1 Flex Work Research Centre International Conference on Flexicurity “Flexibility and the rule of law in ‘active’ labour market policies – Policy dilemmas for the rudimentary Greek social model” Dr. Gabriel Amitsis Assistant Professor of Social Security Law Technology Educational Institute of Athens 37, Poulopoulou Str., GR Athens

2 INTRODUCTION This Presentation highlights the most important dilemmas to promote flexicurity patterns in Greek labour market policies during the recent financial and economic crisis. Current conditions put into question the balance between the rule of law (National Constitution, legislation, collective labour agreements) and external donors’ expectations (EC, ECB, IMF), strongly needed particularly for Mediterranean countries like Greece, faced with serious setbacks in economic growth, public budgets, financial stability, employment and social protection

3 BASIC FACTS ABOUT GREECE 2010 General Government deficit:10.5% of GDP Public Debt: 142.8% of GDP (August 2011) Population (National Survey May 2011): (9,3% foreigners) Over 65: 18% Elderly dependency ratio (population over 65 divided by the population aged 15-64) : 25% Poor elderly: people in 2010 according to Eurostat poverty line definitions Average rate of basic pensions: 490€ Fertility rate: 1,29 Poverty rate (August 2011): 21% Suicide rate: + 17% ( ) / + 40% ( ) Employment rate (March 2011): 64,2% Minimum wage: 715€ Unemployment rate (August 2011): 16,4% Unemployment rate of young persons below 25 (August 2011): 36,4%

4 THE GREEK SOCIAL SECURITY SYSTEM The Greek Social Security System is a rather complex model of social protection mechanisms that supplement the traditional role of families and community networks as the main providers of care against risks and needs. It is promoted through the application of three different techniques: social insurance for persons active in the labour market, social assistance for needy uninsured persons and a national health scheme for all persons living in the Greek territory.

5 THE TREATMENT OF POOR PEOPLE In principle, the Greek social policy model pays marginal attention to the coverage of poor persons outside the labour market, due to the lack of a statutory general guaranteed minimum income scheme for needy persons. Greece and Hungary are the sole EU Member States without an institutional guarantee for sufficient resources to poor people. However, the current Greek framework includes values, objectives and mechanisms of an internal social solidarity paradigm as a means to advance non public coverage of persons outside the labour market: family and kinship networks, entrepreneurship, volunteerism.

6 THE GREEK LABOUR MARKET Hourly labour productivity increased sharply since 1999; average annual working hours are the longest in Europe. Due to strong differences in wage setting, Greek nominal unit labour costs increased by more than 30% since the start of EMU. Monopolistic price setting is also critical, enabling firms to pass on higher wage costs or imported prices onto domestic prices. Non – declared employment is expected to reach persons in Regulatory actions are split between the central government and the social partners; working conditions are regulated by the following Collective Labour Agreements: (a) The National General Collective Agreement that sets minimum wages and salaries pertaining to workers all over the country, (b) The Sectoral or Industry Collective Agreements, (c) The Company Collective Agreements, (d) The National and the Local/Regional Occupational Collective Agreements.

7 THE CRISIS DIARY 23 April 2010: Greece requests financial assistance from the euro- area Member States and the IMF; 27 April 2010: 2-year bond spreads reach 1552 basis points; 10- years bond spreads reach 755 basis points; 2 May 2010: Greece, the Commission, the ECB and IMF announce an agreement on a three-year programme of economic and financial policies. The Eurogroup unanimously agrees to activate stability support to Greece via bilateral loans centrally pooled by the European Commission; 6 May 2010: The Greek Parliament adopts Law No / on “Measures to implement the Financial Stabilisation Mechanism of the Greek Economy” that ratified the Agreement between Greece, the European Commission, the European Central Bank and International Monetary Fund on a three-year programme of economic and financial policies; 9 and 10 May 2010: The Council and the EU Member States endorse a Financial Stabilisation Mechanism

8 ONE YEAR LATER… Rise in poverty rates (18,9% April 2010 – 20,2% April 2011) Sharp rise in suicide rates (over 40%) Rise in unemployment rates (11,9% April 2010 – 16% April 2011) particularly for the group years: (30,8% April 2010 – 43,1% April 2011) Rise in overindebted households (+7%) Introduction of flexible work patterns Reduction in the amount of first pillar compulsory pensions / rise in pensionable age Cuts in social spending - overall reduction of 9.6% or 3.4 billion Euros (1.5% of GDP) on pensions, illness and pharmaceutical benefits in 2010 Increase of taxation (both in income taxation and VAT) No welfare support for poor / excluded persons

9 THE FLEXIBILITY ISSUE – OECD 2009 The OECD 2009 Report on Greece emphasised that enhancing labour market flexibility is important in the current situation to avoid the expected rise in unemployment, which is likely to affect disproportionally the young and women, becoming structural. Flexibility would also boost productivity and help narrow the real income difference between Greece and the most advanced countries, as this is entirely due to a productivity gap. Labour utilisation is relatively high, mostly because of the large number of hours worked. Its contribution to growth can be increased further by reducing the particularly high level of unemployment among the young and women, and by raising female participation.

