THE CASE OF GREECE REVISITED A. DEDOUSSOPOULOS PANTEION UNIVERSITY ATHENS, JUNE 2013 PROMOTING A BALANCED AND INCLUSIVE RECOVERY FROM THE CRISIS IN EUROPE THROUGH SOUND INDUSTRIAL RELATIONS AND SOCIAL DIALOGUE

WHAT THIS SESSION IS ABOUT ASSESSING THE IMPACT OF CRISIS AND POLICY REFORM ON THE LABOUR MARKET AND INDUSTRIAL RELATIONS

STRUCTURE Description of Policy Macroeconomic Effects Labour Market Impacts Impacts on Industrial Relations and Social Dialogue

PART ONE ON POLICY

POLICY ORIENTATION A DOUBLE TARGET  Sustainability of the Greek public debt  Increasing competitiveness DIAGNOSIS  A large public sector  An inflexible labour market PRESCRIPTION  Internal devaluation  A radical reduction in the public sector  Wage reductions leading to price reductions

A FALLACIOUS CONCEPTUALISATION 1 The size of the public sector has been smaller than the average in EURO area  Public spending exceeded EU average for two years proceeding the crisis (2008-9)  Public revenue systematically lagged behind EU average by 6 percentage points in GDP  Tax system increases unequal distribution of income The obvious policy prescription  A radical reorganization of taxation and the tax collecting mechanism (not implemented yet)

A FALLACIOUS CONCEPTUALISATION 2 A highly segmented labour market  A rather well protected segment (less than 1/3 of wage employment)  A rather highly deregulated segment Evidence of sufficient labour market flexibility  Employment levels have been responsive to changes in production (Okun law variation)  Wage structure has been flexible (increasing wage deviation over time)  High layoffs – hiring rates  Relatively high levels of inter-firm movement of personnel

PART TWO MACROECONOMIC IMPACT

FORECASTSACTUAL FIGURES AUTOMN 2010INTERIM 2012SPRING 2013 GDP RATE OF GROWTH ,2 -4, ,0 -7, ,2-4,7 -6, ,0-4, ,6 UNEMPLOYMENT RATE ,5 14, ,0 20, ,219,7 26, ,627, ,0 BUDGET DEFICIT ,6 -10, ,5 -9, ,6-7,3 -10, ,4-3, ,6

A PROVISIONAL CONCLUSION From internal devaluation to a Schumpeterian creative destruction? If destruction is plain to see, where is the “creative” part?  Tourism  Niches of foreign investment – Privatisation project  Real estate  Energy  Transportation  Industrial concentration into large enterprises  Retail trade – small scale manufacture

A MORE DEFINITE CONCLUSION Adjustment though quantities not through prices  Wage cost accounted for only a 14% of total cost in 2007 in manufacture  All other cost elements have been kept intact or raised  Cost of borrowing  Public utilities rates  Indirect taxes  Cost of imported raw materials

PART THREE LABOUR MARKET IMPACTS

CONSIDERATIONS The linear trend coefficient is slightly reduced, but it does not change much The effect of the crisis is fully captured by the t square variable, indicating an accelerating negative effect On the whole, the Greek economy has lost jobs during the period 2009a – 2012d. This means that, had the Greek economy regained the pre-crisis rate of employment growth since the 1 st quarter of 2013, it would have taken 14.5 years to achieve the 2009a level of employment.

STRUCTURAL IMPACTS Employment level reductions are widespread. All sectors of economic activity have experienced severe employment losses However, employment losses are more concentrated in  Construction (22.2% of total job losses)  Manufacturing (18,2%)  Trade (16.9%)  Agriculture (8.3%)  Tourism (6.7%)  Education (5.8%)  Domestic Services (4.7%)  Transportation and storage (4.5%)

THE TIME EVOLUTION Manufacturing and construction industries have been hit hard from the beginning of the crisis Trade and other service sectors have felt the impact on employment later on (in 2012 the trade sector alone has contributed a 26.5% of total job losses)

FULL TIME JOBS vs. PART TIME JOBS

THE EVIDENCE FROM LIB 1 New ContractsFull Time JobsPart Time JobsJob Rotation COMPOSITION OF NEW CONTRACTS ,016,74, ,926,16, ,430,69, ,035,49,6

THE EVIDENCE FROM LIB 2 TOTALPART TIMEJOB ROTATION TOTALROTATION 1ROTATION COMPOSITION OF CHANGES IN CONTRACT FORM ,072,028,0(87,1)(12,9) ,071,328,7(86,6)(13,4) ,055,045,0(72,1)(27,9) ,058,941,1(61,4)(38,6)

