Labor minister excludes major changes in interview
By Christina Kopsini
“Opening new chapters in labor relations before assessing the consequences of the many changes that have been made so far will not contribute to creating a climate of normality,” Labor Minister Yiannis Vroutsis told Kathimerini’s Sunday edition, putting an end – for the time being at least – to speculation that the coalition government may introduce significant labor reforms such as increasing the working week and reducing severance pay, among other measures that government officials are discussing with foreign creditors as part of an 11.5-billion-euro fiscal adjustment package.
Labor reform is one of the main sticking points in negotiations between Athens and a group of envoys from the International Monetary Fund, the European Commission and the European Central Bank – collectively known as the troika – which has suggested that Greece may not achieve the targets outlined in its bailout agreement unless it reduces its labor costs.
During your last meeting with the troika, it seemed that you were trying to avoid discussing the thornier of labor issues. Are you prepared to respond with specific arguments to the issues that the troika has put on the table?
I have no intention of being evasive. I am not the kind of person who avoids challenges. These specific issues and, more generally, changes to the labor market one way or another, have been under discussion for the past two years since [Greece’s] entry into the bailout mechanism and much longer before that. The question is about making the labor market more flexible and it has basically been ongoing for two decades, since the early 1990s.
That said, few and fragmented interventions were made despite the fact that there were obvious institutional and administrative obstacles to the mobility of the market, which undermined the competitiveness of the economy and shaped a shattered labor market with inequalities and exclusions. And these, unfortunately, were made on the “fringes” of the labor market, costing mainly those who were outside the fortified core, the weaker members. The critical absence of a reformist culture – on a political and social level – as well as the demonization of all change, was abundantly clear. So, we come to the present; to skyrocketing unemployment, which has touched everyone and which is a result not just of the deep recession the country is experiencing, but also of the structural distortions of the economy. We should have known that in a world that is constantly changing, standing still and inert is the surest way to fail. This is a historical onus which, first and foremost, I lay on shoulders of the political system itself.
We must now move ahead with our own reformist pace and planning. We need to achieve balance in the labor market once more, to allow the consequences of the changes that have already made to mature, and to speak openly with our social partners.
Are the changes being suggested by the troika linked to the country’s debt reduction targets or are they, instead, aimed at cheapening labor in Greece?
I fully comprehend society’s frustration. The losses suffered by workers – and especially those on state or private payrolls – are huge, the unemployment rate is unprecedented and the sense of insecurity and uncertainty regarding the future is prevalent. However, when it comes to public discourse on labor issues, there is a tendency to overreact and dramatize the issues. What scares me most is not the cheapening of labor, which is no one’s intention and will not happen. I am more afraid of the populism and demagoguery that continue to dominate public discourse. That said, obviously the economic development model we want – and are at pains to achieve – is based on all sectors achieving a competitive dynamism and becoming extroverted, upgrading the technological capabilities of the economy’s production base, formulating flexible and high-caliber institutions, and promoting well-remunerated and dignified jobs.
To achieve this, though, we need to sail through this storm, through this painful phase of fiscal changes, and mainly to remain in the European family.
Are there plans to legislate another freeze on the minimum wage?
I don’t know where this idea has come from. What I do know is that legislation passed in February set the minimum wage – reduced by 22 percent – to be in effect until the end of the midterm fiscal adjustment program. We will, if the condition of the economy allows it of course, evaluate the possibility of increasing the level of the minimum wage earlier. What we have to do as a country is to formulate, in cooperation with the social partners, a new mechanism for defining the minimum wage on a national level, a mechanism in which the state will also have more definitive role. This is the case in the majority of European countries where the institution of the minimum wage is in force.
What are your plans for cracking down on illegal and uninsured labor?
There is no doubt that unregistered and uninsured labor is a sore on the body of the Greek economy. It is effectively an economic crime.
I recognize that it is the up to the state to eradicate the causes that push mostly employers – occasionally workers too – to adopt such practices. This is why I believe that the simplification of legislation and the gradual reduction in the tax cost of labor are the priority.
I also think it is very important to upgrade the labor inspection force so that it can be more effective in dealing with all forms of infringements. This could be achieved by enhancing its role in drawing up settlements, by imposing stiffer penalties for re-offenders and, mainly, by giving it the same sort of institutional support that the Financial Crimes Squad (SDOE) has. Also in the works is a plan, with the cooperation of Public Order Minister Nikos Dendias, to use the Economic Police to supplement the labor inspector force in its very difficult task of locating illegal labor.
Will the coalition government have enough of a majority in Parliament to vote through the new austerity program?
The Labor Ministry has a huge part of the burden of formulating the package for saving of 11.5 billion euros. I must also note that this package is part of a commitment already made by Greece in February in Law 4046/2012. The participation of the Labor Ministry is also part of that commitment. Moreover, the cost of pensions as part of the total of fiscal expenditures, especially in the past few years, has been especially high. For our part, we are making a huge effort to ensure that the measures are balanced and fair. Either way, the final decision over which alternative measures to adopt rests with the leaders of the three parties in the coalition government. The biggest issue right now, though, is ensuring the rest of the bailout funding. And these measures, tough as they are, are directly linked to our continued stay in the euro. I’d like to think that we will all stand up to the responsibility of this quandary.
Are the country’s main social security funds in a position to continue paying pensions through the end of the year?
The pace of revenues at social security funds over the past few months, the rationalization of their operations, savings made through more oversight and reducing the number of false pension claims, as well as measures to clamp down on contribution dodging are beginning to pay off and ensure that there will be no interruptions to pension payments.
Why have you placed such emphasis on reducing the labor costs for employers and, more generally, the cost of payroll?
Everyone knows that reducing the payroll cost, be it in the form of administrative and bureaucratic obstacles or in the form of employers’ contributions, is crucial to creating new jobs and boosting entrepreneurship.
For starters, I believe that the simplification of the legal framework, the planning and application of which will be achieved via social dialogue, will significantly improve the creation of new job opportunities. It is our opinion that the labor market needs a few, simple and reliable changes that will cover everybody. We don’t want small, fragmented, contradictory and possibly clientelist-driven changes that presuppose a high level of employer contributions. Our plan includes a gradual reduction in employers’ contributions by up to 5 percentage points. This is something we can achieve by re-examining specific contributions for unnecessary benefits or toward benefits that can be reduced, such as, for example, those favoring certain departments of the Manpower Organization (OAED). Mainly though, we can achieve the target by broadening the contribution base, such as, for example, via the new mechanism we are forming in cooperation with the European Union’s Task Force for Greece for the joint collection of taxes and social security benefits, for cracking down on unpaid labor, increasing the sectors that have to pay salaries together with their social security payments via banks, etc.
What do you plan to do with the direct payment of benefits together with salaries via banks through the so-called “labor stamp”?
Redesigning the way the “labor stamp” is paid and extending it to other sectors is a top priority. We believe that this measure, introduced in 2010, is correct and can – with certain changes – prove extremely beneficial as it forces into compliance with the regulations, thousands of employers and workers in jobs that are not steady or that have high rates of contribution dodging, such as in the arts, in part-time advertising, delivery services, etc. I would argue that the labor stamp is an excellent way to make legal and insured labor more attractive.