ECONOMY

Union attitudes outdated

The Greek economy has been growing faster than the average of the 15 countries that comprised the former European Union (EU) from 1995, but has not seen this outperformance translate into significant employment gains or any sharp drop in joblessness. Moreover, yearly inflation, which fell fast during the country’s campaign to qualify for eurozone membership in the late 1990s, has been hovering a percentage point or more above the EU-15 average of 2.0-2.2 percent over the last few years, eroding international competitiveness and undermining future job growth. It is clear that Greek policymakers cannot count on a tradeoff between Greek inflation and unemployment even in the short run to bring down stubbornly high unemployment. In this regard, government officials and social partners, especially the trade unions, have no option but to take other factors, such as demographics and the transformation of the pan-European labor market, into account when forming a strategy to combat unemployment locally. Unfortunately, many trade unionists appear not to understand the implications of the changes brought about by the new landscape and the need to compromise, putting more workers’ past gains at risk.  Although the quality of Greek data on unemployment is not the best in the EU, it provides some insights into the workings of the labor market. In this regard, the latest figures from the National Statistics Service (NSS) offered a glimpse of hope for improvement since unemployment fell to 9.6 percent in the second quarter of 2005 compared with 10.4 percent in the first quarter and 10.2 percent a year earlier. In another positive signal, total employment was up 1.5 percent in the first half of 2005. However, the main characteristics of Greek unemployment statistics did not change. The female unemployment rate at 15.2 percent was more than double that of the male unemployment rate, while joblessness was again higher among the young, registering 18.8 percent of the workforce in the April-June 2005 period. Assuming the Greek economy grows at about the same rate as last year, the economic climate keeps on improving as the latest IOBE survey indicates and positive expectations about employment among many firms and consumers are realized, it is likely that we will see total employment rising and unemployment easing this year. Even so, the pickup may prove temporary if the structural shortcomings of the Greek labor market are not addressed, preferably in the form of a consensus agreement reached between the representatives of employees and employers. Transformation Undoubtedly, Greek unemployment has been burdened by the major transformation the economy has been undergoing over the last decade or so. This entails significant short-term social and economic costs but it is considered necessary for the long-term growth of the economy. The declining share of agriculture in GDP, the greater concentration observed in a growing number of industries (with few large firms gaining market share at the expense of hundreds of smaller ones) and the closing down of numerous firms in labor-intensive industries as production is transferred to neighboring countries with much cheaper labor costs are just a few examples. Differences in unemployment among different regions of the country, such as areas of northern Greece with high unemployment and the island of Crete with lower unemployment, can be partially attributed to the ongoing structural transformation of the Greek economy.  However, Greece has been lucky to minimize the costs usually associated with this structural hurricane of international origin called globalization because of its superior GDP growth rates during this period. This outperformance vis-a-vis its main trading partners is likely to continue in the years ahead, partially thanks to the fourth package of EU structural funds (CSFIV) totaling 20.1 billion euros for the 2007-2013 period. This provides a cushion for a benign macroeconomic environment deemed necessary to engineer some long-awaited structural changes in the labor market. Low female participation The changes are even more necessary because of the almost unnoticed transformation taking place in the labor market of other EU countries. Like Greece, there has been a sharp increase in net migration inflows and a shift in employment from manufacturing toward services and construction. But unlike Greece, the labor participation rate has been rising steadily over the last decade or so, aided by increased female participation. The latter has been helped by flexible work arrangements, especially in southern European countries, such as Spain, where the share of women working part-time was much higher (over 20 percent) than among men (below 5.0 percent) in 2005. The registration of previously unrecorded jobs also helped as countries, such as Italy and Spain, cut social contributions and pushed for the wider use of part-time and temporary contracts. Moreover, unlike Greece, the ongoing tightening of requirements for early retirement has produced a pickup in the employment of senior employees in some countries, namely Italy. This has also resulted in the gradual decline of the long-term unemployment rate in countries such as Germany, Italy and Spain, but not in France where the percentage of part-time and temporary jobs is falling steadily. Undoubtedly, one cannot copy another country’s model and put it to work in his own country without taking into consideration various parameters, such as culture. After all, the various structural transformations of the labor markets in EU countries have produced a pickup in employment but have put downward pressure on wages and caused even a drop in productivity growth in areas such as services and construction, where the quality of labor has deteriorated due to the influx of a great number of unskilled workers. However, it would be a mistake in the era of globalization, where competition becomes more and more intense as barriers fall, to stick to the old status quo in the local labor market which penalizes the young and women to the benefit of existing workers. Greater flexibility in the labor market should not be interpreted by trade unionists and others as a green light to employers to fire older, more expensive employees. It should be seen more as a window of opportunity for enhanced employment for more vulnerable groups. It is up to the leaders of trade unions to come to terms with the representatives of employers on a comprehensive package of reforms, including incentives for staying at work longer, which will ease fears of insecurity among the existing workers while promoting employment and combating unemployment among the young and women with the common goal of fostering growth and prosperity. Sometimes, the art of compromise is more effective than the art of strikes, even if it means reducing, but not losing, your power.