The labor market in Italy, 2000–2024 Updated

Elevator pitch

In 2024, Italy's labor market has reached record-high levels of employment and permanent contracts, marking a significant recovery from past downturns. Yet, persistent challenges remain. Youth unemployment and labor market duality remain high, and wages and productivity have stagnated for over two decades. Although several major labor market reforms have aimed to increase flexibility and reduce segmentation, many of their effects remain contested. Female participation has risen and long-term unemployment has declined, yet regional disparities remain deep and persistent, with the south lagging behind. Self-employment is widespread but often low income and non-entrepreneurial, while undeclared work continues to weigh on labor standards and fiscal capacity. Targeted reforms are needed to improve labor market inclusion, reduce fragmentation, and support sustainable growth.

Key findings

Author's main message

Italy’s labor market shows pronounced divides across generations and territories. While older workers have increased their participation thanks to pension reforms, younger individuals continue to experience low employment prospects and declining participation. Despite numerous labor market reforms since the early 2000s, duality remains a persistent feature of Italy’s employment structure. Regional disparities remain persistent, with the south consistently falling short in both job creation and productivity. These structural weaknesses risk undermining the country’s recovery. Addressing them will require a twofold strategy: targeted activation policies for youth and women, and broader efforts to stimulate private investment and innovation, especially in southern regions, by reducing institutional inefficiencies and fostering a more dynamic economic environment. Improving wages and productivity will also depend on encouraging firm growth, formalization and investment in skills, technology and infrastructure.

Motivation

The Italian economy, after years of modest recovery from the double-dip recession, now faces renewed uncertainty due to heightened global geopolitical tensions, energy market volatility, and tightening financial conditions. This fragile environment adds pressure to longstanding structural challenges in Italy’s labor market. In this context, decisive and well-targeted policy action is more necessary than ever to strengthen labor market resilience and lay the groundwork for inclusive and sustained growth.

Figure 1 benchmarks Italy’s labor market performance against a range of labor market outcomes observed across OECD countries. Italy displays notable gaps in employment rate and labor underutilization and shows room for improvement on inclusion indicators such as the gender income gap and the employment gap for disadvantaged groups. While job strain and earnings quality do not position Italy among the worst performers, the country still lags behind top-ranking peers. These patterns reflect underlying structural challenges and highlight the need for targeted reforms to enhance both the inclusiveness and efficiency of the labor market.

Discussion of strengths and weaknesses

Aggregate issues

In the last 24 years, the Italian economy underwent four main recessions, which lasted, respectively, from February 2001 to July 2003, from March 2008 to May 2009, from June 2011 to April 2013, and from June 2019 to May 2020. Each of these downturns left a mark on employment dynamics, amplifying existing vulnerabilities such as high long-term unemployment and limited labor market fluidity, while recovery phases often revealed persistent mismatches between labor demand and supply. In parallel, several major labor market reforms were introduced, with lasting effects on employment structures and labor force participation. In 2003, the Biagi Law promoted new forms of flexible employment and opened the way to atypical contracts, aiming to reduce historical rigidities in the labor market. These changes were further expanded and restructured under the Jobs Act (2015), which revised employment protection legislation, reformed unemployment benefits, and sought to strengthen active labor market policies. In the pension domain, the Fornero reform (2011) significantly raised the statutory retirement age and tightened early retirement options, contributing to a sharp increase in labor force participation among older individuals. More recently, the Quota 100 scheme (2019–2021) reintroduced early retirement under certain conditions, with limited long-term impact. Together, these reforms shaped Italy’s labor market trajectory over the past two decades, often reinforcing segmentation between age groups and employment types.

Figure 2 displays the evolution of the unemployment rate, the long-term unemployment rate (defined here as unemployment lasting for more than 12 months), and the vacancy rate in Italy between 2000 and 2024. The lowest level of unemployment was reached in 2007 at 6.2%, with long-term unemployment at less than 3%. Following the global financial crisis, unemployment rose steadily, peaking in 2014 at 12.9%, while long-term unemployment reached almost 8%. After 2014, both indicators started to decline gradually. By 2024, the unemployment rate has fallen to 6.6%, and long-term unemployment has dropped to 3.4%, suggesting a substantial improvement but still reflecting structural weaknesses compared to the pre-crisis years.

