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Saturday, January 8, 2011
INVESTIGATION ON THE COST OF THE WORK IN ITALY
Stefano Perri *
We have already dealt with the issue of "labor costs in Italy in October last year, in Roberto Romano Wages and productivity in Italy. What shows the comparison with other OECD countries . intervention that we publish here below is another piece to refute the legend Confederation of Italian wages are high because of low productivity. For this signal reading documented counter-investigation Moreno Pasquinelli on productivity and labor costs in Italy.
1 . You common view, expressed in many debates in the media, in Italy there is a curious paradox with regard to labor costs. In fact, the level of wages and salaries of Italian workers is low compared to other advanced countries, but complains, however, that companies should support a high cost for each worker employed in relation to value added per employee. The same "business success in the competitive system" will be damaged. [1] In reality it is a false paradox and the statement just cited should be highly qualified and ground. In fact, very often not considered carefully what the statistics actually show.
2. He was recently denied that in most developed countries there has been a decrease in the share of wages in income since the 80s, as it is considered by many economists. [2]
set equal to 100, the share of compensation of employees only on GDP in 1980, but sees it in 2010 for all countries considered, the share has declined from a low of 4.24 points in Japan to a maximum of 11.83 points in Italy.
This distinction is necessary for the performance income distribution over time. In fact another qualification should be clear: when it comes to income distribution and effect of the decrease in the wage share on aggregate demand, it refers to the wages of "workers 'average'. An increase in inequality in the distribution of wages and salaries for top managers, although it may be compatible with a more or less constant share of wages labor in GDP, has the effect of decreasing the proportion of income of the "average workers & rdquo ;.
should then consider that wages, in our economies, have two different dimensions: from the perspective of society have an income, from the point of view of companies that employ workers are a cost. Then problems arise with regard to the estimated cost of work: in fact, at the level of the economy, the real unit labor cost is defined as the proportion of earnings corrected for self-employment [4] .
In the case of labor costs, however, this correction may also have distortionary effects on the comparison between the levels assumed by this variable in different countries. In fact, the statistical estimation assumes an average compensation of self-employment is equal to the employee. However, overall self-employment is distributed in almost exclusively in micro and small enterprises, where both wages and productivity may differ much from the average values. Consequently, the comparison between countries can be distorted by this fact when the share of self-employment jobs are significantly different in different countries.
3. It is generally believed that the cost per unit of work in Italy is high due to the weight of social security contributions and taxes on workers' compensation. In fact, it appears that the percentage rate of taxes and social charges on income from work is generally relatively high in Italy. For example, according to Eurostat, in 2008 this rate was much higher than not only the United Kingdom, Germany, Spain and France, but also, albeit a little of that Sweden, the Scandinavian country where traditionally the burden of income tax is very high.
The high incidence of taxation and social security contributions does not mean then that the cost per worker is more ; high in Italy compared to other European countries, but that the average disposable income of Italian workers is even lower, even lower than the average EU and Spain, as can be seen by calculating the average wage after tax from the previous two tables:
4. The question of appearance changes radically when we turn to examine the "income share of work", also known as real unit labor cost (ULC real), which estimates the alleged earnings of self-employed. In this case we use the OECD database. The share of labor income, which excludes GDP from the value of the services of housing tends to be higher in Italy than in other countries.
Table 5 are compared values of the share of income from employment and real GDP ULCnel 2008. As you can see, Italy has by far the lowest share of compensation of employees among the countries compared, but the real ULC is exceeded only by that of Great Britain.
In Figure 1 we see the trend of real ULC for Italy and for the world's largest economy, the U.S. and the largest European economy, Germany, since 1970. In all countries the proportion is decreasing. Italy in the early 70 shows a real ULC superior to other countries. Until 2000, however, the trend is strongly decreasing in our country (with a marked fall in the first half of the nineties) to assume a lower value in the early years of the new century, with the figure recorded in the U.S. and Germany. Then the real ULC is back, albeit only slightly, above the levels of the other two economies considered.
5. But how is it possible that even with very low wages - both in absolute terms and as a share of GDP - when we turn to examine the real unit labor cost the value rises above that of other countries?
