Wages below par, but so are prices

A comparison of Greek wages with those elsewhere in the EU has to take into account the fact that prices in Greece are lower and, therefore, the purchasing power of a euro is higher. We also must take into account Greece’s lower levels of productivity compared with the EU average, and assume that the average wage is directly proportional to productivity. On the basis of these assumptions, we find that the salaries of Greek civil servants should rise by 17 percent. Obviously, this 17-percent differential cannot be covered all at once, but done gradually, its length being determined not by technical but by political factors, that is, as a result of negotiations. But because we also have a convergence of productivity (increasing faster in Greece than the EU average), the salary raises to be granted in coming years will have to cover not only a part of the 17 percent, but also the real increases given on average in the EU and the difference in productivity between Greece and the EU average. The same rule must apply also in the private sector if we wish to have a real convergence on the basis of quantitative criteria. I am aware that companies will strongly resist such a policy on the grounds that it would seriously affect the competitiveness of Greek products. Nevertheless, they have to assume the burden of the adjustment that is due to them and boost productivity by other means such as improving the quality of products, tapping new technologies, using new forms of labor organization and increasing the productivity of capital. I doubt whether the Greek economy can prosper in the eurozone with Argentina-type conditions for entrepreneurial activity, that is with low wages and a completely deregulated labor market. (1) Ilias Ioakeimoglou is an associate of the Labor Institute of GSEE, the labor union confederation, and ADEDY, the civil servants’ union. The dull market conditions persist and are unlikely to change for a while.