Price hikes and the minimum wage

Price hikes and the minimum wage

If expert predictions on the pandemic are confirmed, there is finally some light at the end of the tunnel. Even though we will continue living with Covid-19, it will probably become endemic – as long as no new variants with dangerous mutations appears.

According to the available pandemic modeling, the upwards trajectory of new cases is decelerating. New cases will peak over the next couple of weeks (unvaccinated people over 60 should be extra careful and should isolate at home for at least this period) and will gradually decrease through Easter, case numbers are expected to drop to negligible levels.

Let us hope this is the case and we can put the pandemic behind us! However, what comes next? If this grave mortal threat is minimized, it can be certain that public opinion will re-evaluate its problems on a new scale. It can be taken for granted that interest in financial issues and the economy will grow dramatically. At the forefront of these issues will be the increase in prices, almost across the board.

The erosion of purchasing power led to a 20% decrease of turnover over the holiday season in comparison to last year, according to a large study published by the Association of Business and Retail Sales in Greece (HRBA). It found that 58% of households spent less than they did last year, with 31% of those spending less than half.

However, the greatest hurdles still lie ahead. It is expected that households will face a 5-10% price increase in their shopping bill by the end of the first quarter, due to a hike in prices set by importers. In addition, goods will also become more expensive due to consumers assuming a surcharge to cover part of the increased operating costs of retail networks.

Price hikes will not just be limited to groceries, as they will be cumulative across the foodstuffs industry, as well as noticeable on electricity and wider energy bills, public utilities and consumer goods that will be affected by the increase in energy costs. They will also affect the rental prices of homes, office spaces and retail stores.

Some will weather the storm. This will not include economically vulnerable households, who after a deflationary struggle that lasted for more than 10 years, face a treacherous period of inflation. This marks an important differentiating factor when comparing Greece to other countries. There will be similar price increases recorded in other countries as well, but none of them had to tighten their belts quite as much as Greece has done since 2010. Our resilience, especially that of salaried workers, is almost exhausted.

One in two households is unable to cover emergency expenses, 35.5% of households are struggling to cover their basic needs and 27.9% of households are on the brink of poverty, according to the latest data by General Confederation of Greek Workers. A second major difference is that other countries are better able to support the more vulnerable members of their society than debt-laden Greece. A third issue is that many Greek markets exhibit low or non-existent levels of competition, while the Hellenic Competition Commission often reveals that it is less independent than it claims.

What does all this mean? Across-the-board measures on energy subsidies have shown their limited usefulness. This applies to all such horizontal measures, which are basically like shoveling money out of a helicopter. This is because Greece does not have an excess of money (rather, the situation is quite the opposite) and when spent, it should be targeted and used where the need is greatest and the greatest good can be achieved.

This mindset is not widespread. If we were to judge from the hasty retreat of the government on the issue of national pensions being given out in flagrant disregard of the relative legislation, we would conclude that there is, instead, prevalent pre-electoral concern with the polls. But if fishing for votes is the number one priority of this government, you cannot ask salaried workers to be the only ones to show “restraint.”

In fact, if this is the case, they will be quite justified to ask for the implementation of Prime Minister Kyriakos Mitsotakis’ express commitment to increase minimum wages at twice the rate of any GDP increases. Now. Starting the first of January.

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