ECONOMY

Minimum wage increase could make smaller enterprises suffer

minimum-wage-increase-could-make-smaller-enterprises-suffer

The announcement of the increase of the minimum wage, expected this week, is set to create a new social, economy and business landscape in Greece.

Sources converge on the information that despite disagreements and reactions, the government decision is for a hike of between 8 and 10 percent. Therefore the increase in absolute figures will reach or even exceed 50 euros on a monthly basis and bring the basic monthly salary to almost 640 euros.

The government argues this will contribute toward the reduction of income imbalances and the consolidation of social cohesion, while employer associations are currently remaining quiet about how much this will affect them financially (and therefore about the negative impact of a possibly sizable hike on the productivity of labor and the competitiveness of the domestic economy).

A possible increase of between 8 and 10 percent would, according to the Labor Ministry’s team of experts, concern 8.3 percent of employees in the private sector. Small enterprises with low output in sectors such as commerce, accommodation and food service will suffer the most, as their salary costs could rise by 3 to 4 percent.

According to the data that the ministry possesses and Kathimerini has seen, the salary costs of minimum wage workers and those who receive even less exceeds 5 percent of the total salary expenditure in the private sector. Among large enterprises the share of workers on the minimum wage is just 2 percent, but among very small enterprises it is more than 10 percent.

The ministry’s panel of experts admits that even a mild increase in the minimum salary could shake some particularly weak businesses, especially in retail commerce and food services.

Employer associations are warning about the consequences of a hike on the unemployment rate and the prospects of Greece’s long-term growth.

In a study the Foundation for Economic and Industrial Research (IOBE) has submitted to the ministry it notes that the minimum salary currently stands above the level that could help competitiveness increase. It also warns that increasing salary expenditure could lead to the further expansion of undeclared labor in Greece.