The average increase in fixed salaries in Italy in 2022 was 3%. But what is the current inflation rate in Italy? Italy is ending 2022 with inflation estimated at 7%, something which drastically affects this growth figure and brings the real salary of employees in Italy down by 4%. This is the striking fact that emerges from the WTW (formerly Willis Towers Watson) Salary Dynamics Observatory, which highlights how the purchasing power of Italians is being eroded by inflation going into 2023.
Average pay and inflation in Italy and Europe
According to WTW, which conducted the study on a sample of more than 640 medium or large-sized Italian companies, corporate budgets for wages are set to increase by an average of 3% in 2022 in Italy, in line with the main European countries, such as Austria (+3.2%), France, (+3%), Germany and the Netherlands (+3.5%), Spain (+3.3%) and Great Britain (+3.9%).
But does inflation apply to salaries? In the current climate, inflation deeply affects wages because it far exceeds the increases planned by companies in Italy. Therefore, with inflation higher than salary increases, this means that inflation causes a loss in purchasing power as prices continue to go up. More generally, it is noted that across Europe, budget levels planned by companies this year were significantly lower than the inflation rate (with the exception of Switzerland).
"We are coming from years of moderate and linear salary growth, against a low inflation rate, witnessing a physiological increase in salaries due mainly to seniority steps and contractual increases, particularly for the lowest salaries, with little room being left for the economic recognition of merit," says Edoardo Cesarini, CEO of WTW. "Now, however, this linear model is being challenged by the very high growth in the inflation rate, which has had a strong impact on salaries and puts us in front of a new model with more variables and unknowns.
Italy salaries 2023: what wages will look like in the new year
If in 2022 companies tried to improve the purchasing power of their employees by intervening with increases on fixed pay (60 per cent with temporary measures, 40 per cent with more structural measures), the market wage increases planned in Italy for 2023 are expected to grow by an average of 3.9 per cent.
Sectors in which salaries grow the most in Italy
In which sectors are wages growing the most? At the two extremes are the TMT (Technology-Media-Telecommunications) sector with the highest growth of 4.6% (+0.7% compared to the average) and the Retail sector with the lowest growth of 3.2% (-0.7% compared to the average). The sectors in which pay increases will grow the least in Italy, apart from Retail, will be Energy, with increases of +3.3%. Sectors in which wage increases will grow more than the average, besides TMT, include Insurance, which is expected to grow by 4.4% in 2023, and Oil & Gas, which will grow by 4.2%.
Inflation and salaries in Italy 2022/2023
This is the second year in a row that the inflation rate in Italy has exceeded the average increase in wages: a situation so unusual that it has not occurred for thirty years, i.e. since the early 1990s. Since 2010, the average increase in wages in Italy has in fact always exceeded inflation, uninterruptedly until 2021.
"The Italian employment market in 2022 was nonetheless decidedly competitive and companies have never stopped looking for the most specialised profiles, such as engineers, IT professionals for app development, cybersecurity or e-commerce," adds Rodolfo Monni, head of WTW's remuneration surveys. "The pay dynamic for the fixed component of remuneration has led to an increase in wages, net of inflation, but the gender gap is still strong in our country: in 87% of companies, the average fixed wage of women is still lower than that of men. A trend reversal on this front is desirable".
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