Regarding the vacancy rate, it is important to note that a major statistical revision was introduced around 2016, modifying the definition and measurement criteria. As a result, the earlier vacancy rate series and the current one are not fully comparable. Nevertheless, both series are reported to illustrate the overall evolution of labor demand dynamics across the period.

Under the old methodology, the vacancy rate dropped from 1.1% in 2007 to around 0.4–0.5% during 2012–2014. Vacancy rates fell sharply during the crisis and have risen steadily since 2016, peaking at 2.3% in 2023.

Employment levels have also improved significantly. By 2024, Italy's employment rate (for people aged 20–64) reached 67.1%, up from 63.0% in 2019, marking a notable post-pandemic improvement. While still below the EU-27 average of 75.8% and the 78% target set under the European Pillar of Social Rights for 2030, this progress reflects a clear recovery in employment levels and a move toward greater labor market resilience. The share of employees with permanent contracts has also improved, rising from 82.9% in 2019 to 85.2% in 2024, marking a solid recovery to pre-Covid-19 levels. However, this remains slightly below both the EU average and Italy’s own 2011 level of 86.7%, highlighting the persistence of contractual fragilities.

These trends indicate a healthier labor demand compared to the immediate post-crisis years. Nonetheless, persistent long-term unemployment, a moderate overall unemployment rate, and employment levels that still trail the EU average, suggest enduring mismatches between labor supply and demand, despite the apparent recovery in job openings.

Labor force participation — aggregate, gender, and age

Since 2000, total labor force participation has slightly increased, by about five percentage points, with the most significant changes observed among older and younger individuals. 

The participation rate among older individuals (aged 55–64) has risen substantially, resulting in an increase of about 25 percentage points between 2000 and 2024, now standing at 61.3%. This shift is primarily due to the aformentioned important pension system reforms that raised the minimum retirement age, which has driven further participation among older individuals.

While older workers have seen an increase in participation, the participation rate among young individuals (aged 15–24) has experienced a concerning decline. As of 2024, their participation rate is 24.7%, a decrease from 38.1% in 2000. This marks a significant drop, indicating that fewer young individuals are engaging in the labor market. The participation rate among young females also shows a similar trend, dropping from 34% in 2000 to 19.4% in 2024. (The corresponding figure for males would be a drop from 42.2% in 2000 to 29.7% in 2024, indicating a decline in participation, though not as pronounced as for females.)

Especially in the first half of the period, this low participation rate is not explained by an increase in full-time enrollment in education, but rather by the rise of NEET (Not in Education, Employment, or Training) youth. In 2008, the incidence of NEET youth was around 17%, and by 2013 it had reached 22%. On a positive note though, NEET represented 12.7% of the population aged 15–24 in 2023 and is expected to continue decreasing to around 12% in 2024.

Female participation increased by 11.4 percentage points between 2000 and 2024, from 46.2% to 57.6%, reducing but not closing the gender gap. Male labor force remained broadly stable between 2000 and 2024, increasing by just 1.8 percentage points (from 73.8% to 75.6%). Additional analyses on territorial disparities signal that female participation exceeds 66% in the north but remains below 45% in the south, with a regional gap of over 20 percentage points that has remained largely unchanged since 2000. This persistent divide reflects long-standing structural imbalances that continue to shape women's labor market access. Addressing this imbalance will likely require not only stronger support for work-family reconciliation, such as expanded childcare and more flexible working options, but also broader efforts to tackle the deeper roots of gender inequality [1] and [2].

The demographics of unemployment—Age and gender

The 2011–2013 recession generated a peak in unemployment of around 12.9% in 2014 for the population aged 15–64, before beginning a gradual decline. The most dramatic increase, however, occurred in youth unemployment (ages 15–24), which rose sharply from 20.4% in 2007 to a peak of 42.7% in 2014, before slowly declining to 20.3% in 2024, one of the lowest levels since 2007. This pattern signals the disproportionate burden borne by young individuals during and after the Great Recession, though the recent drop suggests an encouraging shift.

In contrast, the unemployment rate for older individuals aged 55–64 showed far greater stability. It increased only moderately from 2.4% in 2007 to 5.7% in 2016, before falling again to 3.8% in 2024 similar to early-2000s levels. This indicates a relatively resilient position in the labor market for older workers, and in fact, the unemployment rate for this age group is now slightly lower than it was before the crisis.

