Report proposes path out of economic crisis

The continuing economic crisis in Greece is the focus of the 2013 annual report of the Labour Institute of the Greek General Confederation of Labour, the INE/GSEE. The crisis is now in its sixth consecutive year. The report looks at the Greek Government’s efforts to combat the problems and its effects on domestic demand, industrial relations and unemployment. The INE/GSEE also puts forward its own solution to the problem, which includes a substantial increase in the minimum wage.

Background

The annual report by the Labour Institute of the Greek General Confederation of Labour (INE/GSEE) has made an evaluation of the Greek Government’s response to the economic crisis in the country, now in its sixth year.

The main focus of the report is the Greek economy and employment with an evaluation of policies between 2010 and 2013. The report looks at their impact on the economy and society. The study considers developments in wages, labour costs, productivity and competitiveness, and the prospects for employment and the unemployment rate.

It assesses possible alternatives to economic and developmental policy, labour relations and child care policies. It also considers developments in social security in Greece and the European Union.

The report attempts to understand the ‘impasse’ of some of the policies, such as internal depreciation, austerity and controlled bankruptcy. It also looks at the planning of policies for the reconstruction of the economy in terms of social needs, wage increases and the increase in public and social expenditure as a percentage of GDP.

It proposes a new developmental model for the economic and social reconstruction of Greek economy.

Economy and employment

The report suggests that wage-led growth is a possible way out of the crisis, and it highlights the most serious problems of the recession:

  • the dramatic 31.3%. fall in domestic demand since 2009, returning to 1999 levels;
  • cumulative decline in gross domestic product (GDP) of about 25% over the six years of recession between 2008 to 2013;
  • the decline of the Greek economy compared with the European Union average, which has cancelled out the progress made between 1995 and 2007;
  • while the increase of 4.8% in public consumption in 2009 stopped the Greek economy plunging deeper into recession, it contributed to the dramatic widening of the public deficit;
  • of the deficit, begun in 2010, cut the volume of public consumption so drastically that by the end of 2013 it had fallen to 2001 levels.

The number of employees dropped from 4.8 million in 2008 and 2009 to 3.9 million in 2013. The unemployment rate, having fallen for seven consecutive years between 2001 and 2008, rose dramatically between 2009 to 2013 to 27% according to Eurostat figures.

European Commission (EC) forecasts suggest the unemployment rate will drop to 26% in 2014. However, the Organisation for Economic Development and Co-operation (OECD) forecast in July 2013 that unemployment would grow to 28.2% in 2014. The INE/GSEE’s own estimates are even more pessimistic. It predicts unemployment will rise to between 30% and 31.5% in 2014.

In the five-year period to 2013, EC figures record a rise in the unemployment rate close to 20 percentage points from the 2009 rate of 7.7%. This is attributed not only to the reduction in the number of employees but also to the stabilisation of the workforce. The number of people between the ages of 15 and 64 either employed or actively seeking work has increased. During the same five-year period, Greece’s workforce grew by 1.2%.

In the first quarter of 2013, the country’s workforce totalled 4,951,159 people, of whom 42.6% were women. This was 6,888 fewer than in 2012; the number of women in the workforce dropped by 1,568, 22.8% of the decrease.

Of all those in employment, around 460,000 (12.8% of the workforce) are young people aged 29 and under; 42.1% are women.

By type of contract, 62.4% of workers are salaried employees, approximately a quarter are self-employed, 6.9% are employers, and 4.8% are assisting and unpaid family members.

Female employment accounts for 40.5% of total employment, of 25.5% of those who work as employers, of 31.6% of the self-employed, of 44.0% of the salaried employees.

The number of people in work fell by around 242,000 in 2012–2013. A large proportion are aged 30 and over, the majority of them men.

