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Can Europe’s firms be trusted to share their profits with the toiling masses?
Ask the European Central Bank, and you’ll get a resounding yes. In recent months, the Frankfurt-based institution has predicted that companies that have enjoyed bumper gains in the last couple of years will do the right thing and deliver much-needed pay rises to struggling workers — without passing the extra costs on to customers.
But in some places, such confidence seems out of tune with reality.
Last week, three unions representing 10,000 hotel workers gathered in Venice — on the streets, and in the canals — to demonstrate against several of the big hotel chains that employ them. Marching and occasionally boating against the city’s iconic Renaissance skyline, briefly inconveniencing the hordes of tourists that throng its winding streets, banner-waving strikers accused the chains of stonewalling the renewal of a six-year-old wage contract that expired in 2018 and provides a measly average monthly salary of €1,650.
The delay has deprived workers of critical inflation-adjusted wage increases after years of being “massacred” by inflation, Luigino Boscaro, secretary of the Venetian branch of tourism sector union UILTUCS, told POLITICO.
The standoff highlights how reality doesn’t always track with the prognostications of policymakers in Frankfurt. For months, the ECB has said big corporates will simply absorb any “catch up” salary increases in their profit margins, trusting that by cooling the economy, its tight money policy will stop them jacking up prices further. ECB President Christine Lagarde assured reporters on Thursday that things were going according to plan, saying that overall wage growth was moderating, and that “profits are beginning to partially offset the inflationary effects of higher labor costs.”
However, ECB data shows that real wages — which are adjusted for inflation and are seen as better accounting for purchasing power — have largely stagnated or trended downward across much of the euro area, suggesting that either there may be quite a lot of catch-up still to come — or that people will be left permanently worse off.
That’s especially true in Italy, where salaries are below the European average, real wages have declined ever since 1990, and where labor contracts took on average 30.8 months to renew in 2022, according to data from the union CGIL. In the Bank of Italy’s case, a dispute over a contract has dragged on for 40 years. In the tourism sector, these delays come despite surging profits from the big chains, many of which have benefited from a huge rise in post-pandemic demand, allowing them to ramp up prices.
According to Franco Bruni, an economist at Milan’s Bocconi University, the delay caused by the reluctance to raise wages makes bigger, more abrupt changes later on more inevitable, leading — rather self-fulfillingly — to the exact wage-price dynamic policymakers have downplayed. “It’s a danger for inflation, which can suddenly rise if salaries are adjusted without warning,” he said.
Consider Venice. Union leaders say the chains — which include such giants as Hilton Worldwide Brands and Star Hotels and have significant influence over two of the Veneto region’s most powerful employers’ federations — have refused their demands for higher wages since 2018, regularly derailing talks at the 11th hour to push for concessions that would weaken workers’ rights.
“The employers requested a percentage increase in fixed-term contracts, more flexibility in working hours … and the introduction of ‘availability’ clauses, where the employee remains at the company’s disposal 24 hours a day [and] the company can call him back to work at very short notice by paying a small financial compensation,” said Boscaro, one of the lead negotiators on the union side. “So we refused.”
With the most recent union proposal in July— which included inflation-adjusted pay rises and more rights for new parents — the big chains simply walked away, Boscaro added. Hence the desperate strike, which was timed to generate maximum inconvenience at the Venice International Film Festival.
“It’s not as if the workers have many other weapons,” said Cecilia de Pantz, general secretary of the CGIL’s Venetian branch.
None of the big chains or employers federations was willing to comment, though Confindustria’s Veneto branch sent a statement to POLITICO arguing that it was the unions, not the employers, that stonewalled during the July meeting, pointing to other recent negotiations that did result in contract renewal. De Pantz, on the other hand, said that meeting produced a number of proposals and counter-proposals that were rejected by both sides.
While workers across Italy remain lumped with low wages, the cause of the inverted dynamic in Venice is largely sector-specific. Tourism work is by nature seasonal and often precarious, giving workers less bargaining power than those, say, on an assembly line that runs constantly throughout the year. The mass closures during Covid, said Boscaro, reduced workers’ options further while accustoming them to the lower wages imposed during furlough.
Tourism is also a sector where it is relatively easy to substitute cheap labor from abroad, due to the lack of formal qualifications required in many areas. Exacerbated by Italy’s demographic decline and the shortage of Italians willing to put up with bad pay, that has led to steadily worsening conditions, Boscaro said. As a result, while the cost of staying in a five-star hotel in its historic center can now run into the thousands of euros, the workers servicing those hotels struggle near the poverty line. For them, official data suggesting that things can only get better offers nothing but cold comfort.
