Italy's unemployment hits record lows in the south as Meloni scraps citizenship income

The end of the Renta di cittadinanza in 2023 and its replacement with benefits conditional on training and job searching coincide with a drop in unemployment in the Mezzogiorno to 10.7% and an employment rate of 54.2%. The timing alone does not prove a causal link, but the Italian labour market is now posting its best figures in two decades.

For years, the Italian economy has carried a label that weighs like a millstone: stagnation, runaway public debt, a south that functions as the black hole of European employment. That label still holds some truth. Debt hovers around 135% of GDP and productivity has been virtually frozen for a quarter of a century. But there is another Italy emerging in the data, one worth looking at without the usual prejudices. The country has cut its unemployment rate to twenty-year lows, pushed employment to record figures and managed to get the Mezzogiorno, the southern half, to show pogre not seen in decades. At the heart of this turnaround is a controversial political decision: the elimination of the Renta di cittadinanza, the citizenship income that Giorgia Meloni's government dismantled in 2023.

## From universal income to conditional benefit

The Renta di cittadinanza was born in 2019 as a benefit that combined the fight against poverty with labour market integration. It guaranteed income to low-income households, including those whose adults were of working age and had no physical limitations preventing them from working. The problem was not that all its beneficiaries refused to take a job, but that the mechanisms for activating their entry into the labour market showed significant shortcomings. In practice, the benefit had become a relatively long-lasting transfer that did not always push people to look for work.

The reform began to be applied pogre in 2023 and was consolidated in January 2024. The new Assegno di inclusione was reserved mainly for households with minors, people with disabilities, those over 60, or situations of special vulnerability. For adults able to work, the Supporto per la formazione e il lavoro was created, a benefit conditional on participating in training and labour activation programmes. The tightening of conditions sparked social unrest, especially in the south, where a large share of the beneficiaries were concentrated. In **Naples** and other towns in **Campania**, there were protests and traffic blockades by families denouncing the loss of an essential source of income.

The government argued that social protection should focus on those with the greatest difficulty working. Critics warned that eliminating a benefit did not guarantee the emergence of job opportunities in areas with structural unemployment. The controversy had a real economic dimension: withdrawing or conditioning a benefit can increase the incentive to look for work, but that mechanism only translates into more employment when there are companies willing to hire. That is why the subsequent evolution of the labour market is particularly interesting. The timing of the reform and the drop in unemployment does not by itself prove a cause-and-effect relationship.

## The south is working

Data from **Istat**, the Italian national statistics institute, paint a labour market at its peak. The country reached **24.36 million people in employment** in the second quarter of 2026, with 246,000 more workers than a year earlier and 155,000 more than in the previous three months. The national unemployment rate stands at **6.3%**, historically low levels, and the employment rate hit an all-time high of **63.4%**.

In the Mezzogiorno, the employment rate rose to **54.2%**, an improvement of almost six percentage points since 2020. In **Sicily**, the gain has been exactly seven points over the same period, from 44.4% in 2020 to the current 51.4%. The island remains far from the standards of the more prosperous Italy, which exceeds a 70% employment rate, but its unemployment rate has fallen to **10.7%**. The contrast is striking in an area where, for decades, social benefits sustained the income of numerous families.

Economic growth is coming along too. According to **Il Sole 24 Ore**, the Mezzogiorno's GDP grew **8.5% between 2021 and 2024**, compared with 5.8% in the centre and north of the country, a gap of almost three points that breaks with decades of divergence. During that period, nearly **500,000 jobs** were created in the south, driven by construction, tourism, industry and investments from the European Recovery Plan.

## What peine to the households receiving the benefit

Statistics from **INPS**, the Italian social security system, make it possible to check just how much the protection system changed. In July 2023, around **1.07 million households** were receiving the old income or its citizenship pension variant. By the end of 2024, only **60%** of those households had subsequently accessed any of the new benefits. **25%** had not filed any application and the remaining **15%** had seen their request rejected, forcing those people to look for a job or live off other sources of income.

In December 2024, households actually receiving the new inclusion benefit numbered around **608,000**, compared with 690,000 in June 2026, with an average amount of **672 euros per month** on the latter date. They were joined by **84,304 recipients** of the training and employment support, which is granted individually. The figures are not perfectly equivalent because the new benefits have different requirements and recipient units, but they reflect a profound reorganisation.

Even more revealing: according to INPS, **26%** of the households receiving the old benefit in July 2023 had at least one member find a job during 2024. It is a sign of labour market integration, although it does not prove that the job was obtained thanks to the withdrawal of the benefit. Istat itself estimated that the change of system hurt the disposable income of some **850,000 families**, with an average annual loss of close to **2,600 euros**. The final balance will depend on whether Italy turns the reduced dependence on benefits into stable and productive jobs, without leaving those who cannot find work unprotected.

## Record employment and healthier finances

The employment recovery has become one of the main arguments for Italy's economic improvement. **Scope Ratings** confirmed the country's credit rating at **BBB+ with a positive outlook** and expressly highlighted the strengthening of its fundamentals. The agency notes that record employment, healthy corporate balance sheets, a profitable and well-capitalised banking system and a positive net international investment position have reduced significant macrofinancial vulnerabilities. In its analysis, Scope argues that Italy's capacity to absorb shocks has been underpinned by the resilience of domestic demand, the strength of corporate balance sheets and a robust labour market.

The rise in employment supports household consumption and cushions the impact of inflation and rising energy costs. For an economy traditionally characterised by its lack of dynamism, getting more people to work means expanding output, strengthening the contribution base and potentially increasing tax revenue. Scope forecasts that GDP will grow **1% in 2026**, after growth of 1.1% in 2024 and 0.6% in 2025, and expects inflation of **3%** this year.

Public finances are also showing signs of stabilisation. The deficit fell from **9.4% of GDP in 2020 to 3.1% in 2025**, and the agency expects it to stand at 2.9% in 2026, before temporarily rebounding to 3.4% in 2027 and falling to 2.7% by 2031. It also anticipates a primary surplus of **1.2% of GDP** this year, compared with the more modest balances forecast for Spain and Portugal. A larger employed population makes fiscal consolidation easier by generating tax revenue and reducing some unemployment protection needs.

The fiscal gap associated with uncollected taxes narrowed from **5.6% of GDP in 2014 to 4.1% in 2023**, while the government maintains a trajectory aimed at stabilising public debt at around **135% of GDP in 2031**. Not everything is rosy. Scope warns that Italy's employment rate remains roughly **eight points below the eurozone average**, especially due to the low participation of women and young people, and notes that labour productivity grew only **0.1% a year between 2000 and 2025**, compared with 0.8% for the monetary area as a whole. That is the real pending exam. More people working is a necessary condition for sustaining growth, but without productivity the momentum runs out. For now, Italy has achieved something that seemed especially difficult: improving its labour market, reducing unemployment and strengthening its economic resilience while transforming its social benefits system. It remains to be seen whether the south turns employment into lasting income or whether the improvement remains just a good statistical figure.