Bricco (Il Sole24Ore, 20 October). Research, productivity, international outlook, reform policy, focus on innovation and the energies of the younger generation.
Indeed, the country’s balanced growth depends on its best industry. With the promotion and fiscal support of a “Made in Italy” that does not only focus on the well-known “typical” (clothing, furniture and agri-foodstuffs), but also on the most competitive and productive sectors: mechatronics and robotics, chemicals and pharmaceuticals, shipbuilding and aerospace, rubber and automotive components, i.e. all those industrial productions that are the pillar of those 630 billion exports that keep the country’s system on its feet and feed a long line of innovative services for businesses. Quality, innovation and development, in short. Wages and welfare. Industry is also the cornerstone of the social cohesion that President Mattarella and the most responsible Italians rightly hold dear.