Why Italy’s Salaries Lag Behind: Causes and Consequences

A recent analysis on net average wages, adjusted for purchasing power, highlights that Italy ranks last among major Western countries, trailing behind France, Germany, and Spain.

The data, referring to 2023, utilize the Purchasing Power Standard (PPS)—a standardized currency that allows for comparisons of purchasing power across nations. In Italy, the net average salary for a single person without children is approximately 24,000 PPS, whereas the European Union average is 27,500 PPS, about 15% higher than in Italy.

Switzerland tops the rankings with over 47,000 PPS, followed by the Netherlands, Norway, Luxembourg, Austria, and Germany, with the latter reaching nearly 35,000 PPS. Specifically, the average German salary surpasses the Italian one by 45%, the French by 18%, and the Spanish by 2%.

This data underscores how, among Europe’s major economies, Italy has the lowest wages when adjusted for the cost of living.

The Tax System and Wage Structure Issues

This situation results from years of tax and wage policies that have led to a complex and inefficient taxation system for work incomes. Over time, various tax bonuses and deductions have created anomalies—such as cases where an increase in gross salary leads to a decrease in net earnings.

Moreover, mid-to-high income brackets (above €40,000 gross per year, approximately €2,100 net per month) have often been overlooked in tax reforms. This has contributed to stagnation—or even a decline—of workers' purchasing power.

A Long-Term Decline in Real Wages

Another alarming aspect is the long-term decline in real wages. According to OECD data, Italy is the only EU country where real wages have fallen since 1990. In 2022 alone, real wages in Italy dropped by 7.3% compared to the previous year, due to rising inflation not being matched by adequate salary increases.

This negative trend starkly contrasts with other European nations, where real wages have seen significant growth over the same period.

Causes and Possible Solutions

The causes of this wage stagnation are multifaceted, including:

• Low productivity growth, which limits salary increases.
• An economic structure dominated by small and medium-sized enterprises (SMEs) with limited financial capacity to raise wages.
• High tax pressure on labor income, reducing workers' net earnings.

To reverse this trend, an integrated approach is needed, combining targeted tax reforms, productivity growth incentives, and policies to strengthen workers' purchasing power—while ensuring the economic sustainability of businesses.

Without structural changes, Italy risks falling further behind its European counterparts, with long-term consequences for its economy and workforce.

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