A closer look, the reason for the apparent paradox is the role played by the absence in one case and by the presence of another estimate for self-employment. While taking into account self-employment is to give a more reliable estimate of trends, however, has distorting effects when comparing the absolute levels of labor costs in different countries.
In fact, in Italy the percentage of employed persons to total employed labor force is particularly high, well above the average of industrialized countries, as shown in Figure 2. Since the employment of self tends to be concentrated mainly in the micro and small enterprises, labor productivity and lower wages than average, the share of labor income in aggregate is overvalued compared to other countries.
[1] See Istat, Italy We, 100 statistics to understand the country we live in, p. 132. The index of business success in the competitive system is according to the Istat represented by the inverse of what is hereinafter referred to as real unit labor cost. In what follows we will not account for obvious reasons of space, another statistical index, the unit labor costs (labor costs per unit of product), which relates the evolution Monetary unit of wages and labor productivity. When this index is higher in one country over another, you create competitiveness problems related to inflation.
[2] See G. Zanella, Economists and the facts, June 28, 2010.
[3] A. Stretch, reducing product that goes to work in this magazine, November 16, 2010.
[4] The formula is [compensation of employees / workers] / [GDP / total employment], or [compensation of employees / GDP] [total employment / employees employees]
We have already dealt with the issue of "labor costs in Italy in October last year, in Roberto Romano Wages and productivity in Italy. What shows the comparison with other OECD countries . intervention that we publish here below is another piece to refute the legend Confederation of Italian wages are high because of low productivity. For this signal reading documented counter-investigation Moreno Pasquinelli on productivity and labor costs in Italy.
1 . You common view, expressed in many debates in the media, in Italy there is a curious paradox with regard to labor costs. In fact, the level of wages and salaries of Italian workers is low compared to other advanced countries, but complains, however, that companies should support a high cost for each worker employed in relation to value added per employee. The same "business success in the competitive system" will be damaged. [1] In reality it is a false paradox and the statement just cited should be highly qualified and ground. In fact, very often not considered carefully what the statistics actually show.
2. He was recently denied that in most developed countries there has been a decrease in the share of wages in income since the 80s, as it is considered by many economists. [2]
set equal to 100, the share of compensation of employees only on GDP in 1980, but sees it in 2010 for all countries considered, the share has declined from a low of 4.24 points in Japan to a maximum of 11.83 points in Italy.
In a recent article in this magazine Antonella Stirati showed that in order to judge the way the distribution of the wage share of gross domestic product should look at the quote "good for take into account self-employment and ensure that its more or less creates a distortion effect when comparing different countries or different periods in the same country " [3] .
This distinction is necessary for the performance income distribution over time. In fact another qualification should be clear: when it comes to income distribution and effect of the decrease in the wage share on aggregate demand, it refers to the wages of "workers 'average'. An increase in inequality in the distribution of wages and salaries for top managers, although it may be compatible with a more or less constant share of wages labor in GDP, has the effect of decreasing the proportion of income of the "average workers & rdquo ;.
should then consider that wages, in our economies, have two different dimensions: from the perspective of society have an income, from the point of view of companies that employ workers are a cost. Then problems arise with regard to the estimated cost of work: in fact, at the level of the economy, the real unit labor cost is defined as the proportion of earnings corrected for self-employment [4] .
In the case of labor costs, however, this correction may also have distortionary effects on the comparison between the levels assumed by this variable in different countries. In fact, the statistical estimation assumes an average compensation of self-employment is equal to the employee. However, overall self-employment is distributed in almost exclusively in micro and small enterprises, where both wages and productivity may differ much from the average values. Consequently, the comparison between countries can be distorted by this fact when the share of self-employment jobs are significantly different in different countries.
3. It is generally believed that the cost per unit of work in Italy is high due to the weight of social security contributions and taxes on workers' compensation. In fact, it appears that the percentage rate of taxes and social charges on income from work is generally relatively high in Italy. For example, according to Eurostat, in 2008 this rate was much higher than not only the United Kingdom, Germany, Spain and France, but also, albeit a little of that Sweden, the Scandinavian country where traditionally the burden of income tax is very high.
However, even considering the weight of taxes and social contributions of the average labor cost per worker in Italy is low compared to competing countries, only slightly higher than average Union European Union (27 countries) and much lower than in Great Britain, France, Germany and Sweden.
