Generous minimum wages in Greece: a myth

From Berlin to Bratislava, indignant Europeans have gasped at stories of the relatively high wages and generous benefits enjoyed by Greek workers, whose fabled laid-back lifestyles have been blamed for helping bring the euro zone to its knees.

Athens’ international lenders have pushed for cuts to the 750 euro minimum monthly wage to boost competitiveness, a welcome call for Germans, French and other voters in the currency area who have bridled at having to bail out Greece.

But for people like 33-year-old magazine editor George Theonas, that wage floor is a myth, as his and other companies use the crisis to skirt legal pay rules by tearing up collective wage deals and forcing employees into contract work.

“I can’t pay my bills and I can no longer live without my parents’ support,» said Theonas, 33, whose employer moved him from permanent to temporary status, making 700 euros a month working 12 hours a day, seven days a week instead of the four days on his contract.

“I’m not looking for a new job. There is nowhere to go. This is Greece,» he said.

Theonas is one of the lucky ones. Others at his company earn as little as 300 euros a month under trainee schemes that are extended for years, even though they do the work once bestowed only on full-time employees.

With Greek unemployment now at a euro-era record high of 18.4 percent, workers are forced to stay put, as their employers say thousands more people are standing in line for their jobs.

“Most of my friends are unemployed. I only hear of people losing their jobs. What choice do I have,» said Theonas.

Before it resigned to make way for a unity government this month, the government of former prime minister George Papandreou pushed new pension cuts and wage rules through parliament, allowing firms to ignore sectoral agreements that normally set minimum wages for specific industries.

Greeks erupted in protest. More than 100,000 people took to the streets in the biggest 48-hour strike in years, leaving central Athens strewn with broken paving stones and smoldering rubbish containers after hours of riots.

Hostile unions said the moves would push Greece into a «death spiral» of economic contraction if the government continued to slash salaries, hike taxes and allow lay offs.

“If we continue this way, it’s certain the unemployed will multiply. We’ll be talking about the living-dead working to support their families on 500 euros a month,» said Nikos Kioutsoukis, general secretary of private sector union GSEE representing about half the country’s 4 million workforce.

TARGET OF SCORN

In euro zone poor man Slovakia, politicians in the ruling coalition used Greece’s official minimum wage — which almost surpasses the earnings of the average Slovak — as a key argument in a campaign against expanding the bloc’s rescue fund, almost torpedoing the initiative.

That argument ignored facts in the real economy.

Nearly one-in-four Greek wage earners work illegally, without welfare. Nearly 10 percent of the country’s 3.5 million private sector workers have taken salary cuts, and about half of the 537,000 new contracts signed from January to September were part-time or flexible, according to government figures.

In the same period, more than 42,000 full-time contracts were converted to part-time or other flexible forms of work, such as the four day week, from about 26,000 last year.

“Workers are being indirectly terrorized … Employers tell them that if they don’t sign deals for less, they’ll get someone else from the thousands waiting,» said Kioutsoukis.

Apart from more flexible wage contracts, Greece’s official creditors in the International Monetary Fund and the European Union are expected to keep pushing for a lower minimum wage in the hope it will boost employment and competitiveness.

That will put more pressure on Greek households. According to Eurostat, a quarter of Greek families suffer from material deprivation — the inability to afford things typically enjoyed by the rest of society. That is the highest level among EU states that joined the bloc before its 2004 eastern expansion.

Workers rights’ advocates say the push to cut the official minimum wage will reverberate across the economy, profoundly reshaping how Greeks are paid for their work.

“It will be like releasing a beast from its cage. Our salaries are only dropping. If the national wage deal is also abolished on paper, there will be no respect for workers,» said Afroditi Lemoni, a 30-year old advertiser who has seen her salary cut twice and half the people at her company fired since 2009.

LAST LINE OF DEFENSE

Greece’s main labor unions agreed with employers a 1.6 percent rise in the minimum wage from July for 2011-2012, but the EU and the IMF say a hike would increase unemployment among low earners as cash-strapped companies could hold off on hiring.

Workers say market forces have already taken care of wage reductions and cutting the official minimum wage further from 750 euros would be an attack on their last line of defense.

Most protesters say the government should, instead, crack down on notoriously high tax evasion and try to force wealthy Greeks to contribute more to budget revenues to put public finances back on an even keel.

Some economists also question the wisdom of focusing on the minimum wage when only a fifth of Greece’s 220 billion euro economy is geared toward exports, meaning the benefits of lower labor — and therefore production — costs may be limited.

“The problem is that Greece has a very closed economy,» said Gilles Moec, senior European economist at Deutsche Bank, noting that countries where the IMF wage-cutting strategy has worked, like Latvia, were much more open to trade.

Some sectors, such as construction and tourism, which employs one in five Greeks, are already too flexible with high level of illegal work and a wide range of part-time jobs, economists say.

They say enforcing rules to bring workers and companies out of the shadow economy may be more beneficial to the economy than cutting the minimum wage because more official jobs would boost contributions to state pension and welfare funds.

“A general compression of wage costs is not enough to improve competitiveness,» said Nikos Magginas, an economist at private lender National Bank of Greece. «Reducing undeclared work is of vital importance.”

When the now fallen government voted through the latest laws on October 20, some lawmakers said it was the last time they would back austerity.

Outside, protesters besieging parliament were furious, both at lawmakers voting to weaken collective wage deals and over their labor rights evaporating in practice.

“Politicians in there are fighting over something which does not exist any more,» said 54-year old electrician Apostolis Boltsis, protesting outside parliament. «I have colleagues who work three months a year or just four days a month. How can we live like this?”