OECD Employment Outlook 2025: Italy
Table of contents
These country notes provide an overview of the labour market situation in each country based on data from OECD Employment Outlook 2025. This edition has a special focus on how population and workforce ageing will affect the labour market and workers’ jobs.
The OECD unemployment rate remains at 4.9% in May 2025 – the same as one year ago. However, there are signs of weakening, with employment growth decelerating and labour market tightness falling back to pre‑COVID‑19 levels in many countries.
Despite the slowdown in economic growth since late 2022, Italy’s labour market has reached record levels of employment and record lows of unemployment and inactivity. In May 2025, the unemployment rate in Italy increased to 6.5%, which is 0.1 percentage points lower than in May 2024 and 3.1 percentage points lower than before the start of the pandemic, although it remains above the OECD average of 4.9%.
Total employment continued to increase over the past year, albeit at a slower pace, with a year-on-year rise of 1.7% in May 2025. This was particularly driven by older individuals. Nevertheless, Italy’s employment rate remains significantly lower than the OECD average (62.9% compared to 70.4% in Q1 of 2025). Inactivity decreased in May 2025 and remains at historically low levels but it is still high compared to other OECD countries.
Looking ahead, despite considerable uncertainty due to global trade disruptions, the unemployment rate is expected to remain stable in 2025 and 2026. Total employment is projected to grow by 1.1% and 0.6% respectively during this period.
Real wages are growing in virtually all OECD countries, but in half of them, they are still below the levels of early 2021 – just before the inflation surge that followed the pandemic.
Italy has seen the largest fall in real wages of all the major OECD economies. Despite a relatively solid increase in the last year, real wages were still 7.5% lower than in early 2021 at the beginning of 2025 (see figure below).
The renewal of major collective agreements over the last year has led to higher-than-usual negotiated wage increases. However, these fell short of fully compensating for lost purchasing power since the inflation hike. Furthermore, at the start of Q1 in 2025, one in three private‑sector employees was still covered by an expired collective agreement.
Overall, real wage growth is expected to remain subdued over the next two years. Nominal wages (compensation per employee) in Italy are projected to increase by 2.6% in 2025 and 2.2% in 2026. While these increases are significantly lower than in most other OECD countries, they will enable Italian workers to achieve modest gains in real terms, given that inflation is expected to reach 2.2% in 2025 and 1.8% in 2026.
People around the world are living longer and healthier lives than ever before. This remarkable achievement has been accompanied by declining fertility, leading to significant demographic shifts. The number of old-age people per working-age person will rise by 67% by 2060 across the OECD. The share of people employed in the population will fall unless policies change, slowing down annual GDP per capita growth by 0.4 percentage points.
The share of employed persons in the overall population is projected to decline, which intensifies pressure on economic and social systems.
Between 2023 and 2060, working-age population in Italy will decline by 34%. As a result, the number of old-age dependants per working-age individual in Italy will increase from 0.41 (one dependant for every 2.4 working-age individuals) to 0.76 (one dependant for every 1.3 working-age individuals). In addition, the employment-to-population ratio will decrease by 5.1 percentage points in the same period (see figure below). Assuming that annual labour productivity growth remains at the level of the 2006‑19 period (‑0.31% in Italy), this implies that GDP per capita will decrease at an annual rate of 0.67%.
Getting more jobs for older workers and promoting gender equality at work could stabilise employment-to-population ratios in most OECD countries. However, GDP per capita growth will still slow in many countries. In addition to mobilising the untapped talent pool, it will also be important to boost productivity growth to sustain growth level close to past levels.
Mobilising untapped labour resources – closing the gender employment gap by at least two‑thirds and importantly, activating healthy older workers as well as promoting regular migration – would just allow to balance the negative impact of an ageing population on annual GDP per capita growth (i.e. bringing annual GDP per capita growth from ‑0.67%.to zero). To allow GDP per capita to grow, productivity should also increase: if Italy were able to boost productivity growth to just half of the rate observed in the OECD in the 1990s (approximately 1%), its annual GDP per capita growth could reach a healthy 1.34%. However, this increase will undoubtedly be challenging for Italy given its recent record.
Baby boomers have enjoyed significantly stronger income growth than younger cohorts over the past three decades. Unless we find a way to boost incomes of younger cohorts, there will be growing intergenerational inequality.
In Italy, older working-age individuals (aged 55‑64) have experienced faster income growth than young working-age individuals (aged 25‑34). While the equivalised disposable household incomes of younger working-age individuals were 1% higher than those of older working-age Italians in 1995, by 2016 this had flipped in favour of older workers, who enjoyed incomes that were 13.8% higher than those of their younger counterparts.
Therefore, if Italy continues to successfully extend working lives, it will not only unlock the labour resource with the highest growth potential, but also relieve the burden on younger generations, who will face the economic challenges of demographic ageing while experiencing decelerating income growth.
Employment of both men and women drops sharply after age 60 in most countries. Promoting lifelong learning, healthy workplaces, flexible retirement, and inclusive employer practices is essential to boost older workers’ employability and extend working lives.
Employment rates for late‑career workers have risen significantly across OECD countries over the past two decades (2000‑23). In Italy, for example, employment rates increased by 31.8 percentage points for those aged 55‑59 (compared to an increase of 13.7 percentage points across the OECD) and by 25.7 percentage points for those aged 60‑64 (compared to an increase of 20.1 percentage points across the OECD), essentially thanks to the increase in statutory retirement ages.
Pension reforms need to be accompanied by efforts to boost labour demand and ensure workers remain employable throughout their lives, including in the later stages of their careers. In many countries, the average age of labour market exit remains below the normal retirement age. This is the case in Italy, where the gap is 2 years for women and 1 year for men (See figure below).
Opportunities to combine work and pension income can facilitate a gradual retirement; however, the proportion of older workers who continue working after receiving a pension is relatively low in OECD countries for which data is available. In Italy, only 9.9% of workers aged 50‑69 continue working when they first receive a pension, compared to an average of 22.4% in 24 other European OECD countries.
Italy has a relatively high proportion of physically demanding jobs (42%), which may present challenges for older workers, as well as a low proportion of high-skilled occupations that value experience (40%).
Contact
Stefano SCARPETTA (✉ stefano.scarpetta@oecd.org)
Andrea BASSANINI (✉ andrea.bassanini@oecd.org)
Andrea GARNERO (✉ andrea.garnero@oecd.org)
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The full book is available in English: OECD (2025), OECD Employment Outlook 2025: Can We Get Through the Demographic Crunch?, OECD Publishing, Paris, https://doi.org/10.1787/194a947b-en.
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