When broken down by gender, overall unemployment trends reveal consistently higher rates for women compared to men. In 2014, female unemployment reached a high of 13.9%, while the male rate peaked slightly lower at 12.1%. Over the last decade, both groups experienced a steady recovery: by 2024, the unemployment rate declined to 7.5% for women and 6.0% for men. This indicates a narrowing of the gender gap in unemployment rates, suggesting some progress toward greater equality in labor market outcomes, even though a structural disparity remains.

Temporary employment

Over the past two decades, the Italian labor market has undergone important structural changes, notably through reforms such as the Biagi Law in 2003, and the Jobs Act in 2015. These policy shifts, while aiming to reduce labor market duality and increase flexibility in a historically rigid system, also significantly reshaped employment dynamics—often with mixed results [3]. As shown in Panel A of Figure 5, the share of temporary contracts is particularly high among individuals aged 15–24, as expected, but remains quite high even in the 25–34 group, only declining meaningfully after age 35. Looking at Panel B, which isolates the 15–24 age group, Italy has seen a rising trend in temporary employment over time, progressively converging towards countries like France, and narrowing the gap with the EU-27 average. However, when focusing on the 25–34 age group (Panel C), Italy continues to stand out: in 2024, 23.9% of this cohort is employed on temporary contracts, well above Germany (15.3%) and the EU average (16.7%), and even higher than France (16.7%), highlighting a delayed path toward stable employment. Investigating further the choice of temporary employment in the 15-24 group, Panel D shows that in Italy, temporary contracts are predominantly not chosen voluntarily: young people often accept them because no permanent positions are available, or because the job was only offered in temporary form. This contrasts with other European countries and reflects enduring structural barriers to secure employment for younger Italians, pointing to a persistent pattern of vulnerability and limited upward mobility (read more on the topic in [4]).

Earnings and productivity

Italy has experienced a long-standing stagnation in labor productivity, with virtually no substantial progress since 2000. In 2024, productivity per hour worked in Italy remains below the EU-27 average and well behind peers such as France and Germany (Figure 6). While France increased from around US$57 to over US$65 per hour worked and Germany from US$56 to nearly US$69 over the period, Italy has remained largely flat, fluctuating between US$52 and US$55. 

This stagnation is mirrored in wages, as it can be noted in Figure 7. According to OECD data, average annual wages in Italy (in purchasing power partiy (PPP)-adjusted US$) decreased in real term, from around US$50,500 in 2000 to US$48,900 in 2023. By contrast, over the same period, Germany saw an increase from US$57,300 to US$65,700, and France from US$49,800 to over US$59,000. Wages in Italy have effectively stagnated for more than two decades, contributing to weak domestic demand and rising discontent. This persistent trend has prompted debate around structural wage-setting reforms and the introduction of a statutory minimum wage, as well as recurring tax-side interventions to raise take-home pay. 

An additional factor that helps explain both stagnant wages and weak productivity is the structure of the Italian economy itself. While self-employment is not inherently problematic, and can even signal entrepreneurial dynamism, Italy’s case is distinctive for its unusually high share of own-account workers without employees. As of 2024, 12.8% of Italian workers are self-employed without employees, far above the EU average of 8.8% and more than triple the German figure of 3.6%. In contrast, only 6.4% of Italian workers are self-employed with employees, a figure that has declined steadily since the early 2000s and is only modestly above the EU average (4%) and roughly in line with France and Spain. This split highlights how Italy’s high self-employment rate is not primarily driven by entrepreneurial expansion but by a prevalence of small-scale, often solo economic activity. Supporting this, tax data from the Ministry of Economy and Finance (MEF) show that in the 2019 tax year, individual entrepreneurs ("ditte individuali") declared an average income of 22,373€. The figure is nearly identical to that of employees (21,060€) and dramatically lower than the 57,970€ reported by self-employed professionals. These patterns suggest that much of Italian self-employment reflects economic necessity, subsistence activities, or labor market segmentation, rather than growth-oriented entrepreneurship. Moreover, the persistence of informality and tax evasion, especially among small, low-income own-account workers, contributes to Italy’s broader productivity malaise. Informal firms often survive by avoiding regulation rather than improving efficiency, which distorts competition and discourages innovation or scale. According to official estimates, in 2021, unincorporated businesses in Italy evaded 66.8% of their personal income taxes, compared to just 2% among employees. At the macroeconomic level, widespread underreporting of income undermines fiscal capacity, limiting public investment in education, infrastructure, and technology, critical levers for long-term productivity growth. Together, these structural features help explain why, despite marginal gains in output and employment, Italy’s labor market remains stuck in a low-productivity equilibrium.

