Inflation and contractual wages: the Italian bargaining system

Abstract

This study intends to analyse, over time, the relationship between inflation and contractual wages in Italy, starting from 2009, year of bargaining system reform. Considering the importance, in Italy, of bargaining’s system on the formation of total compensation, a focus has been conducted on the main characteristics. To analyse the relationship, the work uses contractual wages calculated by ISTAT. In absence of inflationary shock, the bargaining system worked and contractual wages growth in line with inflation. The real test will be in autumn, when the high inflation level could reduce the purchasing power for many employees. The results confirm the existence of wage stickiness in Italy. According to the structural features of bargaining system, contractual remuneration can’t adjust immediately to changes in price level.