From 1951 onwards, the evolution of the Italian economy was characterized, among other things, by a strong increase in salaries per employee, which had its most pronounced peaks in the two-year period 1963-64 and in the following years to 1969. The trend in compensation of employees from 1951 to 1973, as well as the relationships between changes in such incomes, on the one hand, and changes in prices and accumulation rates, on the other, are illustrated in graphs1- 2-3-4. For reasons of space, not all the data relating to these graphs are shown here; they are also available in the sources cited in the bibliography.
The diagram of fig. 1 allows us to appreciate how much the increase in compensation of employees in current lire has exceeded the increase in global productivity: considering the period 1951-73, it is noted that while the compensation of employees per employee in current lire has increased as from 100 to 776, global productivity increased as from 100 to 262. Taking into account that employees make up a very large fraction of the population, their increased monetary availability resulted in a demand for goods and services that was greater than supply available on the market, creating a pressure to which the inflationary tensions which manifested with particular intensity in some years of the period under consideration seem to be attributable to a large part. Indeed, from the available data it is clear that in periods in which the gap between the increase in money wages and the increase in productivity was greater, consumer prices grew more rapidly. In the years 1951-61 and 1966-69, for example, the differences between the percentage increases in wages and those in global productivity remained on average around 2.5 points, and consumer prices rose on average by 2-2. 5% per year; on the contrary, the aforementioned differences were on average 9 points per year in 1962-65 and 12 points in 1970-73, and in the same years there were average increases in consumer prices of the order of 6-6.5 %. For the entire period 1951-73 the relationship between the aforementioned gap and the increase in prices is clearly shown in Fig. 2, in which each year corresponds to a point whose abscissa is the difference between the increase in money wages and the increase in productivity and the increase in the general consumer price index as the ordinate. What is important, for the purposes of price stability, is therefore not so much the rate of increase in wages in and of itself, but the gap between the increase itself and that of productivity: which is precisely the engine of that increase. more or less creeping “cost inflation” which occurred in Italy first in 1963-65 and then starting in 1970.
The sharp rise in wages has also resulted in a substantial redistribution of income in favor of dependent work. You can get an idea of the extent of this redistribution (see fig. 3) by comparing for the period 1951-73 the trend of average employee income per employee with that of capital-business income (profits, rents, interest and income from self-employment) for every thousand lire of capital employed in production. Between 1951 and 1973 the average income of each employee increased (at constant prices) as from 100 to 360, while in the same period the income from business capital for every thousand lire of capital decreased as from 100 to 63.
In addition to prices, the redistribution of income in favor of dependent work also seems to have influenced the accumulation rate (i.e. the ratio of gross investments to income), due to the compression of profits and the consequent reduction in the self-financing capacity of firms. An examination of the historical series of accumulation rates from 1951 to 1973 shows that the years of the most marked increase in wages were followed shortly after (generally one or two years) by periods of decrease in accumulation rates. For both the entire economic system and the industrial sector alone, the correlation between changes in wages in each single year and changes in accumulation rates in the following two years is in fact quite strong and negative (see Fig. 4).