Unemployment by region

Between 2020 and 2024, the unemployment gap across Italy’s macro-regions has seen some shifts, but the overall divide remains significant. While the south continues to struggle with much higher unemployment than the north, there has been a slight narrowing of the gap, especially in the wake of the double-dip recession. In 2020, southern regions registered 16.6% unemployment, compared to just 5.7% in the north. By 2024, the south's rate had decreased to 11.9%, while the north dropped to 4.3%. However, this convergence has not been driven by major improvements in the south, but rather by slower recovery in the north. The centre has seen a steadier decline, with unemployment falling from 8.1% in 2020 to 5.3% in 2024. Unemployment in the southern islands remain high, going from 16.6% in 2020 to 11.7% in 2024. While these changes show some progress, they also highlight how deeply the regional disparities are rooted, with the effects of past recessions still holding back the south and southern islands from catching up with the north.

Undeclared employment

Official statistics should be able to detect all employed people, even if they are employed in the shadow economy. This includes a variety of informal and undeclared employment practices, ranging from legal activities that simply go unreported (such as under-the-table cash payments) to illegal activities like unregistered businesses or illicit labor. This phenomenon remains especially important in Italy and leads to far-reaching negative consequences in terms of efficiency, labor standards, and fiscal revenue. The need to reduce undeclared work is particularly crucial in the southern regions of Italy, where it remains more widespread.

According to the Italian National Institute for Statistics (Istat) [5], data in Figure 9, around 13.3% of all Italian workers were not covered by a regular contract in 2014, thus falling into the shadow economy. This rate has shown some variation across regions. As shown in Figure 9, almost one-fifth of employment in the south was undeclared, while the share was significantly lower in the north, around 10%.

Looking at the data from 2000 to 2021, this regional disparity has remained relatively consistent. In 2021, the share of undeclared employment in the south was still substantial, at 15.6%, down from 19.9% in 2000. In the northern regions, undeclared employment dropped to 8.9% in 2021, from 10.2% in 2000, continuing a steady decrease. The center regions, on the other hand, saw a slight reduction, with the share of undeclared work at 11.7% in 2021, down from 14.1% in 2000.

Overall, the gap between the north and the south has slightly narrowed over time, but the issue of undeclared work remains a critical challenge, especially in southern Italy. While the total share of undeclared work in Italy has decreased in recent years, the problem still persists, and the need for policies that tackle this informal labor sector remains essential for improving fiscal revenue, labor standards, and overall economic efficiency and growth potential.

Limitations and gaps

The present work does not include a temporal and regional breakdown of income dynamics from dependent and self-employment, which would have enabled a more thorough analysis of the issue. This limitation is due to the unavailability of such disaggregated data from official sources.

Summary and policy advice

The Italian labor market remains affected by structural weaknesses that limit its capacity to generate inclusive and sustained growth. Two persistent features stand out: labor market dualism and weak productivity dynamics. Young workers continue to experience high rates of temporary and involuntary employment, and entry into stable employment remains delayed. At the same time, labor productivity per hour worked has remained virtually flat since 2000, diverging from the trajectories of Germany and France. A contributing factor is the high share of own-account self-employment, which remains well above the EU average and is often associated with low earnings and limited firm growth. 

These national-level patterns are compounded by persistent territorial disparities. Labor market outcomes in the south remain significantly weaker than in the north, particularly with regard to employment, female participation, and undeclared work. Although some convergence has taken place since 2020, it has been largely driven by stagnation in the more advanced regions, rather than meaningful progress in lagging ones. 

A coordinated policy strategy is needed to close these regional gaps, focusing on infrastructure, business environment reform, and legal enforcement.

A third priority area is intergenerational inequality. While older individuals have increased their labor force participation, partly due to pension reforms, younger cohorts face increasing difficulties in transitioning from education to employment. 

Finally, female participation remains below the EU average and shows large regional variation.

Acknowledgments

The author thanks the anonymous referee(s) and the IZA World of Labor editors for many helpful suggestions on earlier drafts. Version 2 of this article updates all parts of the text, updates figures, and adds new Key references [2], [3], [4], and [5].

Competing interests

The IZA World of Labor project is committed to the IZA Guiding Principles of Research Integrity. The author declares to have observed these principles.

© Francesca Marino