2011 report on economy and employment

A union-backed annual report on the Greek economy, published in September 2011, is seen as particularly important this year because of the country’s financial crisis. The report, by the Labour Institute (ΙΝΕ) of the Greek General Confederation of Labour (GSEE) and civil service union ADEDY, focuses on the crisis, government efforts to combat it, and its effect on jobs, labour relations and unemployment, which has soared alarmingly. Unions feel government action is ineffective.

Background

This is the twelfth year in which the Annual Report on the Greek Economy and Employment (in Greek) has been published by the Labour Institute of the Greek General Confederation of Labour (INE/GSEE) and the Confederation of Public Servants (ADEDY). The report is expected to contribute to the public debate about the developments in the economy, the labour market and labour relations, and the main macroeconomic indicators, such as labour productivity, wages, expenditure and investments.

The report’s primary objective is to evaluate the policies of ‘internal depreciation, austerity and controlled default’, and to highlight the need to plan alternative policies for meeting social commitments, rather than making a profit.

It also investigates the effects of the government’s two laws to bolster the economy:

  • Law No. 3845/2010 – Measures for the implementation of a support mechanism for the Greek economy by the Member States of the euro area and the International Monetary Fund (IMF);
  • Law No. 3985/2011 – Medium-Term Fiscal Strategy Framework 2012−2015.

Report findings

Government fails to achieve goals for economy

The government has not managed to reach its goals for the economy, which is in its third year of recession, despite great sacrifices made by employees and pensioners. One particular goal that seems certain to be missed is the return of Greece to the markets in 2012.

The recession has led to:

  • a deep difference between the income per capita in Greece (which fell to 2000 levels) and that of the European Union’s 15 most developed countries;
  • a fall in productivity per capita (to 2000 levels);
  • a decline in purchasing power (to the levels of 2001–2002);
  • a rise in the unemployment rate (equalling that of the 1960s);
  • a fall in domestic demand (to the level of 2003) (see table).
Changes in key areas of the Greek economy
 

Reduction 2009–2011

Decline to year …

Reduction compared to the average ΕU15

Decline to year …

Reduction over the average of 35 advanced countries

Decline to year …

Domestic demand

16.4%

2003

   

8.2%

2001

GDP

10.2%

2005

   

13.5%

2001

GDP per resident    

9.0%

2000

   
Labour productivity

3.3%

2005

6.4%

2000

7.6%

2000

Purchasing power of average wage

11.4%

2003

8.3%

2001. 2002

   
Percentage of unemployment

15.2%

1960s

       
Capital stock

3.2%

2007

       
Gross fixed capital

38.2

1998

       
Product ratio/capital

10.0%

1999

       
Export performance*        

7.1%

1975

Notes: EU15 = European Union’s 15 most developed countries; * Export performance – Growth of exports minus growth export markets

Source: Edit Ameco, European Commission

More specifically, the financial crisis has caused:

  • a substantial fall (-16.4%) in domestic demand from 2009–2011, leading to a 10.2% fall in GDP over the same period, plus a significant rise in unemployment;
  • a 4.5% fall in household spending in 2010, which is expected to reach 6.4% by the end of 2011.

Following the 2008 crisis, government debt reached 127.1% of GDP in 2009, (compared with the average for the euro area countries of 79.3%) with the government deficit at 15.4% of GDP (compared with the euro area average of 6.3%).

Employment

There were 761,000 unemployed people in Greece in 2011, a 61.5% increase on the 2009 figure of 471,000. The unemployment rate, after decreasing continuously between 2001 and 2009 from 12% to 7.6%, increased dramatically during 2008 and 2011 from 7.6% to 15.2%, whereas in the European Union the unemployment rate rose from 9.0% to 9.5%. The ΙΝΕ/GSEE-ADEDY report predicts, for 2012, another rise to around 17%–18% with actual unemployment reaching 22%–23%, which almost reaches the 26.4% unemployment rate (864,000 people) seen in 1961. This was when Greece recorded its greatest emigration figures.

People in work numbered 4.58 million in 2008, a rise of nearly one million jobs from the 1991 figure of 3.63 million. However, about a quarter of these (263,000) were lost between 2009 and 2011 (5.8% overall). This decrease in employment is due to the rapid fall in production, along with the fall in GDP. In 2010–2011, the reduction in the number of employees amounted to about 4.7%, while GDP declined by 8%. The remaining 3.3% of the fall in production is derived from the decrease in labour productivity.

Wages

The doubling of the unemployment rate between 2009 and 2011, in combination with wage cuts for civil servants, has caused actual wages to fall by 11.5% in the economy as a whole and by 9.2% in the private sector in 2010–2011.

The average annual earnings in Greece were €27,336 in 2011, compared with the 15 most developed EU Member States (former EU15) average of €39,562. Only in Cyrus and Portugal are earnings less than those in Greece.

Up to and including 2011, the increase of the average actual earnings per employee resulted in a significant convergence of wages in Greece compared to the respective average of the former EU15. Such convergence followed, up to 2009, an upward trend equal to 0.7% per annum. In 2010–2011, however, the upward movement of the convergence of earnings was halted, and the indicator fell from 86% of the EU15 average to 78.5%. Additionally, by the end of 2011, the convergence of real wages is expected to reach the levels of the second semester of 2001.

The minimum wage in Greece is about 60% of that in Belgium, France, Ireland, Luxembourg, the Netherlands and the UK. It is slightly higher compared to that in Malta, Portugal, Slovenia and Spain.

Industrial relations

A big shake-up in the rules governing industrial relations has led to the restriction of labour rights. These changes were put into practice through the enactment of nine laws (2009–2011) regarding public and private sector employees.

The most important measures include:

  • a cut in the basic pay, bonuses and allowances for public sector workers and pensioners, effective from 2010;
  • making it easier to sack workers, with a reduction in the legal levels of severance pay;
  • cuts in overtime pay, and reducing the minimum wage for young employees;
  • suspending recruitment in the public sector and the increased use of flexible working;
  • restructuring of public utilities, including the Hellenic Railways Organisation (GR1110019I), with a transfer of affected workers and a consequent change in individual and collective employment contracts;
  • the abolition of rules in the private sector governing collective employment agreements, making the national general employment agreement (EGSSE) applicable to all workers – overriding any more favourable sectoral agreement that may still be in force – and stipulating that workers under the age of 25 will get only 80% of the minimum pay set by the EGSSE;
  • limiting the role of OMED, the mediation and arbitration body, to setting the basic wage, and restricting the right of appeal against its decisions to employers only;
  • the strengthening of flexible forms of employment in the private sector, through the reduction of the cost of part-time employment, the extension of the time period during which work rotation may be implemented, the facilitation of layoffs and the reduction of the cost of layoffs (severance pay); the promotion of privatisation, and a radical shake-up of labour laws governing public sector workers.

Commentary

The policies adopted so far, although of a strict fiscal discipline, seem to be ineffective and without redistributive and development features, leading the country into a deep recession.

The ΙΝΕ/GSEE-ADEDY report suggests instead a fairer distribution of wealth, with an increase of tax on income from capital and accumulated wealth, the levying of a ‘green’ tax, and more investment in development. The report calls for the improvement of social infrastructure, and investment in new products and services of high added value, quality and innovation, offering employment and structural competitiveness.

Penny Georgiadou, Labour Institute of Greek General Confederation of Labour (INE/GSEE)

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