The distribution of income in Italy has strong inequalities: the state, through tax and welfare policies, aims to reduce these economic differences through an income redistribution. But how much do these regulatory interventions really impact? The most recent Istat data allow us to objectively measure their effect on income inequalities through the Gini index.
How the differences in income are measured
When we talk about income, we often think immediately about the salary. In reality, the income has three different faces:
- Primary income: that generated by work and capital.
- gross income: represents the primary income with the addition of public transfers, such as pensions, bonuses and subsidies
- Available income: what we can really spend, that is, after subtracting tax income and contributions from gross income.
To objectively measure the inequalities between these forms of income, Istat uses Gini’s index: the more close to 100, the more inequality there is; The closer to 0, the more the income is equally distributed.
The geography of inequalities: who is more penalized?
Istat data tell us that in 2024 the primary income in Italy, that is, before taxes and transfers, shows strong inequalities. Adding public transfers – i.e. pensions, subsidies, etc. – and subtracting taxes and contributions, however, we can see greater balance: Gini’s index drops from 46.48% to 30.40%, with a total reduction of 16.07 percentage points (which we will shorten with PP): the reduction of 11.68 pp of transfers is added that of 4.39 pp due to the withdrawal of taxes and contributions. This subdivision highlights how public measures that most affect the reduction of income inequalities are those related to state transfers.
Then analyzing the variations of Gini’s index by geographical area, we get:
- North: from 43.02 to 27.20 (−15.82 pp)
- Center: from 43.97 to 28.21 (−15.76 pp)
- South: from 48.19 to 31.31 (−16.88 pp)
These numbers tell us that both the distribution of primary income and the effect of public policies is geographically uneven, and the South turns out to be the weak point: in fact, it starts from a structural disadvantage (less employment, more submerged economics, minor services) which only partially is compensated. Distributive and productive Italy will be able to transform its geography of income into a more balanced landscape.
The impact of public policies on the redistribution of income
The latest Istat simulations have compared the effect of four regulatory interventions:
- IRPEF Reform (DL 216/2023 Articles 1 and 2)
- Transition from citizenship income to the inclusion allowance (ADI) (Legislative Decree 48/2023 art.1 and Segg.)
- Partial contribution exemption for employees and total for working mothers with two or more children (L. 213/2023, art.1 c.15, c.180 and 181)
- One-off compensation of 100 euros for employees with an income of less than 28 thousand euros (DL 113/2024, art. 2-bis)
Overall, Istat data tell us that these changes have not contributed to the reduction of inequalities: Istat estimates that with their introduction the Gini index on the available income has gone from 30.25% to 30.40% actually detected.
However, analyzing the individual voices, a considerable variability emerges in their impact. For example, thanks to the IRPEF reform, almost half of the families residing in Italy have obtained an available income improvement, on average 586 euros per year. The exemption of contributions for mothers employee instead led to a profit of about 1000 euros for 750 thousand workers.
Instead, the transition to the ADI which led to an annual benefit of around 1200 euros for a small number of families (about 100 thousand) but a worsening of the income available for another 850 thousand families with an average annual loss of around 2600 euros was less effective.
Finally, the one -off allowance is estimated that it has generated a variation of 0.2% of the income available for about 3 million families.