10 OECD RECOMMENDATIONS Further reforms are needed to improve labour market performance : Minimum wages, which are determined by the social partners in Greece, should be set taking into account high unemployment rates of youth and women; in other words, minimum wage increases should be more moderate, so that minimum wage levels do not act as a disincentive for hiring young people. The government should encourage decentralised wage bargaining by not administratively extending collective agreements to firms not directly represented in the agreement. Employment protection legislation, which is particularly restrictive for the white collar and temporary workers, should be eased.

11 THE FLEXIBILITY ISSUE – IMF 2010 Labor market reform under preparation is sound and needs to be implemented forthwith. However, product and services market reforms are too timid for now and need to be strengthened and deepened. The thought persists that Greece’s closed nature and inability to generate inflation below the euro-area average, even in the midst of a deep recession, is evidence of poorly contested internal output markets. As expected, strong resistance is being put up by closed professions (e.g. truckers, lawyers, notaries, architects, etc.) and more needs to be done to overcome such resistance. This will also help generate broad support for the program by preserving fairness in the distribution of the adjustment burden between dependent labor, the self employed, and capital owners. The authorities can send a further strong signal to the markets by being uncompromising in their resolve and speed to privatize or close down the numerous state enterprises which have proven to cost tax payers large sums of money, rather than yielding adequate dividends, and which may well be obstacles to more efficient market structure as long as they remain in the public hands.

12 THE FLEXIBILITY ISSUE – EU 2010 In line with the lowering of public sector wages, private sector wages need to become more flexible to allow cost moderation for an extended period of time. Following consultation with social partners and within the frame of EU law, the government will reform the legal framework for wage bargaining in the private sector, including by eliminating asymmetry in arbitration. The government will adopt legislation for minimum entry level wages in order to promote employment creation for groups at risk such as the young and long-term unemployed. In parallel, the government will implement the new control system for undeclared work and modernize labor market institutions. Employment protection legislation will be revised, including provisions to extend probationary periods, recalibrate rules governing collective dismissals, and facilitate greater use of part- time work. The scope for improvements in the targeting of social expenditures will be revised in order to enhance the social safety net for the most vulnerable.

13 NEW LABOUR MARKET POLICIES UNDER THE MEMORANDUM OF ECONOMIC AND FINANCIAL POLICIES Wage reductions. The 13th and the 14th wage payments was eliminated for all public employees. To protect the lower income segment, for those receiving less than €3.000 a month, a flat bonus payment of €1.000 a year per employee will be introduced, which will be financed through cutting salary allowances for higher income segments. The MOLSI designed an Action plan for reduction of undeclared employment and contribution evasion Introduction of solidarity contribution for unemployed to be paid by public sector employees, self-employed and private sector employees.

14 NEW FLEXICURITY POLICIES? Establishment of a fully symmetric arbitration system; Reduction in severance payments by 50%; Cut in overtime remuneration by 20%; Extension of probation period from 3 to 12 months; Increase of permissible dismissals from 2 to 5% per month; Introduction of firm level agreements (these may violate advantages established by Sectoral / Industry Collective Agreements as far as salaries and working conditions are concerned, but should not violate advantages established by National General Collective Agreements); Introduction of measures promoting part time employment.

15 NEW PROJECTS IN PROGRESS Adapt legislation establishing a simplified remuneration system covering basic wages and allowances that applies to all public sector employees; Reform legislation on fixed-term contracts and on working-time management; Adapt legislation on tackling undeclared work to require the registration of new employees before they start working; Introduction of short working time arrangements in the context of the relevant German scheme; Development of activation measures for job seekers ( in September 2011) and unemployment beneficiaries ( in September 2011); Development of subcontracting techniques between PES and Private Employment Firms.

16 LESSONS FROM THE GREEK CASE Economic and fiscal policies should not underestimate the social values of employment. Anti-poverty and inclusion targets should accompany long term financial sustainability objectives. Deregulation of labour markets destroy family networks and internal support mechanisms. There should be a greater recognition of non economically active persons as citizens and a systematic adoption of a decent living standards perspective in future financial stabilisation measures. Efforts should be made to create stronger employability awareness and perceptions of the right of workers / unemployed people to access good quality services provided in an equitable and accountable way. Networking between PES and Private Employment Firms should be adapted to employability targets and pluralism values.

17 AND THE JOURNEY TO THE ITHACA CONTINUES….