Minimum wage not keeping pace with earnings

Lampousaki, Sofia

Overview

Article

Minimum wage not keeping pace with earnings

Published: 10 February 2008

Sofia Lampousaki

Pay and income

In September 2007, the Institute of Labour (Ινστιτούτο Εργασίας, ΙΝΕ [1]) of the Greek General Confederation of Labour (Γενική Συνομοσπονδία Εργατών Ελλάδας, GSEE [2]) and the Confederation of Public Servants (Ανώτατη Διοίκηση Ενώσεων Δημοσίων Υπαλλήλων, ADEDY [3]) published a report entitled Wages in Greece and in the European Union (in Greek, 1.97Mb PDF) [4]. The report is based on a survey of data from the European Commission [5], Eurostat [6], the Organisation for Economic Cooperation and Development (OECD [7]) and the National Statistical Service of Greece (Εθνική Στατιστική Υπηρεσία της Ελλάδος, ESYE [8]). It also incorporates data from the National General Collective Agreement (/Εθνική Γενική Συλλογική Σύμβαση Εργασίας/, EGSSE) from various years.[1] http://www.inegsee.gr/[2] http://www.gsee.gr/[3] http://www.adedy.gr/[4] http://www.inegsee.gr/ekthesi2007/3.pdf[5] http://ec.europa.eu/index_en.htm[6] http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1090,30070682,1090_33076576&_dad=portal&_schema=PORTAL[7] http://www.oecd.org/[8] http://www.statistics.gr/Main_eng.asp

The Institute of Labour of the Greek General Confederation of Labour and the Confederation of Public Servants (INE-GSEE/ADEDY) has carried out a survey on wage levels in Greece and in the European Union. The survey will form the basis for GSEE’s demands with a view to signing the new National General Collective Labour Agreement (EGSSE). Among its conclusions, the study calls for a 5.4% annual increase in wages.

In September 2007, the Institute of Labour (Ινστιτούτο Εργασίας, ΙΝΕ) of the Greek General Confederation of Labour (Γενική Συνομοσπονδία Εργατών Ελλάδας, GSEE) and the Confederation of Public Servants (Ανώτατη Διοίκηση Ενώσεων Δημοσίων Υπαλλήλων, ADEDY) published a report entitled Wages in Greece and in the European Union (in Greek, 1.97Mb PDF). The report is based on a survey of data from the European Commission, Eurostat, the Organisation for Economic Cooperation and Development (OECD) and the National Statistical Service of Greece (Εθνική Στατιστική Υπηρεσία της Ελλάδος, ESYE). It also incorporates data from the National General Collective Agreement (Εθνική Γενική Συλλογική Σύμβαση Εργασίας, EGSSE) from various years.

Share of labour

In the period 1995–2004, labour productivity increased overall by about 35%. As real wage increases lagged behind labour productivity during this period, from 1995 to 2004 the proportion of wages in respect of gross domestic product (GDP) decreased by seven percentage points – from 51% to 44% (Figure 1). Between 2005 and 2007, labour productivity has slowed down from the average levels recorded during the period 1996–2003 to the current level of 2.3%; it is expected to remain at this level in 2007–2008. Thus, there is less scope for real wages to increase without affecting profit margins.

Share of labour in the private sector, as a proportion of GDP, 1978–2005 (%)

Source: OECD Economic Outlook Database

Income levels

Overall, 55% of employees have a net monthly income of €501–€1,000; 22.3% earn a net monthly amount of €1,001–€1,250; 11.6% are paid €1,251–€1,500 a month; and 5.2% of employees have a net monthly income of €1,501 or higher. A similar proportion of employees (5.1%) receive a net monthly income of €251–€500. In all, 0.8% of workers earn a net amount of less than €250 each month (see table).

Full-time and part-time employment

In general, part-time employment is not highly paid. As a result, this type of employment generates a low net monthly income, with 64.7% of part-time workers receiving a net monthly income of less than €500, most of whom – eight out of every 10 – are women. Part-time workers constitute 53.7% of employees in this pay category. Mainly full-time employees earn net monthly incomes of over €501, whereas part-time employees only represent 1.8% of this wage category.

