In Italy, as in other European countries, there is a considerable variation in the rate of unemployment across regions. Unemployment is concentrated in the regions of the South where the poor performance of the labour market reflects the unsatisfactory general economic conditions of these regions. These regional imbalances indicate that one or more mechanisms for adjusting this situation are not functioning. The same considerations apply to Spain and Germany, just to mention the countries where regional imbalances are most relevant.
In Italy however, the gap is greater than in the other two: between North and South italy the difference in the unemployment rate is almost 25%, a figure more than twice the economy-wide unemployment rate. Moreover, the working-age population is increasing faster in the South than in the North, so that the regional mismatch between labour demand and supply tends to deteriorate even further.
Also long-term unemployment is very high in the South and at a very low level in the North. The rate of unemployment for adult males in the North is at a level that appears even lower than a frictional one. In fact, labour shortages are widespread in all Northern regions. In the South, unemployment seems to be concentrated among the younger labour force. For some categories of the working population, unemployment in the South reaches astonishing levels. Out of five young girls in the labour force, three are unemployed and looking for their first job.
This huge amount of unemployment might be explained, at least in part, by the fact that a considerable proportion of all these young people state that they are unemployed, but in fact they are not because they do some sort of work in the black economy. The underground economy is probably the most important problem of those regions. Although present everywhere in Italy, it is much more widespread in the South, as the “official” statistics of the National Institute for Statistics (ISTAT) seem to indicate. According to other studies, the percentage of undeclared workers in the total number of regular workers can be as high as 30-40%.
Supposing that only a minor fraction of these workers declare themselves as being unemployed and in search of a regular job, the conclusion should be that the poor performance of the Italian labour market is not due to the high unemployment and the low employment rate of the Southern regions, but more simply to the enormous diffusion of the underground economy.