Working time reduction to create more jobs in Greek banking

Download article in original language : GR9711137FEL.DOC

The employers' organisation and trade unions in the Greek banking sector recently carried out a joint study to examine the potential effects of reducing working time to 35 hours a week. Although the two sides agree that employment will increase by 4%, there are still disagreements over the advisability of reducing working time.

Employers and the trade union in the banking sector set up a joint team of experts to study the effects on employment and profitability of working time reductions to 35 hours a week. The methodology and quantitative results of the study, recently published, have been accepted by all the experts who participated, both from the union and employers' side. However, those appointed by the employers estimate that the increase in the cost of labour (4.7%) will be a significant burden on companies and that this aspect merits further study.

Focus of the study

The calculations carried out by the group of experts from the Greek Bankers' Association and the Greek Federation of Bank Employee Unions (OTOE) aimed at assessing the impact of a range of factors - but in particular the hourly cost of labour - on each bank's pre-tax rate of return on equity. Calculations were made with minimum and maximum prices which permitted sensitivity analysis for relevant variables. Calculations were carried out for the sector as a whole, and for each of the 12 largest commercial banks.

The current working week in Greek banks is 38 hours and 20 minutes. Reducing it to 35 hours will bring about a 9.5% increase in the hourly cost of labour - provided, of course, that there is not a simultaneous reduction in wages or other employee costs, all other things being equal. The researchers made the assumption that the reduction in working time will not be accompanied by a transfer of resources from the state to the banking sector, which would as a result have to bear the entire increase in the cost of labour.

The second assumption of the study is that the reduction in working time will be accompanied by an increase in labour productivity. This assumption was based both on the results of previous experience in reducing working time elsewhere in Europe and on other relevant macroeconomic studies. These increases in labour productivity will derive from improvements in work organisation, the reduction of certain breaks in the working process and the creation of better working conditions. Furthermore, an important role in increasing labour productivity through a reduction in working time will obviously be played by labour/management negotiations and productivity agreements.

These productivity assumptions are perhaps the most important in the study because if they are not forthcoming to a significant degree, then recruitment and labour costs will increase correspondingly. Conversely, provided that the reduction in working time does increase labour productivity, then recruitment and subsequent increases in labour costs are smaller.

The researchers also assumed that in enterprises with a low level of productivity there is much room for organisational improvements and that therefore substantial increases in productivity should be expected. On the other hand, they assumed that in those companies which already enjoy a high level of productivity there was little room for such improvements and that a reduction in working time would not bring about great increases in productivity.

A third assumption made by the researchers is that in the case of executives and certain other categories of staff, the reduction in working time will not lead to recruitment because their working patterns are not linked to working hours. The percentage of job grades which will not be affected in this way by the reduction in working time is 20% of the total number of bank employees.

A fourth assumption regards the average pay for those new employees recruited as a result of the reduction in working time. This average pay was assumed to be 90% of the average in the bank involved in the recruitment.

Finally, in calculating the increase in labour costs, the researchers also took into consideration the additional financial costs entailed in tying up the additional capital needed to pay additional wages.

The results of the study can be summarised as follows: labour costs for the sector as a whole will rise by 4.7%, whereas numbers of employees will rise by 4%. Rate of return on equity will be reduced by 0.4 percentage points to 2.4%, depending on the enterprise. In the sector as a whole, the rate of return on equity will decrease from 24.5% to 22.5%.

Commentary

The fact that the employers' organisation and the trade union in the banking sector now have available, as a common basis for negotiations, a mutually acceptable study on the effects of reduced working time on employment and profitability is a step forward in the discussions being carried out in Greece between the social partners. To date, all assessments and calculations carried out by the two sides have shown substantial variations in their methodology and results. When a similar study was carried out for industry by a joint team of experts from the Federation of Greek Industries (SEV) and the Greek General Confederation of Labour (GSEE), full agreement was not reached on either methodology or on the results of the calculations.

Nevertheless the employers and union in the banking sector attribute varying importance to the fact that the rate of return on equity will be reduced by between 0.4 and 2.3 percentage points, depending on the enterprise. In the view of the employers' side, this reduction will impose a severe burden on the banks. However, the experts from the OTOE point out that it is comparatively more likely that banks operating in Greece will meet the demand for a 35-hour week without a reduction in pay, since the banking sector is characterised by high profitability (24.5% rate of return on equity). So, even though both sides agree on the quantitative aspects of the study, they still disagree over the advisability of a reduction in working time. (Eva Soumeli, INE/GSEE)