Jobs are scarce in southern Italy. A recent paper blames centralised wage-bargaining
day, from Messina in northern Sicily you can see Calabria on mainland Italy’s southern tip. The strait between them is the supposed location of Scylla and Charybdis, the mythical sea monster and whirlpool between which Homer’s Odysseus had to choose on his voyage home. Italians on either side of the strait face another hazard today—unemployment. In 2017 about a fifth of the workforce in the south, and over half of young people, were out of work.
An economic downturn is making matters worse: Italy fell into recession in the second half of 2018. But longer-standing structural factors help explain why jobs are scarce in the south even as bosses up north complain of labour shortages. A recent paper blames centralised wage-bargaining, and computes the gains from switching to a Germany-style localised model.
Nearly 350 national industrial agreements cover the vast majority of firms and formal employees in Italy. They take little account of regional differences in the cost of living and productivity. Employees can take their bosses to court if they are not paid the nationally agreed minimum. Workers in the south who are lucky enough to be in the formal sector are very well paid. But fewer are hired than would be if wages were lower.
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