A PROVISIONAL CALCULATION In % of all employees has either  Lost their job  Have been employed as part-timers  Or forced to accept job rotation Wage reductions are in effect in line to the reduction of minimum wage rate reduction (22%) Reductions in pensions, unemployment and mini-jobs have contributed severely in widespread poverty among population Public provision of services such as education and health have also severely deteriorated for large sections of the population

PART FOUR WAGE SETTING AND INDUSTRIAL RELATIONS

INSTITUTIONAL SETTING Collective bargaining structure and processes have been redefined  Minimum wage rate is unilaterally determined by Minister’s decree, after consultation with social partners  Sectorial and occupational collective agreements have given place to agreements at the firm level  Most enterprise agreements have been conducted by “associations of persons” not by trade unions  Individualised bargaining increases, as the number of employees covered by collective agreements has been severely reduced  The role of the Organization for Mediation and Arbitrage has been marginalised

National General Collective Agreement Setting Minimum Wage Mostly Politically Determined Sectorial and Occupational Collective Agreements Setting wage mark up Bargaining - Trade Unions OMED Market Forces WIDE SPREAD Collective Agreements at Enterprise Level Setting wage mark up Bargaining - Trade Unions OMED Market Forces LIMITED Individual Bargaining Setting wage mark up Mostly determined by the employer

National General Collective Agreement No Authority in Setting Minimum Wage Minimum wage is Exclusively Politically Determined Sectorial and Occupational Collective Agreements Setting wage mark up Bargaining - Trade Unions OMED (marginal) Market Forces VERY LIMITED Collective Agreements at Enterprise Level Setting wage mark up Bargaining - Trade Unions – Ass. Of Persons OMED (marginal) Market Forces WIDE SPREAD FOR ASSOCIATIONS OF PERSONS Individual Bargaining Setting wage mark up Mostly determined by the employer Terms and conditions of work – time schedules COMMON Employers’ opting out

SECTORIAL AND OCCUPATIONAL AGREEMENTS MAY 2013  TERMINATED: 233  RENEWED: 33 YEAR AT ENTERPRISE LEVEL SECTORIAL OR OCCUPATIONAL WITH NATIONAL COVERADGE

THE IMPACT OF THE ASSOCIATIONS OF PERSONS ON WAGE SETTING 2/3 all collective agreements concluded by associations of persons have led to wage reductions to the minimum wage rate Individual agreements have resulted on a 22.9% wage reduction on the average Trade union concluded agreements at the enterprise level have managed to retain wage levels by 33%

THE CENTRALITY OF MINIMUM WAGE SETTING Wage ladders are collapsing as  the minimum wage rate has been reduced  and sectorial and occupational collective bargaining becomes marginalised Sectorial and occupational collective bargaining and wage setting enable both employers and employees to avoid a personal confrontation within the establishment and has provided the ground of remarkable degrees of functional and time flexibility, especially in small and medium enterprises With a handful of exceptions, even large enterprises do not possess any system of linking rewards to productivity at the individual level, and even some they have it, they prefer not to operate it.

A CHANGING REGIME OF MANAGEMENT As personal confrontation was eliminated, a paternalistic regime of management had been maintained, i.e., exchanging favours between the two parts, based on personal relationships, long tenures and loyalty. The new legislation and the extent of employment crisis leads to the establishment of a new regime, that of authoritarian management in which management appears as an undisputed power, limited only by external factors. Within this context industrial relations, collective bargaining and social dialogue seem to be words void of any meaning

TWO ILLUMINATING EXAMPLES The conclusion of a sectorial collective agreement in summer 2012 The conclusion of a national general collective agreement in May 2013

MORE THAN ONE CAMP Traditionally in national bargaining procedures there had never be a clear cut division between employers and employees. Small and medium enterprises, represented by GESEVEE and ESSE, have been occupying an intermediate position, leaning towards employees’ demands on wage issues. It seems that nowadays a more clear cut division to be established between social partners representing large enterprises and those representing small and medium firms.

ON THE STATE OF SOCIAL DIALOGUE Social partners appear to be confused, frustrated, disappointed and practically incapable to contribute to an alternative strategy for economic reconstruction. Though most of them have openly opposed wage reductions and all of them anticipate that such reductions have negative effects on the prospects of economic recovery, they are reluctant to demand for a full restoration of social dialogue procedures and of collective bargaining at national level.

ON THE STATE OF SOCIAL DIALOGUE 2 Social partners representing employers are counting the possibility of a large scale exit of members from their organisation, if wage issues are not settled to their members’ short-term conceptions, i.e., a defensive stand of survival through wage reductions. Internal conflicts may arise in the near future, especially in the trade unions, as traditional party affiliations are jeopardised. Institutional settings, instead of providing a solid ground for much needed compromise, have created a labour market jungle.