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EUROPEAN SOCIAL POLICY NETWORK
10th Annual Conference 2012
Edinburgh, 6 – 8 September 2012
Paper for STREAM No. 7
“Developing activation discourses in an era of fiscal
constraints – Policy challenges for the rudimentary Greek
Welfare State”
Prof. Dr. Gabriel Amitsis
Department of Health & Welfare Administration
School of Administration and Finance
Technology Educational Institute of Athens
Address for correspondence
Dr. Gabriel Amitsis
37, Poulopoulou Str.
118 51 Athens – Greece
tel.: + 30 6973 207806
fax : +30 22990 25881
e-mail: [email protected]
ABSTRACT
The development of sound activation policies for unemployed and welfare
beneficiaries constitutes a key challenge for the rudimentary Greek Welfare State in
the context of the sharp financial crisis that affects Greece and its implications during
the implementation of the First (May 2010) and the Second Financial Stabilisation
Mechanism of the Greek Economy (February 2012). It represents a major policy issue
in the debate on the reform of traditional employment and social security policies,
given that it may affects a broad range of interested target groups (unemployment
claimants, long term unemployed, welfare claimants, people excluded from current
categorical minimum income schemes).
In this respect, the objective of this Paper is to describe the existing institutional and
operational framework of hybrid activation measures for unemployed and welfare
beneficiaries and to highlight internal (put forward by the Ministry of Labour, Social
Insurance and Welfare and the Public Employment Service) and external scenarios
(put forward by international donors and the OECD) for the introduction of activation
principles in employment and welfare policies. Advantages and shortcomings of a
broader social activation discourse will be discussed in the challenging context of the
financial and sociopolitical crisis.
Summary of the main issues
A general overview of the Greek employment and welfare regimes;
The current national institutional, operational and financial framework of activation
measures for unemployed and welfare beneficiaries;
The impact of financial crisis on the development of sound activation policies;
Scenarios of a national social activation discourse against the backdrop of a very
challenging financial position.
BRIEF PROFILE
Dr. Gabriel Amitsis is Assistant Professor of Social Security Law in the Department of
Health & Welfare Administration – Technology Educational Institute of Athens. He has
undertaken research and teaching at the Greek Open University and the Athens National
School of Public Administration in areas relating to EU and comparative social security and
inclusion policies. His relevant publications include: “Human Rights and Social Exclusion:
The new European Agenda” in D. Pieters (ed.) Confidence and Changes: Managing Social
Protection in the New Millennium (Kluwer, Hague, 2001); “The effect of legal mechanisms
on selective welfare strategies for needy persons – The Greek experience”, in L. Williams /
A. Kjonstad / P. Robson (eds.), Law and Poverty – Poverty Reduction and the Role of the
Legal System (ZED Books, London, 2003); “Principles and instruments of social inclusion
policies in Europe”, in Th. Sakellaropoulos / J. Berghman (eds.), Connecting Welfare
Diversity within the European Social Model (Intersentia, Antwerp, 2004); “Developing
universal anti-poverty regimes –The role of the United Nations in the establishment of
International Poverty Law”, in L. Williams (ed.); International Poverty Law – An emerging
discourse (ZED Books, London, 2006), The European Social Inclusion Strategy (Papazisis
Publishing, Athens, 2006) and Public Employment Agencies in the European Region
(Ministry of Labour and Social Insurance, Nicosia, 2008).
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Introduction
Since the end of the 2000s, the financial crisis in the European region strengthens the
re-introduction of the dependency discourse1 in the social policy agenda, strongly
influenced by the debate on the fiscal crisis of Mediterranean welfare states. The
economic decline and rising unemployment (unemployed in the EU region reached 25
million people last May) “obliged” several national policy makers to introduce new
strict eligibility conditions for the provision of unemployment/welfare benefits and
services, while EU bodies reinvented active inclusion trajectories2. This is exactly the
risk where dependency theories may influence political decisions, contributing as the
policy foundations of activation3 that may bring into question entitlements to benefits.
Greece is going through a major economic and social crisis. GDP has been falling
continuously since the beginning of the crisis in 2008 up to 2011 (the rate of growth
was -6.9% in 2011, -3.5% in 2010 and –3.2% in 2009). It is strongly expected that the
recession of the Greek economy in 2012 will be deeper than projected, given that
unofficial data (August 2012) estimate a recession of more than 6.7% of GDP.
The social impact of the crisis has also been extremely severe so far. The
employment rate declined from 66.5% in 2008 to 59.9% in 2011. It declined in almost
all economic sectors, although recession particularly affected cyclical sectors, such as
construction, manufacturing and trade. Unemployment has increased dramatically
(17.7% in 2011 from 7.6% in 2008 – annual average). It is likely that it will increase
further in 2012, given that during the first semester has reached 22.6%. Long-term
unemployment has reached 9.1% of the labour force and youth unemployment was
48% in November 2011, which is almost twice as high as it was 2 years ago.
Prior to the crisis, Greece had one of the highest at-risk-of poverty and/or social
exclusion rate in the EU (see Table 1). Nevertheless, the factors increasing poverty
have been exacerbated, disposable income has been hit (down 9.3% in 2010, cuts in
average wages of almost 30% between 2009 and 2011), homelessness is increasing
rapidly and in-work poverty remains at a high level (13.8% in 2010). Rising
unemployment leads more and more people to non- contributory social programmes,
the cost of protection keeps increasing and there is a growing fear, particularly among
international donors, that unemployment / welfare benefits operate either as popularist
redistribution of public funds or as major disincentives to seek or retain a job4.
