Italian civil servants and loss of purchasing power (2004)

In the three years 2001-2004, the vicious mix of uncontrolled price increases and the effects of the fiscal drag contributed to an overall loss of 18.4% of the purchasing power of the salaries of about 3.4 million civil servants. First of all, according to the methodological approach of Eurispes, it was possible to note that the loss of purchasing power of public employees, due only to the effect of inflation, from 2001 to 2004, was not – as Istat claims – 9.8%, but 22.2%. In any case, according to both Istat and Eurispes data, civil servants have seen their purchasing power decrease. If inflation has been higher in the past years than that calculated by the Central Statistical Office, this loss of purchasing power has been of such a nature that it has profoundly changed the consumption habits of civil servants. However, the loss of purchasing power of civil servants and of every income earner, in general, is far more significant than that measured by a simple comparison between pay increases and inflation.

The effects produced by the fiscal drag mechanism due to the progressive nature of our tax system must be added to the inflation effect. But what is the size of the fiscal drag effects as far as civil servants are concerned? To make an overall assessment, Eurispes calculated an average value of the fiscal drag taking public employees’ salaries as weights and obtained a coefficient of 0.525. This made it possible to calculate the overall loss of purchasing power of civil servants who, of course, pay taxes to the last cent.