The high incidence of taxation and social security contributions does not mean then that the cost per worker is more ; high in Italy compared to other European countries, but that the average disposable income of Italian workers is even lower, even lower than the average EU and Spain, as can be seen by calculating the average wage after tax from the previous two tables: 4. The question of appearance changes radically when we turn to examine the "income share of work", also known as real unit labor cost (ULC real), which estimates the alleged earnings of self-employed. In this case we use the OECD database. The share of labor income, which excludes GDP from the value of the services of housing tends to be higher in Italy than in other countries.
Table 5 are compared values of the share of income from employment and real GDP ULCnel 2008. As you can see, Italy has by far the lowest share of compensation of employees among the countries compared, but the real ULC is exceeded only by that of Great Britain.
In Figure 1 we see the trend of real ULC for Italy and for the world's largest economy, the U.S. and the largest European economy, Germany, since 1970. In all countries the proportion is decreasing. Italy in the early 70 shows a real ULC superior to other countries. Until 2000, however, the trend is strongly decreasing in our country (with a marked fall in the first half of the nineties) to assume a lower value in the early years of the new century, with the figure recorded in the U.S. and Germany. Then the real ULC is back, albeit only slightly, above the levels of the other two economies considered.
5. But how is it possible that even with very low wages - both in absolute terms and as a share of GDP - when we turn to examine the real unit labor cost the value rises above that of other countries?
A closer look, the reason for the apparent paradox is the role played by the absence in one case and by the presence of another estimate for self-employment. While taking into account self-employment is to give a more reliable estimate of trends, however, has distorting effects when comparing the absolute levels of labor costs in different countries.
In fact, in Italy the percentage of employed persons to total employed labor force is particularly high, well above the average of industrialized countries, as shown in Figure 2. Since the employment of self tends to be concentrated mainly in the micro and small enterprises, labor productivity and lower wages than average, the share of labor income in aggregate is overvalued compared to other countries.
6. Attention then. When one says that labor costs in Italy is relatively high does not mean that companies should bear a cost to employ a worker higher than in other countries who are in economic conditions comparable to ours. The dynamics of the high cost of certain work by employees and therefore does not depend on such factors as the alleged propensity for conflict or the lack of availability for work, as someone has gone to support. For a serious examination, the reasons for low labor productivity in Italy depend more on the model of specialization of our economy and, therefore, on factors such as low capital endowment per worker and the small average size of companies.
The reality is that labor productivity does not grow in Italy since the turn of the century, depending on the structure of employment and therefore, in spite of low wages, the real unit labor costs remained stable or has a slight tendency to grow. Mind you that this decline of the Italian model of development is before the current crisis. It can not therefore simply waiting for "walk the night", although this would be totally unreasonable in all cases, but including the nature of the paradox of the share of wages and labor income in aggregate in its real terms, the question becomes that of an industrial policy at the prospect of the problems posed by the need for improving the competitiveness of country.
The reality is that labor productivity does not grow in Italy since the turn of the century, depending on the structure of employment and therefore, in spite of low wages, the real unit labor costs remained stable or has a slight tendency to grow. Mind you that this decline of the Italian model of development is before the current crisis. It can not therefore simply waiting for "walk the night", although this would be totally unreasonable in all cases, but including the nature of the paradox of the share of wages and labor income in aggregate in its real terms, the question becomes that of an industrial policy at the prospect of the problems posed by the need for improving the competitiveness of country.
NOTES
[1] See Istat, Italy We, 100 statistics to understand the country we live in, p. 132. The index of business success in the competitive system is according to the Istat represented by the inverse of what is hereinafter referred to as real unit labor cost. In what follows we will not account for obvious reasons of space, another statistical index, the unit labor costs (labor costs per unit of product), which relates the evolution Monetary unit of wages and labor productivity. When this index is higher in one country over another, you create competitiveness problems related to inflation.
[2] See G. Zanella, Economists and the facts, June 28, 2010.
[3] A. Stretch, reducing product that goes to work in this magazine, November 16, 2010.
[4] The formula is [compensation of employees / workers] / [GDP / total employment], or [compensation of employees / GDP] [total employment / employees employees]
* Professor at the University of Macerata
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