The Italian labour market and the crisis

The financial crisis has significantly increased unemployment rates with differential effects on living standards. Our objective in this paper is to analyse the effect on income inequality in the Italian labour market. We will construct a microsimulation analysis into the impact of the crisis on household income, unemployment, and inequality using the European Statistics on Income and Living Conditions Survey, Italian Labour Force Survey data.In this regard, we will consider the effect of joblessness on household income and well-being and the impact of different systems of unemployment benefit on unemployment sustainability. Our focus is not only on the pecuniary dimension of well-being, but also the socio-economic impact of unemployment. On the latter we can provide an estimate of cost in terms of limited access to medical tests and dental treatment, and on the perception of not making ends meet for the Italian unemployed compared to their previous employment status.The first section of the paper will briefly address the characteristics of the Italian labour market before and after the crisis. The second section will present the data that will be used to carry out the empirical analysis. Our findings from the multivariate analysis on the costs of unemployment in Italy before the crisis are shown in Section 3 while the methodologies used to microsimulate the effect of the crisis on income distribution and income poverty in Italy together with results of their application will be presented in Section 4. The final section will suggest ameliorative policies based on our findings, and draw the conclusions.