This country note provides an overview of the labour market situation in Italy drawing on data from OECD Employment Outlook 2024. It also looks at how the transition to net-zero emissions by 2050 will affect the labour market and workers’ jobs.

Labour markets continued to perform strongly, with many countries seeing historically high levels of employment and low levels of unemployment. By May 2024, the OECD unemployment rate was at 4.9%. In most countries, employment rates improved more for women than for men, compared to pre‑pandemic levels. Labour market tightness keeps easing but remains generally elevated.

• Despite the slowdown in economic growth since the end of 2022, the Italian labour market has hit record-high levels of employment and record-low levels of unemployment and inactivity. The unemployment rate in Italy fell to 6.8% in May 2024, 1 percentage point lower than May 2023 and 3 percentage points lower than before the COVID‑19 crisis but still above the OECD average of 4.9%. Total employment also increased in the last year, with a year-on-year increase of 2% in May 2024. However, Italy’s employment rate remains well below the OECD average (62.1% vs. 70.2% in Q1 2024).

• The labour market is projected to continue to grow over the next two years: despite adverse demographic developments, total employment is projected to grow by 1.2% in 2024 and 1% in 2025.

• Despite recent notable improvements, Italy still lags behind many other OECD countries in terms of female and youth employment, where further progress is also needed to fill the relatively high number of job vacancies.

• Earlier this year, the government replaced the previous minimum income (“Reddito di cittadinanza”) with a social assistance scheme for selected vulnerable groups (“Assegno di inclusione – Adi”) and an allowance for vulnerable people who do not have access to the Adi but are participating in an active labour market programme (“Supporto per la formazione e il lavoro – Sfl”). Work incentives for Adi beneficiaries could be improved by a more gradual withdrawal of benefit entitlements for those who take up employment. Extending Adi eligibility to the entire population at risk of poverty and with very poor labour market prospects would ensure that the most vulnerable remain covered by a minimum social safety net, while the limited resources for training in SfI can be better targeted at people closer to the labour market.

Real wages are now growing year-on-year in most OECD countries, in the context of declining inflation. They are, however, still below their 2019 level in many countries. As real wages are recovering some of the lost ground, profits are beginning to buffer some of the increase in labour costs. In many countries, there is room for profits to absorb further wage increases, especially as there are no signs of a price‑wage spiral.

• Italy is the country which has seen the largest fall in real wages among the largest OECD economies. At the beginning of 2024, real wages were still 6.9% lower than just before the pandemic.

• Thanks to the renewals of major collective agreements, particularly in the service sectors, the number of private sector employees covered by an expired collective agreement fell in the first quarter of 2024 to 16.7% from 41.9% a year earlier. This has contributed to push negotiated wage growth up to 2.8% compared to the previous year.

• Overall, real wage growth is expected to remain muted over the next two years. Nominal wages (compensation per employee) in Italy are projected to increase by 2.7% in 2024 and 2.5% in 2025. Although these increases are significantly lower than in most other OECD countries, they will allow Italian workers to regain some of their lost purchasing power, as inflation is projected to be 1.1% in 2024 and 2% in 2025.

The ambitious net-zero transitions currently undergoing in OECD countries are expected to have only a modest effect on aggregate employment. However, some jobs will disappear, new opportunities will emerge, and many existing jobs will be transformed. Across the OECD, 20% of the workforce is employed in green-driven occupations, including jobs that do not directly contribute to emission reductions but are likely to be in demand because they support green activities. Conversely, about 7% is in greenhouse gas (GHG)-intensive occupations.

• In Italy, 19.5% of the workforce is employed in green-driven occupations. Of these, only 13.7% are truly “green new or emerging occupations”. Conversely, about 5.1% of Italian employment is in emission-intensive occupations. The highest share of green-driven occupations can be found in Abruzzo, while the highest share of GHG-intensive occupations can be found in Sardinia.

• In Italy, men are more likely to be employed in green-driven and GHG-intensive occupations, while older workers are more likely to be employed in GHG-intensive occupations.

• Many high-skilled emission-intensive and green-driven jobs are very similar in their skill requirements, meaning that high-skilled workers can move from emission-intensive to climate‑friendly industries with relatively little retraining. However, this is not the case for low-skilled workers, who will require more retraining to move out of emission-intensive occupations.

• At present, however, training uptake among workers in Italy remains low and workers in emission-intensive occupations tend to receive significantly less training than other workers. The new “Supporto per la formazione e il lavoro – Sfl” provides additional support to training. To also contribute to the green transition, it should be better targeted to respond to labour shortages in key sectors for the net zero transition. In addition, quality assurance mechanisms in adult education and training in Italy should become the norm in all regions of the country.

• In terms of job quality, low-skill green-driven jobs tend to have significantly lower wages and labour market security than other low-skill jobs. This suggests that, in the absence of policy measures, low-skill green-driven occupations may be a relatively unattractive option for low-skill workers.

• The projected changes associated with the net-zero transitions should be contrasted with the employment costs of inaction on addressing climate changes. While climate change mitigation policies may impose costs on OECD labour markets, climate change itself will affect workers and firms: 8% of workers in Italy report suffering from significant heat discomfort, typically workers in outdoor occupations and workers in process and heavy industries, with likely negative effects on their health and productivity.