Abstract

In the last twenty years, labour productivity has experienced an almost flat growth trend. Different European authorities have tried to promote reforms of the Italian labour market, including an increase in the use of bargaining at firm level. The aim is to curb wage growth and to promote higher productivity growth. However, they did not take into consideration the changes in real variables. Indeed, after the adoption of the euro, real wage growth was lower than productivity growth. Furthermore, the current Italian two-level bargaining system allows for linking wage components to productivity only in decentralised bargaining. Therefore, the Italian government has launched tax relief measures in relation to productivity bonuses. This policy, however, seems to increase the North-South territorial divide and generate other forms of polarisation. The current incentive system needs to be integrated with not only labour policies but also economic development policies. Furthermore, new approaches in bargaining and in industrial relations are needed.