Social class and wealth inequality in Italy over 20 years, 1993–2014

Abstract

Italy is facing its worst economic crisis since the Second World War. As many studies have already shown, the crisis is affecting the country’s social class structure, thus accentuating several inequality tendencies. In this connection, the empirical purposes of this article are twofold: (1) to analyze whether accumulation and inequality in wealth are growing or declining in absolute terms; and (2) to investigate the relationship between social class and wealth inequality. To this end, we adopt a longitudinal approach – that is, we take the 1993–2014 period into account – by using data from the Italian Survey of Household Income and Wealth. Our findings suggest that overall net worth has trended down in the years following the beginning of the crisis, and that inequality in wealth has basically been increasing during the 20-year period, with a decline from 2012. However, there has been no persistent social splitting process in wealth distribution by social class. Rather, there is a high (and increasing) level of domestic differentiation in terms of household wealth by class, mainly within the lower class and self-employed middle class, which could put further stress on social cohesion standards and allow new forms of social vulnerability to emerge.

Keywords:

• Social inequality
• wealth distribution
• polarization
• economic crisis
• household wealth
• accumulation

Notes

1. Wealth has been observed at the macro level in greater detail: the large stock of wealth pertaining to nations or macro-areas (cf. Mazzaferro and Toso 2009). In addition, wealth has been investigated at the micro-dynamic level: wealth accumulation processes during the life course (cf. Modigliani 1986). There is a lack of meso-empirical research, in which wealth is disaggregated for social classes and adopted as a proxy for observing social inequality or, at least, several dynamics internal to social classes (Brandolini et al. 2004).

2. Another difficulty concerns the fact that while data about income are readily available on an individual level, and can then be aggregated on a family basis, in the case of the assets making up household wealth, the individual formal ownership frequently does not fully correspond to the beneficiaries of the asset. Consider the example of the family home: it can be formally owned by a single member, but it is the place where the whole family lives (Filandri 2015).

3. The youth unemployment rate in EU-28 countries in 2015 was 20.3% (Eurostat: http://ec.europa.eu/eurostat/web/labour-market/overview).

4. According to the Credit Suisse Global Wealth Report, ‘the highest values for median net worth can be found in Italy (€99,970), Belgium (€92,670) and France (€71,310)’ (Skopek 2015, 66). Similarly, Italy is one of the eight richest countries in terms of the average amount of wealth per adult (Credit Suisse 2016). Apart from circumscribed differences due to calculation techniques and contingent oscillations, trends in median net wealth show a similar tendency in different datasets, which all situate Italy in the top cluster worldwide in terms of household wealth (Skopek, Buchholz, and Blossfeld 2014, 474; see also https://stats.oecd.org).

5. According to Eurostat data, the gross household saving rate in 2005 was 14.7% in Italy, compared with an average of 11.2% in the European Union (cf. http://ec.europa.eu/eurostat/web/sector-accounts/data/quarterly-data). The national saving propensity of Italian households is still high compared to all other rich and developed countries, including non-European ones (Rocher and Stierle 2015).

6. Bank of Italy data show that in 2000 Italian households had a debt rate equal to 30% of GDP, which was lower than the majority of advanced economies, e.g. France (46%), Germany (74%,) United Kingdom (77%) and the United States (76%) (Magri 2002).

7. Previous research has shown that the unequal geographical distribution of bank branches, penalizing the south, and the perceived inefficiency of legal remedies for debt recovery have long been an obstacle to lending in Italy (cf. Magri 2002).

8. According to census data, the home ownership rate in Italy is almost 80%, which is the highest value among G8 countries (Filandri 2015). This high rate can be traced to a number of factors, regarding cultural and socio-economic contextual features, and to public policies. Among others: the use of households’ localized resources (land, buildings, and support networks) to ensure access to home ownership by their members; the character of a safe haven against inflation that domestic property had in the Seventies and Eighties; very little social housing; a broad tolerance of unauthorized construction.

9. Italy had no property tax on principal homes until 1992, when such a tax was introduced during the first Amato government. After several reforms, it was fully abolished by the Renzi government (2015).

10. As explained below, the Bank of Italy survey collects information on wealth at the household level, since real and financial property are usually shared by all members regardless of their individual formal ownership.

11. Since SHIW data do not include information about the former occupation of retired interviewees – information used to assign social class – retired households are not included in our sample.

12. Details about the construction of the consumer price index and its use as a deflator index are available on the website of the Italian National Institute of Statistics: http://www.istat.it/en/archive/36294.

13. To analyze wealth distributions, we use the Gini index calculation that allows zero and negative values. For a comprehensive discussion, see Cowell, Karagiannaki and McKnight (2012).