Protesters take part in a rally during a nationwide strike over the high cost of living, calling for improved pay and working conditions, in Athens on November 20. [EPA]
Has the period of deflation – when the value of labor, business and land plummeted as a result of the debt crisis – come to an end? Are we done with the austerity programs and the strings attached to them? The answer to both questions is yes and no. The deflationary period is over and austerity-mandated restrictions have ended in all but one area: salaried labor. In one sense, deflation never stopped in this area since wage earners continue to see their purchasing power drop, even though this time around it is not because all values are dropping at the same time, but because all the other values, except labor, are rising. There is also the fact that, in the spirit of memorandum-type restrictions, collective bargaining has basically been put on ice, becoming much like a museum piece that is there to remind us of a bygone era.
More specifically, the average annual income from salaried labor in Greece came to 21,191 euros in 2009 and stood at 80% of the European Union average of €26,384. Last year, it came to €17,813, which was 16% less than in 2009 and was approximately 47% of the EU average. In the rest of Europe, salaries have gone up 44% over this period but in Greece they have dropped, just as the value of land, real estate and business profits has skyrocketed. In contrast to other European countries, Greece’s actual hourly wage per hour of work is the lowest in the EU-27 – even lower than that in Bulgaria – 15 years after the debt crisis erupted, according to the Center of Planning and Economic Research (KEPE).
Sustainable growth is based on knowledge and innovation, that is, on high-value labor. Greece is moving in the opposite direction
Greece also deviates from the European norm on the matter of collective labor bargaining and agreements. According to the relevant EU guidelines, 80% of salaried workers in every member-state need to be covered by a collective labor agreement and, when this is not the case, the state needs to actively pursue this target. Here in Greece, however, not only is collective bargaining lacking any support, it is not even allowed in determining the minimum wage. Despite opposition from the General Confederation of Greek Workers (GSEE) and even the Hellenic Federation of Enterprises (SEV), these negotiations have been replaced by an algorithm, a tool.
This algorithm is the cherry on the cake. It ensures that minimum wages cannot be increased above the rate of inflation and the overall course of productivity in the public and private sectors. Cheap labor is the cake.
Salaried labor is what bore the brunt of the crisis, since the Greek economy’s feeble competitiveness was restored thanks mainly to the depreciation of salaries. In the meantime, the continuous decline of salaried workers’ purchasing power is what underpins the gross exaggeration of what is being called growth today: tourism, all the various traditional services and construction. The bulk of Greek exports, moreover, are the result of intensive (cheap) labor.
What’s the bottom line? That there is an important qualitative difference in productive structures and practices behind the few decimal points by which the Greek economy’s growth is stronger than that of other European countries. These are the critical variables that determine a country’s position in the international division of labor and that shape the future. Sustainable growth is based on knowledge and innovation, that is, on high-value labor. Greece is moving in the opposite direction. It diverges from the rest of Europe both in wage growth and, crucially, in collective bargaining and contracts. In these areas, deflation and a regime of austerity continue to apply. How “normal” is that?