Employment in small companies severely hit by the recession

The July 2010 survey conducted by the Institute of Small Enterprises of the Hellenic Confederation of Professionals, Craftworkers and Merchants (ΙΜΕ/GSEVEE) in cooperation with MARC S.A. sought to find out how small enterprises in Greece were faring in the middle of the economic crisis. The results reveal the deep recession facing the Greek economy, with closure in the near future considered probable by 20.9% of those surveyed and 21.9% having had to reduce staff numbers.

About the survey

The survey carried out by the Institute of Small Enterprises of the Hellenic Confederation of Professionals, Craftworkers and Merchants (ΙΜΕ/GSEVEE), in cooperation with Marketing Research Communication S.A. (MARC S.A.), aimed to record basic facts and trends for small enterprises in the middle of the economic crisis. The survey was conducted between 15 and 28 July 2010 on a national sample of 960 enterprises employing up to 49 people.

Main findings

The survey allows a clear evaluation of the enterprises’ basic economic facts during the first half of 2010 while at the same time making a prediction for the next half. According to ΙΜΕ/GSEVEE:

The results reveal the deep recession facing the Greek economy. The recession is expected to continue and to intensify with unpredictable consequences, if measures are not taken for the weaker – in terms of income – strata and for supporting, in particular, small and very small enterprises, which create and maintain a stable number of jobs in Europe and in Greece.

Closure of enterprises

In response to the fundamental question of whether an enterprise was able to carry on its productive activity, the survey’s findings were as follows.

• One out of five enterprises (175,000 enterprises or 20.9%) thought it probable they would close down in the near future. This percentage is almost double that found by a similar ΙΜΕ/GSEVEE survey in May 2009 (11.7%).

• Almost 200,000 enterprises (23.5%) were finding it difficult to carry on their business activity.

(It should be noted that the above figures have been obtained by using the percentage to scale up from the sample number to the total number of enterprises in Greece.)

Taking these findings into consideration and assuming a moderate scenario, the researchers at IME/GSEVEE estimated that there was a grave danger of more than 300,000 jobs (managers, self-employed persons, salaried workers) being lost in Greece up to the end of 2011.

It is worth noting that:

• the survey data refer solely to small enterprises and do not take into account the impact of the economic crisis on larger enterprises;

• the survey was conducted in July in the middle of the tourist season when there is a seasonal upsurge in economic activity in Greece.

Employment

A particularly negative impact was recorded in the field of employment, as almost one out of five enterprises (21.9%) had been forced to reduce their number of employees and only 3.6% of the sample’s enterprises had recruited personnel. These figures translate into a loss of about 88,000 jobs in the first half of 2010, especially in the manufacturing sector and the sample’s larger enterprises.

Furthermore, almost three out of 10 business owners who employ personnel (27.7%) predicted that they would be reducing their number of employees during the second half of 2010 and only 2.8% said they would be recruiting people.

Based on the moderate scenario, it was estimated that another 120,000 jobs would be in a precarious state during the next six months.

Predictions for the second half of 2010

When asked to predict their overall economic situation, 67.1% of the business owners surveyed predicted that it would deteriorate. More specifically:

• 65.6% predicted a deterioration in turnover;

• 66.9% predicted a deterioration in liquidity;

• 63.8% predicted a deterioration in demand;

• 64.4% predicted a deterioration in orders;

• 47.5% predicted a deterioration in investment.

Wages

Four out of 10 enterprises had faced problems paying their employees’ salaries.

But more than seven out of 10 business owners said that they had not had to make any cutbacks in their employees’ wages, suggesting that labour costs were not considered the major problem in determining an enterprise’s viability. According to the respective press release by the Hellenic Confederation of Professionals, Craftworkers and Merchants (GSEVEE), ‘this finding justifies the resolute attitude of the associations of very small and small enterprises in not accepting the zero wage increases and the abolition of the “13th month” and “14th month” wages (holidays, Christmas and Easter bonuses).

According to the survey, eight out of 10 business owners questioned wanted the 13th month and 14th month wages to remain as they are or to be incorporated in the year’s 12 monthly payments, whereas only one out of 10 wanted them to be abolished.

However, the fact that one out of three enterprises had been forced to reduce the number of working hours or working days is alarming. This reduction is confirmed by data from a report by the Labour Inspectorate (SEPE) on the conversion of a large number of employment contracts from full-time into part-time or rotational employment contracts.

The majority of small enterprises consider the subsidy for maintaining job positions a more effective measure, followed by the recruitment subsidy. In addition, only one out of 10 enterprises favours the reduction of redundancy costs.

Tax reform

Seven out of 10 enterprises said that a new increase in value-added tax (VAT) rates would severely affect their turnover, while 26% said that they would consider relocating their headquarters for tax reasons.

Three out of four enterprises, mostly the smaller ones from the sample, declared that so far they had been able to absorb the increase in VAT rates. However, one out of two enterprises employing more than 10 people claimed that they had been forced to increase their prices.

ΙΜΕ/GSEVEE estimates that any further increase in VAT rates (from 11% to 23% on goods and services) would have the effect of an ‘atomic bomb’ on turnover, jobs, inflation, the closing down of enterprises and, eventually, on the revenues of both the state and the insurance funds.

Sofia Lampousaki, Labour Institute of Greek General Confederation of Labour (INE/GSEE)