Table 1: Workforce data
 

Employees (1,000s)

Unemployed

(1,000s)

Unemployment

% Unemployment

Total

(change 2012–2013)

Total

4,951.2

3,595.9

1,355.2

27.4

-6.9

15–29 years old

879.6

459.4

420.2

47.8

-27.7

30 years and over

4,071.6

3,136.5

935.1

23.0

20.8

Men

2,841.6

2,140.1

701.4

24.7

-5.3

15–29 years old

481.1

266.1

215.0

44.7

-14.1

30 years and over

2,360.4

1,874.0

486.4

20.6

8.8

Women

2,109.6

1,455.8

653.8

31.0

-1.6

15–29 years old

398.5

193.3

205.1

51.5

-13.5

30 years and over

1,711.2

1,262.5

448.7

26.2

12.0

Source: Secretariat General of the Hellenic Statistical Authority, Workforce Survey 2012, 1st quarter of 2013.

Table 2: Workforce changes, 2012–2013
 

Change in numbers of employees, 2012–2013 (1,000s)

Change in numbers of unemployed, 2012–2013 (1,000s)

Total

-242.0

235.1

15–29 years old

-69.9

42.2

30 years and over

-172.2

192.9

Men

-146.1

140.7

15–29 years old

-42.4

28.3

30 years and over

-103.6

112.4

Women

-96.0

94.4

15–29 years old

-27.4

13.9

30 years and over

-68.5

80.5

Source: Secretariat General of the Hellenic Statistical Authority, Workforce Survey 2012, 1st quarter of 2013.

Undeclared work and earnings

During the economic crisis and recession, estimates regarding the number of uninsured and undeclared workers have increased significantly; perhaps as many as 36% of workers are either uninsured or undeclared, or both.

During the same period, the number of company-level employment contracts has increased from 238 in 2010 to 976 in 2012. Of these, 72.6% were signed with associations and only 17.4% signed by business associations. This increase in company-level agreements due to the economic crisis, recession and high unemployment constitutes one of the key factors for imposing salary reductions.

Between 2010 and 2013, average nominal earnings per employee fell by 16.3%. Labour productivity dropped by 2.6% due to a reduction in businesses’ productive and technological capacity. This resulted in the reduction of labour costs per product unit by 13.9%.

Average annual earnings per employee in Greece in 2013 were smaller than those of Slovenia and Cyprus, where real wages have also fallen. Average annual earnings in Greece were €22,325, compared to €34,000 in Spain, €38,000 in Germany, €49,000 in France and €45,000 in Ireland. It is estimated that labour productivity in Greece declined by 5.1% between 2008 and the end of 2013, and is now at 2003 levels.

It seems the tendency in Greece has been to return to lower productivity and a lower standard of living so as to balance the external balance of goods and services and the primary public stability.

Commentary

The Labour Institute has put forward its own ideas of how the Greek economy should emerge from the recession. It proposes an alternative macro-economic policy, which it says would be economically and socially effective.

This policy would include an immediate increase in the minimum monthly wage from €586 to €751 which it claims would contribute to a 0.75% increase in domestic demand, and a 0.5% increase in GDP. It estimates employment would grow by 7,000 during the first year.

An increase of the minimum wage should be assisted by the debt restructuring, says the report. This should be drastic restructuring because mild restructuring would prolong recession and remove development prospects.

Recovery would also be based on the increased liquidity of the economy, and effective and successful measures against tax evasion.

It says that investment, both public and private, will increase under an EU-funded project in the south of Europe and Greece (10% of GDP total investments of which 7.5% productive and 2.5% residences) which will contribute additionally to GDP growth by 1.7% per year and to an increase in employment to the order of 25,000 new jobs.

At the same time, the recovery of the Greek economy would help to restore the democratic functioning of collective bargaining and collective agreements and the reconstitution of the welfare state.

The report says there will be a strengthening of demand through the creation of income streams, increasing investment, activation and reconstruction of production.

Recovery of 3% to 4% per year can be achieved, according to the report. That would mean a 15% rise in GDP over the next five years, increasing employment by 7% to 10% and bringing 250,000 back into work. To restore the million jobs lost between 2010 and 2013 by this means would take 20 years, requiring a decade of annual GDP growth of between 7% and 8%.

Elena Kousta, Labour Institute of the Greek General Confederation of Workers (INE-GSEE)

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