Italy's Wage Growth Trails EU Average for Four Years Running

Italian contractual wages grew 2.4% year-on-year in March 2026, according to ISTAT, the national statistics institute — a pace that continues to lag behind the broader European Union average and leaves workers' real incomes under pressure from years of elevated inflation.

The gap between Italy's wage trajectory and that of its main European peers has widened steadily since 2022, when the post-pandemic inflation surge began. With the OECD projecting that Italian real wages will fall a further 0.9% in 2026 and remain 6.1% below their first-quarter 2021 level — the widest shortfall among major OECD economies — the structural weakness of Italian pay-setting is drawing renewed attention from policymakers and labour economists alike.

What happened

ISTAT's contractual wages index, which tracks pay determined by national collective bargaining agreements and is calculated against a fixed employment structure based on December 2021, showed hourly wages rising 0.1% month-on-month and 2.4% year-on-year in March 2026. The per-employee index moved in parallel. Coverage of active collective agreements stood at 68.8% of employees and 68.3% of total wages at the end of March 2026.

The pace has been broadly consistent through recent quarters. In June 2025, the hourly index and the per-employee index rose 0.5% and 0.6% respectively from the prior month, according to ISTAT's April–June 2025 release. In December 2025, both indices edged up just 0.2% from the previous month. Coverage at end-December 2025 reached 57.8% of employees — roughly 7.6 million workers — and 55.5% of total wages, reflecting the slow renewal of expired contracts that has characterised Italy's industrial relations landscape.

How does Italy compare with the rest of Europe?

Eurostat, the statistical office of the European Union, reported that hourly labour costs in the euro area rose 3.3% in the third quarter of 2025 compared with the same period a year earlier, and held at the same rate in the fourth quarter of 2025. Across the broader EU, the increase was 3.7% in both quarters — comfortably above Italy's contractual wage growth of around 2.4%.

The European Commission's Labour Market and Wage Developments in Europe reports for 2023 and 2024 documented a peak in nominal wage growth across the EU driven by tight labour markets and high inflation, with growth subsequently decelerating but remaining elevated in most member states. Italy's collective bargaining system, which relies on multi-year national contracts that are often renewed with significant delays, has historically produced smoother but slower wage adjustments than the more flexible systems in Germany, France and Spain.

In 2025, the average hourly labour cost across the EU stood at €34.9, according to Eurostat data published on 3 June 2026, with wide dispersion from €12.0 in Bulgaria to €56.8 in Luxembourg. Italy sits in the middle of the distribution, but its rate of change has been among the more subdued in the euro area's core economies.

The real-wage squeeze

Nominal figures alone understate the challenge. The OECD, in a forecast published on 7 July 2026, projected that Italian real wages — nominal wages deflated by consumer prices — would fall 0.9% in 2026, following a modest 1.3% rise in the first quarter of 2026 compared with 2025. The organisation further projected a recovery of just 0.2% in real terms in 2027, leaving Italian workers' purchasing power 6.1% below its first-quarter 2021 level — the largest cumulative shortfall among the major economies it tracks.

The European Commission's 2024 Labour Market and Wage Developments report noted that the high-inflation period of 2022–2023 left lasting social effects, with vulnerabilities rising particularly for low-wage earners and middle-income groups. Labour share developments — the portion of national income going to workers — raised fairness concerns across several member states, Italy included. The 2025 edition of the same report confirmed that nominal wage growth remained strong but was slowing, and that real wage recovery was uneven across countries and worker categories.

Why it matters

Italy's persistent wage lag has direct consequences for domestic consumption, which accounts for a substantial share of the country's GDP. When real wages stagnate or decline, household spending power contracts, weighing on retail sales, services and ultimately on economic growth.

ISTAT's labour market report for the second quarter of 2026, published on 11 September 2026, showed that the number of employed people rose to 24.363 million, up 155,000 or 0.6% from the first quarter of 2026, with permanent employees up 120,000 (+0.7%). Hours worked grew 0.3% quarter-on-quarter and 1.3% year-on-year. GDP, however, expanded by only 0.2% quarter-on-quarter and 1.0% year-on-year — meaning employment is growing faster than output, compressing productivity per worker and limiting the scope for wage increases.

The slow renewal of collective agreements is a structural feature of Italy's wage-setting architecture. At end-June 2025, only 56.3% of employees were covered by agreements in force for wage-setting purposes, and 54.0% in terms of total wages — figures that rose to 69.9% and 67.3% respectively by end-April 2026, suggesting some acceleration in contract renewals but still leaving a significant share of workers on expired agreements. Delayed renewals mean that pay adjustments often arrive well after the inflation that eroded real wages has already done its damage.

• Italy contractual hourly wages: +2.4% year-on-year in March 2026 (ISTAT)
• Euro area hourly labour costs: +3.3% in Q3 and Q4 2025 (Eurostat)
• EU hourly labour costs: +3.7% in Q3 and Q4 2025 (Eurostat)
• Average EU hourly labour cost in 2025: €34.9 (Eurostat)
• OECD forecast for Italian real wages in 2026: −0.9%
• Italian real wages vs Q1 2021: −6.1%, the widest gap in major OECD economies
• Italian employed population in Q2 2026: 24.363 million (ISTAT)

What to watch next

Several data releases and institutional updates will shape the picture in the months ahead.

• Eurostat wages and labour costs article update: planned for October 2026, according to the article published on 3 June 2026, which will incorporate the latest cross-country comparisons.
• ISTAT contractual wages — Q2 2026 full release: the April–June 2026 report is in progress; the coverage rate at end-April 2026 stood at 69.9% of employees, and the June 2026 figures will confirm whether the pace of contract renewals and wage growth has shifted.
• ISTAT labour market — Q3 2026: the next integrated reading of employment, hours worked and GDP will test whether the productivity gap between job creation and output growth is narrowing.
• OECD 2027 real-wage forecast: the organisation's projection of a 0.2% real-wage gain in Italy in 2027 will be revised as inflation and bargaining data are updated; any upward revision would signal a turning point in the purchasing-power cycle.
• European Commission Labour Market and Wage Developments in Europe 2025: the full report will provide updated cross-country benchmarks for Germany, France, Spain and other major EU economies, allowing a more granular assessment of Italy's relative position.