Impossible convergence

One of the reasons Greece’s incomes and living standards are lower than the EU average is that Greece has a smaller labor force. It’s a myth that Greeks work fewer hours than other Europeans. The truth is that fewer Greeks work. A smaller percentage of the population is in the labor market and that is mainly because unemployment is rife among young people while a considerable number of women do not work. The high jobless rate takes its toll on the national income and living standards. In theory everyone tries to improve people’s living standards. But in practice most refuse to admit that the conditions for increasing incomes are getting worse. Legislation promotes the reduction of the work force. Greece offers strong incentives for early retirement, particularly to well-paid and experienced employees. Pensions almost match normal wages. But apart from the incentives for retirement there are actually counterincentives for working. Working from a specific age threshold and afterward is no good because of hefty taxation and social security contributions (which do not really improve on the pension or benefits). A recent financial bulletin released by Alpha Bank underscores that unemployment is not only hitting young men and women but is increasingly felt among older people. According to current demographic trends, by 2050 Greeks over 65 will make up some 30.2 percent of the total population, up from 18.2 in 2005 and 11.1 in 1970. Moreover, there will be 1.1 pensioners for every worker and contributions and state expenditure will not be enough to cover pensioners’ needs. This is the heart of the social security issue, which few people want to see. But it is not only a problem of the future as it actually explains current poverty levels. It reveals the causes of Greece’s poor living standards and why convergence with the European Union is an illusion.