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The Greek government is seeking to achieve public budget surpluses of 5% to 7%, while public servants have expectations of regaining the losses in purchasing power that they have sustained over the past 15 years. The aspirations of the two parties are not compatible as the government seeks to introduce a new pay system for public servants in summer 2001, and as a result the margins for bargaining are limited. A feeling of unfairness and discontent is growing among public servants.
In summer 2001, the Greek government defined the basic elements of a new pay system in the public sector, on which it intends to open a dialogue with the Confederation of Public Servants (ADEDY). Previous collective bargaining with the public servants' union has not led to an agreement, since the workers concerned have undergone significant losses of pay over the past 15 years and are hoping for substantial increases, while the government is under pressure to meet the obligations it has undertaken to the European Union with regard to public finances. According to the Greek government's Stability and Growth Programme 2000-4, it intends to achieve a surplus of 5%-7% in the public budget balance over the five-year period.
With the new pay scale, the government will try to reduce or even abolish the special "pay supplements" or bonuses enjoyed by certain categories of public servants. The transition from the current to the new pay scale, which will take place over three years, will in all probability cause some unrest and opposition among public servants, first because it will not lead to a substantial rise in wages, and second because it will change relative wages and is therefore likely to create a sense of unfairness in certain categories of workers.
Dramatic decline in public servants' real wages
In 2000, public servants' pay in Greece represented less than 11.5% of GDP. This figure refers to people employed in "general government", which, apart from central government, also includes local government, social insurance funds and public law bodies (in health, education and social welfare). Compared with other countries, public servants' pay in Greece, as a percentage of GDP, is not among the highest in the EU - there are five countries in which the relevant figure is higher. The development of the paybill of people employed in general government in Greece, as a percentage of GDP, can be divided into three periods: 1974-85, during which period wages increased from around 8% to around 14% of GDP; 1986-94, when it fell back to 10.6%; and most recently, 1995-2000, when it stabilised at around 11.5% of GDP.
With regard to the number of people employed in general government in Greece, three periods can again be distinguished: the first (1980-90), was characterised by annual increases that remained fairly constant at around 4%; during the second period (1991-3), the number of people employed in general government fell; and since then (1994 onwards) annual changes have been small, fluctuating around 1% on average.
On the basis of these data, the figure below calculates the development of the average wages of public servants from 1981 to 1999 at constant 1981 prices. The changes shown in the figure reflect the change in purchasing power of the average wage of workers in general government. The figure also shows the respective change in the average wage in the business sector of the Greek economy (including state-owned utilities and enterprises).
Comparing pay in the two sectors of the economy, the purchasing power of the average wage in the business sector followed a fairly steady long-term trend beginning in the early 1980s and ending in the mid-1990s, whereby the whole increase in labour productivity was transformed into higher profits for enterprises. Only in recent years has an increase in real wages been seen, which has brought purchasing power up to levels 15% higher than those of 1981. In the meantime, labour productivity in the business sector has increased by around 50% (1981-2000). The development of average wages in the public sector is evidently much less favourable. Their purchasing power fell dramatically in the years 1986-7 and 1991-3, leading to an approximate 10% decrease in the value of the average wages of people employed in general government, comparing 2000 with 1981. There was a significant correction in the last four years, but the losses sustained in 1986-7 and 1991-3 have still not yet been recovered.
Developments in average real wages in Greece, 1981-2000
Commentary
Control of public expenditure is one of the main objectives of public finance in Greece. It allows for the creation of primary surpluses that will be allocated to the reduction of public debt (Greece's primary surplus is already 5% of GDP and rising). Moreover, such a policy has also been recommended by EU institutions, which propose the adoption of specific targets regarding the development of revenues and expenditures, the examination of their "quality" and the creation of automatic mechanisms for managing unforeseen revenues and expenditures. Such mechanisms would ensure that unexpected expenditures would be offset by cuts in other expenditures, and not by rising taxes. The medium-term objective, according to the EU's Broad Economic Policy Guidelines, is to reduce further the size of the public sector. This gives the Greek government a very narrow base for bargaining with public servants as regards their real wages.
By contrast, public servants have seen the purchasing power of their wages fall over the past 15 years, and as a result they are hoping for substantial wage increases. Their expectations are reinforced by the fact that the Greek economy has been growing at an annual rate of 3.5%-4% for the past five years and productivity increases are the highest in the EU, next to those of Ireland.
Therefore, the conditions that are being created are making bargaining extremely difficult. In the event that the government implements a new pay scale far below the expectations of the public servants, it will result in a rise in social tension and the development of strong discontent among public servants. (Elias Ioakimoglou, INE/GSEE-ADEDY)
