Greece: Wage formation
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Convergence of workers’ incomes with incomes in the developed countries of the EU, protection of social cohesion and reduction of inequalities, boosting competitiveness, having the advantage of low labour costs, and the need to reduce inflation are the factors, often contradictory, that create the framework for wage formation in Greece. As the new National General Collective Labour Agreement (EGSSE) signed in March this year showed, the function of minimum wages, at least in protecting incomes from increased inflation, constitutes a minimum safety net for an increasing part of the population, for whom more and more characteristics of new poverty are being created.
1.Systems of wage formation
The system for setting wages in Greece is different forworkers in the private sector and workers in the public sector.
In the private sector, collective agreements set wages at various levels (national, industry-wide, enterprise-level), and where no agreement applies, either of the sides can take the initiative to request an arbitration decision, which has the character of a collective agreement and is binding.
The basis for setting wages in the private sector is the National General Collective Labour Agreement (EGSSE), which usually has a term of two years and sets the overall minimum wages for white- and blue-collar workers in the private sector. The amount of minimum pay varies depending on a worker’s years of service and family status.
On the sectoral level, the industry-wide collective agreements set minimum levels for the workers that they cover. The enterprise-level agreements set minimum wages for workers in individual enterprises. Operating on the principle of the applicability of the collective agreement with the most favourable terms, the industry-wide and enterprise-level agreements usually contain more favourable provisions than the EGSSE. Furthermore, if a new EGSSE sets minimum wages for some workers that are higher than those set by another collective agreement or arbitration decision, then these agreements cease to apply and the minimum levels set in the new EGSSE are applicable.
In the public sector pay is determined by law, according to the government’s annual incomes policy. Law 2738/1999, which recognises the right to collective bargaining in the public sector, excludes pay issues from such bargaining. The law governing public servants’ pay for 2007 was Law 3606/07, which increased public servants’ basic pay by 3.5%. Various levels of minimum wages are set in the public sector, depending on level of education, years of service and hierarchical grade.
The main actors in the private sector are the Greek General Confederation of Labour (GSEE, www.gsee.gr), representing the workers, and the Hellenic Federation of Enterprises (SEV, www.fgi.org.gr ), the National Confederation of Greek Traders (ESEE, www.esee.gr ) and the General Confederation of Greek Small Businesses and Trades (GSEVEE, www.gsevee.gr), representing the employers. Although no agreements address the issue of pay in the public sector, the public servants’ representative body, the Confederation of Public Servants (ADEDY, www.adedy.gr), brings pressure to bear on the government to improve both pay and non-pay conditions.
No provision is made for direct participation of state bodies in pay bargaining. However, various government bodies (state officials) and authorities (e.g. Bank of Greece) intervene indirectly, by citing the need for self-restraint in demands for pay increases, with a view to boosting the competitiveness of the economy.
If bargaining fails, then the two sides apply either unilaterally or jointly to the Mediation and Arbitration Service (OMED, www.omed.gr, GR0707059I), an independent body providing mediation and arbitration services. Arbitration decisions are binding on all members, and are based on the one hand on the points of convergence of the parties’ views, and on the other on the evidence presented during collective bargaining on their points of disagreement.
None of the social partners has a body to monitor the regulations of collective bargaining. The regulations of collective bargaining create law and their violation comes under the jurisdiction of the Labour Inspectorate of Ministry of Labour.
2. Wage Developments
Following the comparative report on pay for 2006 (GR0704029S and GR0605019I), increases in minimum pay of 5.1% beginning on 1.5.07 were provided for. For the preceding months of 2007, the 2006-2007 EGSSE provided for a 2.9% increase. In March 2008 a new EGSSE was signed for 2008-2009, providing for pay increases of 3.45% on 1.1.08, another 3% on 1.9.08 and another 5.5% on 1.5.09.
As regards the statutory framework, no provision has been made for wage differences between men and women. However, INE/GSEE-ADEDY’s Annual Economic and Employment Outlook reports a difference in men’s and women’s real emoluments. Three out of four employees with net incomes of less than €500 are women, and in the high-income brackets, with net salaries of over €1,501, only 20% of employees are women. In addition, the unemployment rate of women is over double that of men. To achieve the goal of increasing women’s participation in employment to 60% from the current 46.2%, the General Secretariat for Equality (www.isotita.gr) signed in 2006 a protocol for cooperation with the employers’ side to increase women’s participation in employment and boost female entrepreneurship.
