Welcome address
by Paolo Angelini
Deputy Governor of the Bank of Italy
7th Bank of Italy-CEPR workshop on labour market policies and institutions
Rome, 19 September 2024
Ladies and gentlemen,
It is with great pleasure that I welcome you today to the seventh edition of the workshop
on labour market policies and institutions, co-organized with the CEPR.
The labour market is a key component of our economies, providing the foundation for
individual livelihoods and societal well-being. The Covid-19 pandemic and its aftermath
have accelerated long-term trends that are reshaping our labour markets: technology
adoption and rising inequalities. These two issues are receiving much attention, and
rightly so, in my view. They run through the papers that will be presented over the next
two days, and will be addressed by our keynote speakers. In my remarks today, I would
like to share some thoughts on these two related themes.
First, the pandemic accelerated the digitalization of our societies. As a result, the demand
for workers with digital skills has risen sharply. While this transformation has created new
job opportunities, it has also deepened existing wage inequalities, as it mostly benefited
high-paid and highly educated workers.1 Automation and generative AI are an important
part of this process. These innovations can potentially improve labour productivity and
the quality of work, but they also risk displacing some types of jobs, this time also at the
top of the earnings distribution.
While the ultimate impact of the new technologies on welfare and inequality is still
uncertain, it is clear that it can be potentially large. Therefore, careful monitoring and
analysis will be required to guide policy design in areas such as social protection, welfare
and education. It is a privilege to have Professor David Autor as our keynote speaker on
this important topic. His contributions to the literature on the impact of technology on
the labour market and on inequality have set milestones in these fields.
While new technologies can affect welfare and inequality, requiring a reaction from
labour market institutions and policies, the latter can in turn have an important influence
on the adoption of technologies. A few papers in the programme discuss this interplay.
One shows that improving the quality of worker-job matching, including through
well-designed institutions and labour law reforms, is crucial to unlocking the economic
gains of innovation.2 Another paper shows that unions play an important role in
technology adoption: their actions reduce the negative effects of technology on
workers and can even improve the quality of the technology in which firms invest3
(today's opening paper, also about unions, confirms that they negotiate over different
job characteristics, not just about money).4 Another paper to be presented this
morning shows that digital technology can also improve occupational training and
skills acquisition, and ultimately promote the adoption of new technology itself.5
Digitalization has also enabled the rapid and massive shift to remote working triggered
by the pandemic. Employees benefit from reduced commuting time and costs, more
flexible daily schedules, and a better work-life balance. Firms can reap significant cost
savings from reduced need for office space, and can achieve better job-matches by
potentially recruiting from a larger pool of candidates, as physical proximity is no longer
indispensable.
But there could be a dark side of these visible benefits: in the medium to long term, the
changes in interactions patterns among colleagues brought about by remote working could
have unwanted and hard-to-identify effects on productivity, innovation and even mental
well-being. Working from home also poses challenges for firms in terms of adapting
management practices and incentivising employees.6 Research on these effects is hampered
by the relative novelty of the phenomenon, but it will become very relevant to private and
public decision-makers as soon as availability of good quality data makes it possible.
Let me now turn to the issue of rising inequalities. The pandemic has exacerbated
deep-seated inequalities - in income, access to health care, job security, and
opportunities. Unequal societies tend to be more prone to economic inefficiencies and
political instability, and the two are likely to reinforce each other. Inclusiveness is not
only an antidote to inequality, it is also a powerful driver of economic development
and resilience. That is why we need to pursue inclusive growth. In labour markets,
this means tackling the barriers that have long marginalized certain groups, including
migrants and women.
The literature has increasingly recognized the important role of immigrants in the
economy - in particular their contribution to innovation, labour market fluidity and female
participation - and has found that their skills are primarily complementary to those of
natives.7 Another important aspect, that has received less attention, is the impact of
highskilled immigration on firms. A paper on this topic, to be presented tomorrow, demonstrates
the positive impact of high-skilled migration on firm performance and employment.8
Regardless of how important these aspects are, we cannot avoid mentioning the host
of challenges posed by the ageing of advanced societies, a particularly pressing concern
in Italy. The political debate has often focused on illegal immigration, but awareness
is growing that a proper management of migration flows is important to counter the
decline in labour force caused by ageing.
Another part of the solution to the ageing problem must come from increasing labour
force participation. Policies in this area are also essential, and involve, inter alia, promoting
female participation in the labour market (another pressing concern in Italy). Regarding
the study of gender gaps, we are honoured to have as our second keynote speaker
Professor Claudia Olivetti, a leading economist in this important field.
Women are less likely to be in top positions within firms, and gender quotas can be
of help in this respect. In 2021 the Bank of Italy did its part. We used our regulatory
powers to introduce a gender quota for the top management of all Italian banks,
following the Italian law on gender balance for listed companies. Let me add another
bit of self-promotion. The research department of the Bank has been particularly active
in studying gender gaps. Last year we presented and published the results of a major
project looking at various aspects of women's experience in the Italian labour market.9
One of our key findings, to be presented in this workshop, is that gender gaps are already
large at the point of entry into the labour market.10 Educational choices, already in high
school, are key to explaining much of these gaps. Women tend to avoid STEM subjects,
which - also because of the digital revolution - tend to be more remunerative. Let me
tell you an anecdote about this. Since 2008, the Bank of Italy has been funding an annual
prize for high school students who excel in mathematics and information technology.
Students' participation in the contest is voluntary, and the selection process is entirely
conducted by the schools. Over 17 years, the prize has been awarded to 340 students.
7
G. Peri and C. Sparber, "Task Specialization, Immigration, and Wages", American Economic Journal:
Applied Economics, 2009; G. Basso and G. Peri, "Internal Mobility: The Greater Responsiveness of
Foreign-Born to Economic Conditions", Journal of Economic Perspectives, 2020; G. Barone and
S. Mocetti, "With a little help from abroad: the effect of low-skilled immigration on the female labour
supply", Labour Economics, 2011.
8
P. Mahajan, N. Morales, K. Shih, A. Brinatti and M. Chen, "The Impact of Immigration on Firms and
Workers: Insights from the H-1B Lottery", IZA DP No. 16917.
9
F. Carta, M. De Philippis, L. Rizzica and E. Viviano, "Women, labour markets and economic growth",
Bank of Italy Workshops and Conferences, 26, 2023.
10
G. Bovini, M. De Philippis and L. Rizzica, "The origins of gender wage gaps: the role of school to work
transition", Bank of Italy Working paper series, forthcoming.
The proportion of males has remained fairly constant over the period, averaging 93 per
cent. This suggests that in order to better understand the sources of such a deep gender
gap, we may need to focus on the secondary school period, possibly even earlier.
Let me conclude. The workshop programme is very rich and touches on many other
relevant topics that are of great interest to policy makers and to the wider research
community. I am sure that each presentation will generate a fruitful discussion and new
ideas.
I would like to thank the organisers for their efforts, the presenters and the keynote
speakers for their contributions, and all of you for being here to participate in the
workshop.