Permanent and temporary employment

Of all workers employed on a temporary basis, 21.2% receive a net monthly income of €251–€500, and 36.4% are paid €501–€750 a month. Only 11.2% of temporary employees have a net monthly income of over €1,000. On the other hand, 53.9% of people employed on a permanent basis earn a net monthly amount of €501–€1,000, and 42.6% earn €1,001 or more each month.

Public versus private sector

In the private sector, 69.4% of employees receive a net monthly income of €501–€1,000. Overall, the majority of people earning such incomes – eight out of 10 workers – work in the private sector. In the broader public sector, only 29.5% of workers earn a net amount of €501–€1,000, while the majority of workers (67.4%) earn €1,001 or more. One in three women in the broader public sector earn more than €1,250 a month, whereas the corresponding ratio in the private sector is one in five women.

Employment in the broader public sector is defined as employment in the following areas: public services, state-law entities, public organisations, municipalities and communities or municipal enterprises, public utilities, state banks and state-controlled enterprises.

Gender differences

Three out of every four employees whose net monthly income is less than €500 are women. This proportion falls to one in every three employees in relation to the €751–€1,500 pay category, whereas in the over €1,500 category the relative proportion is one woman in five employees. The income level of men and women is about equal only in the category of workers earning a net wage of €501–€750 a month.

**Net monthly pay from main job, 2006 (€)**
This table shows the net monthly pay received by men and women on various types of employment contracts in 2006; it also distinguishes between income received in both the private and broader public sectors.
€	Total employment	Employment				Employees working in:
€	Total employment	Full-time	Part-time	Permanent	Temporary	Broader public sector	Private sector
To 250	20,165 (0.8%)	6,227 (0.3%)	13,938 (11.9%)	9,310 (0.4%)	10,855 (4.2%)	5,712 (0.7%)	14,453 (0.9%)
251–500	121,245 (5.1%)	59,283 (2.6%)	61,962 (52.8%)	66,427 (3.1%)	54,819 (21.2%)	20,727 (2.4%)	100,518 (6.6%)
501–750	573,293 (24.0%)	546,274 (24.0%)	27,019 (23.0%)	479,192 (22.5%)	94,100 (36.4%)	63,162 (7.3%)	510,130 (33.5%)
751–1,000	738,230 (31.0%)	728,208 (32.1%)	10,022 (8.5%)	668,372 (31.4%)	69,858 (27.0%)	191,625 (22.2%)	546,604 (35.9%)
1,001–1,250	533,501 (22.3%)	531,902 (23.4%)	1,599 (1.4%)	513,886 (24.1%)	19,616 (7.6%)	317,812 (36.8%)	215,689 (14.1%)
1,251–1,500	278,201 (11.6%)	276,657 (12.1%)	1,544 (1.3%)	273,667 (12.8%)	4,534 (1.7%)	187,328 (21.6%)	90,873 (6.0%)
1,501–1,750	63,181 (2.6%)	62,970 (2.8%)	211 (0.2%)	60,801 (2.9%)	2,379 (0.9%)	42,529 (4.9%)	20,652 (1.3%)
1,751–2,000	30,346 (1.3%)	29,395 (1.3%)	951 (0.8%)	28,953 (1.4%)	1,393 (0.5%)	18,722 (2.1%)	11,624 (0.8%)
2,001 or more	30,826 (1.3%)	30,678 (1.4%)	148 (0.1%)	29,556 (1.4%)	1,271 (0.5%)	16,974 (2.0%)	13,853 (0.9%)
Answers	2,388,988	2,271,594	117,394	2,130,164	258,825	864,591	1,524,396
No answer	445,157 (15.7%)	418,813	26,344	396,384	48,772	140,282	304,875
Number of employees	2,834,145	2,690,407	143,738	2,526,548	307,597	1,004,873	1,829,271

Income of men (€)	Total employment	Full-time	Part-time	Permanent	Temporary	Broader public sector	Private sector
To 250	5,950 (0.4%)	3,488	2,462	2,122	3,827	1,857	4,093
251–500	30,529 (2.2%)	17,183	13,346	15,265	15,264	4,492	26,037
501–750	260,339 (18.7%)	252,213	8,126	219,357	40,982	25,307	235,031
751–1,000	466,953 (33.5%)	463,285	3,668	422,414	44,539	103,756	363,197
1,001–1,250	346,466 (24.8%)	345,715	751	333,218	13,248	183,526	162,940
1,251–1,500	188,234 (13.5%)	187,237	997	185,171	3,062	117,508	70,725
1,501–1,750	49,403 (3.6%)	49,192	211	47,237	2,167	32,084	17,320
1,751–2,000	22,445 (1.6%)	22,101	344	21,864	581	13,497	8,948
2,001 or more	24,170 (1.7%)	24,170	-	22,900	1,271	12,563	11,608
Answers	1,394,489	1,364,584	29,905	1,269,548	124,941	494,590	899,899
No answer	266,515	254,701	11,814	239,881	26,634	80,460	186,055
Number of employees	1,661,004	1,619,285	41,719	1,509,429	151,575	575,050	1,085,954