Among the most important industry-wide collective agreements in recent years was the two-year agreement for the banking sector (GR0701059I), which provided for a €44 increase in monthly salaries across the board beginning on 1.1.06 and a €47 increase beginning on 1.1.07. In the area of trade and sales, a two-year industry-wide agreement was signed at the end of 2006 (GR0611029I). This agreement provided for wage increases of 3% from 1.9.06, 2.7% from 1.1.07, and an additional increase of 3% from 1.9.07.
As regards the possibility of individualised wage formation, the basic regulations of the industry-wide and enterprise-level agreements on wage formation for all staff (subject to certain criteria such as education and length of service) and the various pay schemes that link pay with productivity and apply to all staff remain in effect. However, a trend is emerging, particularly in the banking sector (GR0602105N), to lay the emphasis on the enterprise-level agreements rather than the industry-wide agreements, which in practice entails a trend towards more decentralised, more individualised bargaining.
Recently the labour unions have been concentrating their efforts on overturning the new regulations on the insurance system, whose main feature is that large categories of workers such as women will remain on the job longer before retiring. It was on this issue that the biggest wave of industrial action of recent decades took place (GR0801059I and GR0711019I). But even where the main demand was against the new insurance system, strikers also reiterated the demand for wages that afford a decent standard of living (GR0701039I).
One positive development was that an agreement between the social partners on the new EGSSE was achieved in a short time. The social partners were of the opinion that an advantageous agreement was reached leading to real wage increases. The point on which they disagreed related to the criteria for setting the amounts of successive wage increases. For the workers, the increases should offset loss of income from rising inflation and provide them with a share of the increase in productivity. Although the employers recognise that the high prices and unemployment affecting Greek society are partly a result of negative international developments, and realise that wages are too low, for them the main goal is to boost the competitiveness of the Greek economy, and therefore any pay increases must not affect competitiveness.
3. Minimum wages
As already mentioned, Greece has fixed levels of minimum pay, which are set in accordance with the model of a typical worker, including, for example, the working conditions pertaining to typical working hours and the five-day week. Minimum wages, as mentioned above, are mainly set by the rise in inflation, as anticipated on the basis of estimates from Greek (e.g. Bank of Greece, Annual Report on the Economy of the Ministry of Finance) and international organisations (e.g. European Commission). On 1.1.08 the salary of a newly hired unmarried worker without children (the EGSSE’s basis for calculation) will increase to €681.
Based on relevant research by the National Statistical Service (www.statistics.gr) using data from the second quarter of 2006, half of Greece’s paid employees (whose total number for this period has been estimated at 2.8 million) have net incomes of between €501 and €1000. Thus for the majority of paid employees, increases in minimum pay are of particular importance. It should be taken into account that the minimum wage in Greece on 1.1.2007 was 54% of the respective minimum wage in the wealthiest EU member states.
Table 1
| EGSEE’s | Term (from-to) | Daily wage (euros) | Rate of increase % | Monthly salary (euros) | Rate of increase % | Annual nominal wages (12 months) | (Rate of increase in annual nominal pay (in relation to previous year) % | (Rate of change). Comparison of average annual Consumer Price Index with that of previous year | Rate of change of real wages |
|---|---|---|---|---|---|---|---|---|---|
| 2006 | 1.1.06 1.9.06 | 27.17 27.96 | 2.9 2.9 | 608.33 625.97 | 2.9 2.9 | . 7,370.52 | 6.44 | . 3.2% | 3.13% |
| 2007 | 1.1.07 1.5.07 | 27.96 29.39 | 0 5.1 | 625.97 657.89 | 0 5.1 | 7,767 | 5.38 | 3% | 2.31% |
Source: INE/GSEE-ADEDY
INE’s Annual Economic and Employment Outlook for 2007 (GR0801079I), reports that the net minimum wages is 45% of the net mean wage.
Regarding the question of minimum wages, the workers’ side believes that the minimum wage, which is earned by a large proportion of workers, must be increased to converge with the mean wage. Thus the percentage of poor workers will be reduced, whereas in terms of social cohesion increasing minimum wages is a much more important policy than granting any other benefits. Although the employers’ side recognises the severity of the problem of poverty, it believes it is more important to increase employment and boost competitiveness. Thus the employers have proposed (GR0602106F) that the minimum levels of pay not be applicable to areas with high rates of unemployment, so that they can hire workers in such areas without running the risk of relocation. This proposal was not acceptable to the workers, who insist on the need for a system for determining minimum levels of pay.
