INE/GSEE presents economic and employment outlook for 2008

In September 2008, the Institute of Labour (INE) of the Greek General Confederation of Labour (GSEE) published its annual report on the Greek economy and employment. The report examines key developments in the economy, along with industrial relations, social policy and employment.

Background

The Institute of Labour’s (Ινστιτούτο Εργασίας ΓΣΕΕ, INE/GSEE) 2008 Economic and Employment Outlook report (in Greek) – like the 10 previous annual economic and employment outlooks – makes an important contribution to the public debate on labour market developments and industrial relations in Greece, as well as on the evolution of basic macroeconomic indicators such as labour productivity, wages, labour costs and investment. Researched over the course of the entire year, the report is compiled within the framework of the INE/GSEE’s overall research and study activities. The results of the report were presented in September 2008. The findings give advance notice of the general direction of government policy in relation to the economy and employment for the coming period; they also provide a frame of reference for the new national budget.

Pay issues

Based on increases to real wage increases during 2007 (3.9%), pay increases in Greece were the highest of the countries of the EU15. Prior to the 2007 increase, there had been four years during which the average annual increase in Greece was around 3%. These big increases, by international standards, in the average real wage in Greece were fully offset by increases in labour productivity, leaving unit labour costs stable in real terms at 2000 levels.

In the private sector during the 2000-2007 period, there was a cumulative decrease of 1.2% in real unit labour costs. Average real wages increased more slowly than average labour productivity, which left companies with leeway to benefit from higher labour productivity. The effect of this development was that at the end of 2007 real wages in the private sector had increased by 27% over the 2000-2007 period, while productivity increased by 36.5%. Thus, there was a benefit to companies of around 7% in unit labour costs in real terms.

For the year 2007, Greece was in second to last place as regards the level of gross wages in € (net wages plus employee contributions). In Greece, average monthly earnings in 2006 amounted to €1,668 for full-time employees, compared to an average of €2,366 in the other countries of the EU15.

In Greece the mean wage is approximately €1,250. In other words, 50% of paid employees receive gross monthly pay of less than €1,250. Average gross monthly pay stands at €1,668, much higher than the mean wage, since 15% of paid employees have extremely high wages, which raise the average, creating false impressions regarding the great majority of paid employees. The threshold below which workers are designated as low-paid is 2/3 of the mean wage, i.e. around €830 a month. Based on this figure, 22% of workers in Greece are low-paid. The purchasing power of the mean gross wage in Greece in 2007 was 83% of the average in the EU15. Only in Portugal was the purchasing power of wages lower (61%).

Whereas monthly labour costs in Greece were 83% of the comparable mean costs in the EU15 (in purchasing power parities), labour productivity in Greece stood at 91% of the European average.

In recent years unit labour cost in Greece has become the lowest in the EU15. This development relates to the fact that in Greece labour productivity increased substantially in 1996-2004 and increased in the range of 1.7%-2.7% a year during the four years from 2005 to 2008.

Analysis and processing of tax returns in Greece in 2004-2006 show that in 2004 paid employees and pensioners paid 44% of income tax, and in 2006 they paid 50.1% of income tax. By contrast, whereas enterprises paid 43% of income tax in 2004, in 2006 the figure had fallen to 36.3%.

Poverty and income disparities

Based on data from the 2006 EU-SILC survey, Greece’s rate of relative poverty (21%) was second only to that of Lithuania (23%) in the EU27. The high relative poverty rate goes hand-in-hand with great inequality in income distribution: the income of the 20% of the wealthiest Greeks, which represents 40.4% of total income, is consistently around six times higher than the income of the 20% of poorest Greeks, who receive only 7% of total income. The proportion of workers living below the poverty line in Greece is 14%, compared to 7% in the EU-27.

While in the case of steady employment under open-ended contracts the poverty risk ratios are at the same levels in Greece and in the EU15 (4%), in all other cases the ratios are much higher in Greece. In the case of temporary employment, the poverty ratio in Greece is 19%, compared to 12% in the EU15. In the case of full-time employment, the poverty ratio in Greece is 13%, compared to 6% in the EU15. In the case of part-time employment, the poverty ratio in Greece is 26%, compared to 10% in the EU15. In the case of year-round employment, in Greece the poverty ratio is 14%, compared to 7% in the EU15, and in the case of employment for only part of the year, the figures are 19% for Greece and 14% for the EU15.

According to the data from the 2006 EU-SILC survey, in Greece all social transfers (pensions and allowances) reduce the poverty threshold by 19 percentage points (from 40% to 21%), whereas the respective reduction in the European Union as a whole is 27 percentage points (from 43% to 16%). The proportion of public spending on unemployment benefits and early retirement amounts to only 0.4% of GDP, compared to an average of 1.5% in the EU15.

The proportion of the population aged 25-64 in lifelong learning is only 1.9% in Greece, compared to an average of 11.3% in the EU15.

Unlike the vast majority of the countries of the EU27, there is no form of guaranteed income in Greece.

Conclusions of the report

Purchasing power of wages is expected to continue to decrease as inflation in 2008 exceeds 4% on average, compared to 2007 levels. Taking into account the fact that goods and services, the prices of which increase the most and have a greater impact on the consumption of lower-income households, will show an inflation rate of around 6%, it becomes clear that for workers inflation exceeds inflation for the country as a whole by half. It is also worth noting that there are a huge number of households that will be affected by higher-than-average inflation in 2008, since 50% of paid employees receive gross monthly wages of less than €1,250, which INE/GSEE estimates to be the mean wage in Greece.

INE/GSEE argues that the lower competitiveness of products manufactured in Greece mainly relates to the low structural competitiveness of the Greek economy, involving factors of crucial importance, such as the quality of goods, the sectoral structure of industry, the geographical orientation of exports, the organisation of production, the quality of vocational training, etc. In parallel, it argues that current public policies must move towards increasing the share of labour in output, combating tax evasion and contribution evasion, increasing the level of unemployment benefits, the length of time they are paid and the range of people who have access to them, adopting some form of guaranteed income for working-age people with no other resources, and reinforcing public health and public education.

Sofia Lampousaki, Labour Institute of Greek General Confederation of Labour (INE/GSEE)

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