Indirect increase in minimum wage

Download article in original language : GR0005171NEL.DOC

On 3 April 2000, the government announced indirect financial assistance for 270,000 low-paid workers receiving minimum salaries and wages, by paying their social security contributions from the state budget. This announcement brought mixed reactions from the Greek General Confederation of Labour (GSEE), while strongly opposing views were also expressed in the media.

On 3 April 2000, the Prime Minister, Kostas Simitis, announced that the employees' social security contributions of low-paid workers receiving minimum salaries and wages would in future be paid out of the state budget. The president of the Greek General Confederation of Labour (GSEE) expressed the view that the initiative constituted a positive response to a very important demand of GSEE and low-paid workers. In particular, the GSEE president noted that this option helps redistribute income in favour of low-paid workers, offering substantial support to 270,000 workers and contributing to social cohesion and solidarity. The measure effectively increases the value of the national minimum wage by 8%.

However, the under-secretary of GSEE released a statement in which he took an opposite stand to that of the organisation's president. The under-secretary expressed apprehension regarding implementation of the measure, and also claimed that it was inadequate. He pointed out that the minimum wage has lost around 16% of its purchasing power over the last 15 years, and has diverged significantly from the average wage. Therefore, the announced payment of low-paid workers' social security contributions from the state budget only partially restores the purchasing power of the minimum wage and only partially narrows the gap between the minimum and the average wage. In addition, the vice-president of GSEE stressed that the government should not allow the expenditure entailed by the new measure to cancel out its obligation to contribute to the social security funds under the system of tripartite funding.

To avoid making the employers foot the bill, the government has taken on the cost of an indirect increase in the minimum wage by transferring part of the burden of insurance contributions to the state budget. It has done so because in government circles there is a firm conviction that reduction of labour costs is a factor of decisive importance for increasing the employment rate. However, unions claim that it has not been established in practice that there is such a correlation between employment and labour costs in Greece. That is why the vice-president of GSEE has stated that a direct minimum wage increase (paid for by employers) would be preferable to the announced measure, which will serve to increase the public debt.

The controversy over the announced measure has been taken up by the mass media, where it has been the subject of much discussion, in which the president of GSEE has expressed the view that the payment of social security contributions from the state budget is a response on the part of the government to a long-standing demand by GSEE, raised in the talks over the last National General Collective Agreement (GR9805171N).

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment