INE issues annual economic and employment outlook

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In September 2000, the Institute of Labour of Greece's GSEE and the ADEDY trade union confederations issued its second Annual economic and employment outlook. The report's basic conclusions are that: increases in wages and demand have had positive effects on production and employment; the principal factor in addressing unemployment is accelerated economic growth; and immigration to Greece has increased employment among Greek people.

On 1 September 2000, the Institute of Labour (INE) of the Greek General Confederation of Labour (GSEE) and the Confederation of Public Servants (ADEDY) released its second Annual economic and employment outlook at the HELEXPO international trade fair in Thessaloniki (GR9908145F). The report contains a detailed analysis of macroeconomic indicators for the Greek economy, for the purpose of explaining the evolution of employment and unemployment and examining the effects of increases in real wages on the course of the economy.

The report finds that during 2000 and 2001 the real convergence of the Greek economy with EU averages will continue for the fifth and sixth consecutive years. The GDP growth rate in Greece is expected to rise from 3.5% in 1999 to 3.8% in 2000 and 3.9% in 2001. Alongside this recovery in production, there has also been a significant increase in labour productivity in recent years. As a result of the practically parallel rise in GDP and labour productivity, the employment rate has steadily risen at an average annual rate of about 1%.

Unlike other similar reports - by the Bank of Greece, theMinistry of National Economy, the Organisation for Economic Cooperation and Development (OECD) and the European Commission- which attribute the recovery of the Greek economy to neoliberal policies, the INE report believes that the driving force in the Greek economy has been the substantial increase in effective demand. This increase is seen by INE as corroborating a series of critical observations it has systematically put forward since the beginning of the 1990s in opposition to the government's neoliberal economic policy of holding down wages and demand (over the 1986-95 period).

Employment and unemployment

During the past decade, employment in Greece has increased by 217,000 persons. However, the labour force has increased over the same period by about 459,000 persons. Thus the number of unemployed people increased by 240,000, and the unemployment rate increased from 7.7% in 1991 to 11.7% in 1999. This increase, combined with the increased numbers of people out of work for over a year, has made unemployment the central problem of the Greek economy.

The increases in employment and the labour force are long-term trends over the past 25 years. However, during the 1990s, the rapid increase in the labour force, despite the increase in employment, led to a substantial rise in the unemployment rate – in contrast to the 1980s, when the unemployment rate remained stable at around 7%-8%. It should be noted that in recent years, despite the rapid increase in GDP, employment has either risen slightly or has fallen.

As concerns employment prospects in the years to come, in mid-1999 - states the INE report - there were some uncertain but real indications that Greece was entering a period when the productivity of labour would increase at a relatively high rate, both because the Greek economy is growing at an annual rate of over 3%, and because increased investments in industrial equipment, computers and other machinery are bringing new technologies into industrial processes. The negative impact these developments will have on employment will probably be intensified further by the restructuring of the Greek economy. Such restructuring involves two simultaneous moves - a move to slough off loss-producing capital and a move towards technological and organisational modernisation of viable enterprises - both of which exert a negative influence on employment in industry. Apart from the above, some doubts are now being expressed with regard to the ability of the service sector to absorb the "superfluous" labour force, as it has consistently done in the past. This is because employment in the public sector is tending to stabilise, and more and more new technologies are being used in the private service sector. This has an obvious impact on the number of people in employment (a good example is banking, where employment is expected to continue to increase at low rates or remain stable in the medium term, whereas the long-term prospects appear negative).

This are the reasons put forward by the INE outlook to explain the fact that, in the midst of an economic recovery, total employment has risen only slightly. The problem of unemployment also depends, however, on the evolution of the labour force, which increases every time employment increases, but is also strongly influenced by the higher numbers of young people and women entering the labour market.

Greece's unemployment rate, which in the 1980s was one of the lowest among the EU Member States, is currently well above the average: only two Member States have a higher rate. It would not be unreasonable to say that, since the other EU countries are further along the road to modernisation of production than Greece, their potential for increased unemployment is lower. Thus it is not at all unlikely that in the years to come Greece may have the highest rate of unemployment in the EU.

The INE report maintains that economic growth is the main factor in dealing with rising unemployment, which has repeatedly disproved the forecasts of economic policy experts (since, according to the report, in Greece the "Non-Accelerating Inflation Rate of Unemployment" (NAIRU) stands at about 5%).

Immigrants and employment

A degree of "economic racism" has developed in recent years in Greece, based on the idea that immigrant labour is forcing Greeks out of employment and into unemployment. According to the INE report, this is a misunderstanding, and in fact the Greek economy profits from immigrant labour, which helps increase production and employment. Immigrant labour creates more jobs for Greek citizens than it takes away from them.

Immigrants can be divided into two groups: those who perform jobs in which Greeks do not show the slightest interest; and those who take jobs which under normal conditions would be taken by Greek workers. Thus, immigrant workers are pushing Greeks out of some jobs, in some sectors, says the report. However, immigrants who take jobs in which Greeks show no interest increase employment rather than create unemployment. This is because their labour creates incomes not only for themselves but also for their employers. When spent, these incomes are converted into increased demand and therefore increased production. The increase in production brings about an increase in employment – employment of Greeks. The increase in employment of Greeks again creates new incomes which are spent, increase production, and so on ad infinitum. The employment of immigrants thus has multiplier effects on both the income and the employment of Greeks. A high percentage of immigrants perform jobs not acceptable to Greeks. Correspondingly, the percentage of immigrants competing with Greeks for the same jobs is low. Thus, in all probability, the positive effect of immigrant labour on employment more than makes up for the effect of replacement of Greeks by immigrants in some sectors, such as construction. The INE report uses a calculation based on the "Keynesian multiplier" to support its views.

Commentary

The INE's Annual economic and employment outlook, now issued for the second year running, constitutes an integrated theoretical contribution by the trade unions to the discussion on the economy, employment and unemployment, since it analyses all macroeconomic variables on the basis of economic theories which are in opposition to the prevailing neoliberal views. Thus the INE outlook differs radically from other similar reports, both as to the causes of the rapid growth of the Greek economy (1995-2000) and as to the causes of unemployment. Therefore it reinforces the views of the trade union organisations in the process of social dialogue currently underway in Greece (GR0009183N). (Elias Ioakimoglou, INE/GSEE-ADEDY)

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