Clash over 35-hour week in Greece

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In December 1996, a committee consisting of experts from Greek trade unions and employers' organisations was set up to discuss the effects of reducing working time to 35 hours a week. However, on completion of its task in October 1997, it had become clear that the differences between the two sides were irreconcilable. We examine the main points of disagreement between the Greek General Confederation of Labour (GSEE) and the employers.

In accordance with the provisions of the two-year National General Collective Agreement for 1996-7, in December 1996 a committee of experts was set up to analyse the effects of a possible reduction of the working week to 35 hours (GR9704110F). Serving on the committee were experts appointed by the Greek General Confederation of Labour (GSEE) and the employers' organisations, the Federation of Greek Industries (SEV), the National Confederation of Greek Commerce (ESEE) and the General Confederation of Greek Small Businesses and Trades (GSEVEE).

When the committee's work had reached a certain stage, it became obvious that there was going to be no agreement amongst the experts. At the end of October 1997, the committee issued its findings, setting out in detail the differences of opinion on the one hand, and each side's separate evaluation on the other.

Points of disagreement

The first point of disagreement that arose among the experts centred on the evaluation of the effect that a reduction of working time would have on the productivity of labour. According to the GSEE experts, a reduction of working time would be accompanied by an increase in productivity (volume of production per person) stemming from the fact that as soon as working time is reduced businesses will proceed to make changes in work organisation, increase the pace of work, and reduce breaks in the work process. The GSEE experts based their view on data from the literature and on previous experience of reductions in working time. By contrast, the employers' side did not accept this evaluation because in their view the productivity of labour, especially in Greece, shows very little elasticity to any type of change.

Nevertheless, this disagreement was not an insuperable obstacle to the continuation of the committee's work. The most important disagreements focused on the effect that an increase in labour cost per unit of product would have on macroeconomic variables such as inflation, employment and the competitiveness of the Greek economy.

In brief, the GSEE experts stressed the following points.

The share of wages in Greek GDP is 33%, a figure corresponding to two million wage-earners. Nevertheless, there are certain wage-earners for whom the 35-hour week would not bring about any changes, either because their work is not tied to a fixed working pattern (such as business directors and executives), or because it involves a lot of breaks (such as underemployment in services where there is a surplus of staff), or because they are already working reduced hours, or for some other reasons. Thus, it is estimated that a total of 1.3 million wage-earners would be affected by the reduction in working time. The GSEE experts are of the opinion that the two million self-employed Greeks would not increase the prices of their services or products because the state of the economy (increased unemployment, fierce competition, under-utilisation of invested capital) would not allow this.

On the basis of these data, the GSEE experts estimate that there would be an increase in the general level of prices in the order of 2%, because many businesses will transfer the increase in labour costs to prices, so as to maintain profit margins at present levels. Businesses that do not increase their prices because they are exposed to international competition will obviously experience a reduction in profits, but this will not hurt their ability to invest because profitability is already at high levels and the limiting factor on investments in the present state of the economy is not profitability but demand.

However, the views of the SEV experts on these questions are briefly the following.

A reduction in working time will affect all earnings without exception, both those of wage-earners as a whole and those of the self-employed. This is because the evolution of the hourly wage is, for the self-employed, a reference point for the prevailing price of labour, which they tend to follow. According to calculations by the SEV experts, the increase in labour cost per unit of product would be greater than 7% and would cause a spectacular rise in inflation necessitating a particularly tight - and therefore undesirable - monetary and fiscal policy to hold inflation in check.

There was also a significant difference of opinion over the implementation of measures that could mitigate the effects that a reduction of working time would have either on inflation or on profitability. According to the GSEE experts, a reorganisation of working time and flexibility in the use of human resources would make it possible to keep machinery in operation for longer hours, that is, to step up utilisation of fixed capital, increase production and bring about an attendant reduction in the cost of production. In addition, the GSEE experts propose transferring resources from the state to businesses that reduce working time.

The SEV experts believe that the lengthening of machinery operating times is not affected by conventional hours of employment, but depends rather on demand. Since reducing working time to 35 hours will not cause an increase in demand but an increase in inflation, the operating time of machinery installations will remain unaffected. The SEV experts also believe that transfer of resources from the state to businesses that reduce working time will have a dramatic impact on public finances, and so it is not considered realistic.

Commentary

The creation of a joint committee of experts of the trade unions and employers' organisations to examine the impact of a reduction in working time was first and foremost a positive step for a country such as Greece, where no such practices involving cooperation between the social partners have been adopted in the past.

However, the irreconcilable differences which arose during the committee's deliberations underlined the fact that reduction of working time is an exceptionally crucial matter for labour relations. The employers' side believes that a reduction of working time to 35 hours will have catastrophic consequences for the Greek economy; the trade union side, on the other hand, believes that its introduction will have positive effects on employment without exerting a negative influence on macroeconomic variables, on the condition that the reduction of working time is accompanied by a series of other measures.

As the two views are extremely divergent, it will be very difficult in future to find points of compromise, and it is reasonable to suppose that the issue will remain a source of friction. (Elias Ioakimoglou, INE/GSEE)

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