Income of women	Total employment	Full-time	Part-time	Permanent	Temporary	Broader public sector	Private sector
To 250	14,215 (1.4%)	2,739	11,476	7,187	7,027	3,855	10,360
251–500	90,717 (9.1%)	42,101	48,616	51,162	39,555	16,235	74,482
501–750	312,954 (31.5%)	294,061	18,893	259,836	53,118	37,855	275,099
751–1,000	271,277 (27.3%)	264,923	6,354	245,958	25,319	87,869	183,408
1,001–1,250	187,035 (18.8%)	186,187	848	180,668	6,368	134,287	52,749
1,251–1,500	89,967 (9.0%)	89,420	547	88,496	1,471	69,820	20,148
1,501–1,750	13,778 (1.4%)	13,778	-	13,565	213	10,445	3,332
1,751–2,000	7,901 (0.8%)	7,294	607	7,089	812	5,225	2,676
2,001 or more	6,656 (0.7%)	6,508	148	6,656	-	4,411	2,245
Answers	994,500	907,011	87,489	860,617	133,883	370,002	624,499
No answer	178,642	164,112	14,530	156,503	22,139	59,822	118,820
Number of employees	1,173,142	1,071,123	102,019	1,017,120	156,022	429,824	743,319

Source: Data from the National Statistical Service of Greece (ESYE), Labour Force Survey, second quarter, 2006

Comparison of minimum and average wages

From 1990 to 2007, the average net wage increased more rapidly than the minimum net wage (Figure 2). However, the ratio between the two rates declined from around 55% in 1994 to around 45% in the six years between 2002 and 2007. Thus, the minimum wage was €270 in 1994, representing 55% of the average wage (€488). By 2002, the average wage had reached €944, while the minimum wage was only 45% of that amount (€430).

Average and minimum wage levels, 1990–2007 (€)

Source: INE-GSEE/ADEDY, 2007

Trends in real minimum wages

Whereas a gradual increase in the real value of minimum wages has been recorded from about the mid 1990s, there has not been a return to 1984 levels (Figure 3). For this to occur, in 2008 real wages should increase by about 4%, which in nominal terms translates to 7.1% – assuming inflation forecasts are taken into account.

Figure 3 shows the evolution of real minimum wages – adjusted for inflation – during the period 1984–2007, taking into account annual nominal wages for each year (on a 12-month basis) and deflating to average levels with the consumer price index, according to provisions of the 2007 Stability Pact for inflation.

Longitudinal trends in real minimum wages, 1994–2007

Note: Reference year 1994=100.

Source: Calculations based on National General Collective Labour Agreements (EGSSEs) and average consumer price index

Conclusions

The INE study concludes by noting the following points.

In social cohesion terms, wages carry much more importance than any other benefit. Therefore, in 2007–2008, in order to maintain the purchasing value of wage earners’ average nominal pay (not adjusted for inflation), their pay should increase by 3.1% in 2007 and 3.1% in 2008. Moreover, in order to avoid the redistribution of income at the expense of labour, nominal wages should also increase by a further 2.3%, representing a total increment of 5.4% annually.
Defining the minimum wage is a necessary tool, which acts as a minimum safety net to prevent an increase in the number of poor workers. Therefore, in 2007–2008, real minimum wages must be increased substantially if there is to be a gradual convergence with the respective wages of other former EU15 Member States.

Source

INE-GSEE/ADEDY, The Greek economy and employment 2007, Annual Report, Athens 2007, available (in Greek) at: http://www.inegsee.gr/ekthesi2007/ekthesi2007.htm

Sofia Lampousaki, INE-GSEE/ADEDY

Eurofound recommends citing this publication in the following way.

Eurofound (2008), Minimum wage not keeping pace with earnings, article.