Italian worker wage gap.


There is apparently more that institutional reform can accomplish in the Italian labor market than introducing flexibility, which has been shown to reduce unemployment. A September 2007 working paper, prepared by the Bank of Italy, Italy's central bank, closely examines wage discrepancies between older and younger male workers. Older workers are paid more (on average) and differentials persist as the younger workers age--younger workers do not catch up with their older colleagues.

The specific workers studied were those younger workers who entered the Italian labor market in the 1990s.

The paper says, "Younger cohorts do not experience any catch up: Their earnings appear to grow at the same rate as older cohorts at comparable ages, so that new cohorts of workers seem to have suffered a permanent loss in their relative income." At first this was puzzling to the Bank of Italy researchers. "But what did prompt such a pronounced shift in the relative...

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