Real wages in Italy: the freeze lasting 35 years

Updated 2 August 2026.

Real wages in Italy have barely moved for more than three decades. Between 1990 and 2024, average gross real pay per full-time-equivalent employee fell by 1.6%, while the OECD average rose by roughly 35%. The figures come from Working Paper 1/2026 by Italy’s Parliamentary Budget Office, drawing on the OECD annual wages series.

The gap with other major economies is striking. Over the same period, real pay increased by 50.5% in the United States, 48.4% in the United Kingdom, 33.4% in France and 32.9% in Germany. This does not mean every Italian worker lost exactly 1.6%. It means Italy failed to turn economic development and technological change into lasting purchasing-power gains for a standard full-time job.

Why real wages in Italy produce two different declines

The OECD’s 1.6% fall and the Budget Office’s 6.6% decline are not contradictory. The first standardises employment into full-time equivalents, making international comparisons possible. The second follows actual earnings for private-sector non-managerial employees through the Italian social-security institute’s longitudinal LOSAI sample: about 4.8 million observations covering more than 460,000 workers.

That distinction matters. When part-time work, interrupted careers and lower-paid occupations become more common, the annual income workers actually receive can deteriorate faster than the theoretical pay attached to a standard full-time position. One measure approximates the price of labour; the other captures how changes in the jobs available affect people.

Weak productivity creates a weak wage base

The first structural factor is productivity. According to Istat, Italian labour productivity increased by only 0.3% a year on average from 1995 to 2024. Over time, companies can sustainably raise real wages when each hour of work generates more value, margins are shared more broadly or production moves towards higher-quality goods and services. A stagnant value-added-per-hour trend leaves limited room for economy-wide pay increases.

Productivity is not an automatic excuse for employers. Investment, technology, management, company size, competition and bargaining power all matter. An economy dominated by undercapitalised small firms tends to invest less in equipment, training and processes. This can become a loop: low investment holds back productivity, weak productivity constrains wages, and poor pay encourages skilled workers to leave.

The shift towards lower-paid services

The Budget Office finds a sharp sectoral split. Between 1990 and 2026, real pay rose by 16.5% in industry and construction but fell by 20.9% in services. At the same time, industry’s employment share dropped from 35.3% to 26.6%, while services expanded from 57.4% to 70%.

Services are not inherently unproductive. Finance, software, advanced consulting and research can generate high value. Italy’s problem is the composition of growth: much of the additional employment has been concentrated in fragmented, low-margin activities where workers have limited bargaining power. Moving more people into those jobs weighs on the national average even when parts of manufacturing continue to offer better pay.

Part-time work and inequality deepen the loss

The share of part-time employment in the analysed sample rose from 4.4% to 31.6%. Part-time work can be a useful choice, but involuntary part-time employment reduces annual income, contributions and career progression. Its impact overlaps with contract instability and is especially relevant for young people, women and service-sector workers.

The national average also conceals a highly unequal distribution. From 1990 to 2026, real earnings at the tenth percentile fell by 40.8%, while the ninetieth percentile recorded a 3.3% gain. Wage stagnation therefore did not hit everyone equally. Losses were concentrated at the bottom, where increases in rent, energy and food absorb a larger share of household budgets.

The 2025-2026 rebound does not close the gap

Collective-agreement renewals are now supporting a partial recovery. Istat reported that average contractual hourly wages rose 2.6% year on year in the first quarter of 2026, faster than inflation over the period. That is positive, but it follows the 2022-2023 price shock. In September 2025, real contractual wages were still 8.8% below their January 2021 level.

The difference between nominal and real increases is central, as explained in our guide to inflation, interest rates and markets. A 3% pay rise does not increase purchasing power when prices rise faster. Decisions by the ECB and other central banks also affect mortgages, demand, investment and labour-market strength.

What could reverse the trend

There is no single solution. Faster contract renewals can stop inflation from eroding agreed pay for years. Lower labour taxes can support take-home income, but they cannot replace growth in gross compensation. Italy needs more investment in capital and skills, companies able to scale, wider technology adoption and policies that move employment towards higher-value production.

Reducing involuntary part-time work and fragmented careers is equally important. The transition from education to skilled employment needs to work better, and progress should be measured across the entire wage distribution. If the average rises while the lowest decile continues to lose ground, the social problem remains unresolved.

The data do not say Italian pay is frozen every single year. Some sectors advance and temporary recoveries occur. The deeper point is that 35 years of change in real wages in Italy have not produced an improvement comparable with other advanced economies. Without stronger productivity, better job quality and greater bargaining capacity, the current recovery may prove to be only a pause in a much longer stagnation.