ECONOMY

Big rise in labor costs

The positions of the General Confederation of Greek Workers (GSEE) are a recipe for divergence rather than convergence of living standards. Convergence requires competitiveness, which will fall if real wages rise more than productivity. In the 1980s, this recipe led to inflation and economic stagnation. Now that we have conceded the right for exercising monetary policy to the European Central Bank, it would lead to unemployment and stagnation. The collective labor negotiations that will start soon must take into account two factors: First, the latest report of the European Commission on prices and competitiveness (http://europa.eu.int/comm/economy-finance/publications/priceandcostcompetitiveness-en.htm) shows that despite some improvement in the last two years, the cost of labor per unit product in Greece has increased much faster than in the rest of the eurozone in the last 15 years. This development is not unrelated to the fact that the external sector of the economy (imports-exports) had a negative contribution to GDP growth during this period. Second, the reduced tax scale for individual incomes which applies as of this year means an approximate 1 percent increase in the disposable income of working people.(1)Economist-analyst in Schroder Salomon Smith Barney investment house.