OECD report calls on Greece to bring in more flexible labor laws

Introducing more flexible labor laws and lowering the legal shield provided to employees are among the changes proposed by the Organization for Economic Cooperation Development (OECD) in an effort to reduce Greece’s unemployment rate, one of the highest in the European Union. The yet-to-be-released OECD report points out that offering less protection to higher-paid employees will pave the way for more inexperienced workers to enter the market. Greece’s jobless rate has remained stubbornly high, remaining above 9 percent last year despite the country’s high growth rates, which have recently outperformed the 15-nation bloc. The OECD report added that taxes and total amounts paid to pension funds are too high and that a restructuring of the pension system is needed to give luster to early retirement. «The reform in Greece needs to aim at connecting income levels that pensions are based on with the total income a person received over the course of their working life,» the report outlined. Currently, pension payments take into account only the salary received in the last five years. «Even though the nominal retirement age in Greece is at 65, only 15.5 percent of people retire at that age,» the report added. The current payment system under which Greece pays its disability pension and the special conditions applicable to workers from unhealthy workplaces, such as heavy industry, have led to more Greeks opting for early retirement. The OECD report comes at a crucial time for the country’s labor unions, which are currently in the process of negotiating 2004 wage deals. Talks between the two sides are expected to wrap up in the first six months of the year. The Paris-based organization also said that the current method used for the calculation of pensions acts as a disincentive to early retirement. «It encourages older and less productive employees to accept lower salaries and an extension of their working life,» it said. One of the main changes the OECD called for is allowing exceptions to collective wage agreements, particularly for smaller-sized businesses and the amounts settled upon regarding starting salaries. «The wage level (of starting salaries) accounts for more than 50 percent of average income received by employees and administrative staff in industry,» the report said. This proposal, OECD argues, will help increase money which can be directed to unskilled workers. The report added that compensation amounts paid to white-collar workers who have had their jobs terminated is too high and should be lowered to similar amounts received at blue-collar levels. This is a proposal which comes into sharp contrast with GSEE, Greece’s largest union group. GSEE has been arguing that blue-collar workers should be upgraded to their white-collar peers and receive more compensation in the event where their employment contract has been terminated. Other changes needed to the country’s labor market include giving companies more leeway to reduce headcount. This will give them a higher incentive to introduce labor-saving technologies. Greece had implemented changes to the law relating to headcount reduction in 2001 by the previous Socialist government, but more is needed. Companies with 200 staff members or more are allowed to cut back on staff by 2 percent, while firms with fewer than 200 people can proceed with job cuts of four positions per month.