Inflation, loss of purchasing power and loss of credibility

During the latest episode of PiazzaPulita on La7, Michele Santoro made a statement that reveals the state of public debate in Italy: “Istat tells us very clearly that Italians’ purchasing power has fallen by 63 per cent since 2000.” This statement is a blatant piece of nonsense, which serves to highlight a television landscape where grammatical errors provoke outrage, whilst numerical errors go unnoticed.

Santoro has simply confused the loss of purchasing power with cumulative inflation: according to Istat, the overall rise in the consumer price index between 2000 and 2025 was 63 per cent. Santoro, incidentally, uses this figure to argue that the alleged collapse in Italians’ purchasing power is due to joining the euro. But as the data show, the post-2000 period is the one with the lowest inflation in the history of the Italian Republic. So if, for him, inflation is the number one enemy of wages, the single currency is the best protection for Italian workers: from 2005 to 2025, Italy experienced roughly the same cumulative inflation as Germany (45 per cent versus 49 per cent), whilst from 1975 to 2025, Germany’s cumulative inflation stood at 222 per cent and Italy’s at 1,162 per cent. However, this does not imply that Italians’ purchasing power has fallen by 1,162 per cent.

It is worth remembering – it seems incredible, but it must be said – that inflation measures how much prices have risen, whilst to calculate purchasing power one must also take into account how much incomes have risen over the same period. Hourly wages set by national collective agreements (CCNL), adjusted for inflation, tell us how much purchasing power per hour worked has changed (from CCNL): This indicator has fallen by just 2.6 per cent from 2005 (the first year for which data is available) to the present day, with significant sectoral differences, given that for metalworkers, contractual purchasing power per hour worked has increased by around 7 per cent.

If we then consider actual pay, including bonuses and company-level collective bargaining agreements, the picture changes: real compensation per hour worked is now 8.13 per cent higher than in 2000. And if, on the other hand, we measure the total real compensation of the workforce – that is, the aggregate remuneration received by all workers – the increase rises to around 21 per cent, which is a much higher (not lower) level than in 2000, driven primarily by the fact that there are now far more pay packets than there were 25 years ago.

A final perspective is that of households’ real disposable income. This indicator remains essentially stable or slightly higher than in 2000. Fiscal redistribution – particularly in the years following the inflationary shock – and rising employment have helped to sustain households’ aggregate purchasing power, with the ever-present caveat that these figures do not necessarily reflect the income of the average household, nor do they rule out significant losses for specific social groups.

Of course, the issue of wages remains a serious one, as productivity has been stagnating for decades, with marked difficulties in low-productivity sectors. Recognising these problems, however, requires the use of appropriate indicators, rather than a haphazard interpretation of official statistics.

Santoro also claimed that Germany spends more on defence than Russia, another factually incorrect statement which I shall not comment on for the sake of brevity. But the more general problem lies in the format of Italian talk shows, which are always populated by the same guests and organised according to political affiliations, where the value of a contribution depends primarily on whether it is in favour of or against the government, rather than on any real knowledge of the subject. For this reason, one figure can be substituted for another without anyone noticing, because the only thing that matters is confirming the convictions of the partisan audience.

Here is one of the paradoxes and glaring signs of our decline. In a world dominated by technology, even today in Italy an incorrect use of the subjunctive is seen as proof of the speaker’s incompetence, whilst confusing inflation with real incomes, or inventing a 63 per cent loss in purchasing power, provokes no reaction whatsoever. Corrado Formigli has stated that he does not want fake news on his programme; we therefore trust that PiazzaPulita will publicly correct the figure.