3. Wage formation within IT sector
The sector of new technologies has been a particularly dynamic one in recent years. A study by the Observatory for the Greek Information Society (www.observatory.gr) on the situation in the sector has highlighted the following characteristics.
In 2005 a total of 1,801 enterprises in the broader information and telecommunications sector (including trade in ICT-related goods) were doing business in Greece. Of these, 87% were in the information technology sub-sector and 13% in the telecommunications sub-sector.
Based on data from the Ministry of Finance, between 2000 and 2003 the number of companies in the sector increased on average by 27.2%, whereas the total number of companies in the country as a whole increased by 3.5%. In the same period, the turnover of companies in the sector increased by 17.5%. Because of this dynamism, the companies in the sector represented 1.5% of all companies in the country in 2003, compared to 0.8% in 2000. In 2005 their share of national GDP was 3.5%.
Companies in the sector diverge widely between a few large companies and the vast majority, which are small enterprises. In 2005 41% of total turnover in the sector was attributable to the five biggest companies.
Also indicative is the fact that between 1999 and 2005 the ratio of households’ spending for new technology goods and their total spending more than doubled.
In 2006 there were 80,000 workers in the sector, compared to 58,000 in 2000, i.e. an aggregate increase of 37.4% and an average annual increase of 5.4%.
Based on these data, employment in the sector represented 1.68% of employment in the whole economy, higher than in 2000, when the figure was 1.34%.
The vast majority of companies (81.5%) employed fewer than 49 people, 14.8% employed between 50 and 249 people, and only 41 companies could be considered large i.e. with more than 250 employees. These included mainly chain stores selling technology-related goods and fixed and mobile telephony companies.
No industry-wide agreement is signed in the sector, which also includes sub-sectors from broader categories such as trade, construction, etc. Furthermore, the vast majority of companies in the sector are too small to be unionised. There are, however, enterprise-level agreements in the sector’s large enterprises. For employees in the electronic goods trade, there is the industry-wide agreement between ESEE on the traders’ side and the Federation of Greek Private Employees (OIYE) on the employees’ side.
As regards earnings, there are no characteristics distinguishing them from earnings in other sectors of the economy. Nevertheless, the Union of Computer and Communications Engineers says that Greek scientists’ pay is differentiated in the same way as in other countries. In Greece the average monthly salary of scientists in the sector is around €1,500, among the lowest in Europe. Thus it is objectively difficult to have an influx of immigrant scientists, since pay in Greece is already very low. On the other hand, the Observatory’s field research has shown that enterprises are aiming change the way they are organised, by cutting costs in order to increase productivity. Furthermore, no differences between multinational and Greek-owned businesses have been noted as regards pay policy. The enterprise-level agreements in the sector provide for much higher salaries for workers than successive EGSSEs. For example, the 2004-2005 enterprise-level agreement at Cosmote mobile telephony company created better levels of minimum pay than the EGSSE for those two years. Thus, in 2004 minimum pay at Cosmote was €775 (compared to the €559 set by the EGSSE) and in 2005 it was €813.75, compared to the €591 set by the EGSSE (GR0410106F). These data, in conjunction with the fact that the sector’s employees have a relatively high level of education, and that highly skilled employees (electronic technicians, engineers, etc.) are in the €1,251-1,500 pay bracket, which according to the INE/GSEE survey includes only 11.6% of Greek paid employees, create pay characteristics in the sector that are better than those set by the EGSSEs.
Active in the sector on the companies’ side is the Federation of Hellenic Information Technology & Communications Enterprises (SEPE, www.sepe.gr), whose members represent 95% of the sector’s turnover in Greece. One of SEPE’s objectives is to develop the sector of new technologies in Greece and safeguard the interests of its members. As already mentioned, no industry-wide collective agreement is signed.
Views of the National centre
Based on the most recent EGSSE signed in mid- March and the pay increases that slightly exceed estimated inflation, the value of minimum pay appears to be recognised as an indicator for boosting social cohesion. Furthermore, workers’ increased occupational and professional skills in certain growth sectors (such as the new technologies sector, banking sector, etc), contributed to the achievement - on industry or enterprise level - of minimum pay higher than that provided for in the EGSSE. For employees in sectors with positive growth outlook, these wages above the minimum standards of the EGSSE reflect increased productivity and the good prospects of these sectors.
Stathis Tikos, INE/GSEE