C. Garsten and K. Jakobson (eds.), Learning to be employable – New Agendas on Work,
Responsibility and Learning in a Globalizing World, 2004, J. F. Handler, The Rise and Spread of
Workfare, Activation, Devolution, and Privatization, and the Changing Status of Citizenship, 2008.
2
European Commission, “A consultation at EU level to promote the active inclusion of the people
furthest from the labour market”, A Communication from the Commission, COM (2006)44/ 8.2.2006,
Brussels, European Commission, “Modernising Social Protection for greater social justice and
economic cohesion: Taking forward the active inclusion of people furthest from the labour market”, A
Communication from the Commission, COM (2007)620/ 17.10.2007, Brussels, European Commission,
“The active inclusion of people excluded from the labour market”, A Communication from the
Commission, COM(2008) 639, 3.10.2008, Brussels and European Commission, “A European
Microfinance Facility for Employment and Social Inclusion”, A Communication from the
Commission, COM(2009) 257, 3.6.2009, Brussels.
3
R. Van Berkel and I. Moller, “The concept of activation”, p. 45 in R. Van Berkel / I. Moller (eds.),
Active Social Policies in the EU – Inclusion through Participation?, 2002, H. Dean (ed.), The ethics of
welfare – Human rights, dependency and responsibility, 2004.
4
This risk is expressed through the terms of “unemployment trap” (welfare recipients who are
discouraged from seeking work) and “poverty trap” (welfare recipients who undertake low paid jobs
find that their situation worsens by the combination of reduction of benefits and taxation).
1
3
The development of sound social activation strategies5 for unemployed and welfare
beneficiaries constitutes a key challenge for the rudimentary Greek Welfare State in
the context of the sharp financial crisis and its implications during the implementation
of the First (May 2010) and the Second Financial Stabilisation Mechanism of the
Greek Economy (February 2012). It represents a major policy issue in the debate on
the reform of traditional employment and social security policies, given that it may
affect a broad range of interested target groups (unemployment claimants, long term
unemployed, welfare claimants, people excluded from current categorical minimum
income schemes).
In this respect, the objective of this Paper is to describe the existing institutional and
operational framework of hybrid activation measures for unemployed and welfare
beneficiaries and to highlight internal (put forward by the Ministry of Labour, Social
Insurance and Welfare and the Public Employment Service) and external scenarios
(put forward by international donors and the OECD) for the introduction of activation
principles in employment and welfare policies. Relevant measures have been already
adopted in the majority of other EU Member States as a means open to different
institutional, ideological and economic interpretations6.
1. Greece after 2009 – The social impact of financial crisis
Since 2010, Greece has taken a wide range of measures in order to bring public
finances back on a sustainable track, with the support of international donors, known
as the mighty Troika (International Monetary Fund, European Commission, European
Central Bank)7. These measures led to a reduction in the budget deficit to GDP ratio
from 15% in 2009 to 9% in 2011, in a highly unfavourable economic context.
The First Economic Adjustment Programme was launched in May 2010 and
committed a loan package of € 110 billion, of which € 73 billion was disbursed. In
June 2011, the Socialist Government adopted a Medium Term Fiscal Strategy
(MTFS), which comprises new measures amounting to 12% of GDP and provides a
roadmap for the adjustment effort up to 2015.
In early 2012, the Coalition Government adopted a supplementary budget with
additional fiscal measures to realign with the targets of the MTFS. It also adopted a
new Memorandum of Economic and Financial Policies with the Troika on 9th
February 2012 aimed at securing the continued disbursement of financial assistance
by the European Financial Stability Facility. This Memorandum sets targets
on Greece for fiscal consolidation as a condition of drawing down further Troika
financial support8. The Second Economic Adjustment Programme was agreed in
5
European Foundation for the Improvement of Living and Working Conditions, Linking welfare and
work, 1999, I. Lodemel / H. Trickey (eds.), An offer you can’t refuse – Workfare in international
perspective, 2000, J. Pillinger, Quality in social public services, 2001, W. Hanesch / N. Baltzer, The
role of social assistance as means of social inclusion and activation, 2001, A. Moreira, The Activation
Dilemma – Reconciling the fairness and effectiveness of minimum income schemes in Europe, 2008.
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S. Betzel and S. Bothfeld (eds.), Activation and Labour Market Reforms in Europe, 2011, G. Heyer,
S. Koch, G. Stephan and J. Wolff, “Evaluation der aktiven Arbeitsmarktpolitik - Ein Sachstandsbericht
für die Instrumentenreform 2011”, Journal for Labour Market Research, 45 (1), 2012.
7
The total package of assistance to Greece, including loans from EU and financial institutions, writedowns on private sector debt holdings, and grants from the EU structural and other funds, adds up to
about € 380 billion. This is equivalent to 177% of Greek GDP.
8
Government of Greece, Letter of Intent, Memorandum of Economic and Financial Policies and
Technical Memorandum of Understanding, 9.3.2012, Athens.
4
March 2012 with a loan package of € 130 billion in addition to the amounts not
disbursed from the First Programme.
It is interesting to note that current loan conditions require that social programmes
(excluding pensions and health) contribute 1.5% of GDP to fiscal consolidation.
Other programmes (including health, education, pensions and defence) are also
required to contribute to fiscal consolidation. The overall target is to turn the primary
balance from a deficit of 2.5% of GDP in 2011, to a surplus of 4.5 % of GDP in 2014.
Achieving the 2014 target would require spending measures of some 7% of GDP.
Greece has agreed that most of the adjustment will focus on the spending side.
In the meantime, the Greek economic and social context remains highly challenging,
with implications for both social stability and growth. The social pressures generated
by recession and fiscal consolidation are already significant; they are likely to
intensify in the short to medium term, as growth is expected to resume only in the
second half of 2013. In 2012, Greece is experiencing its fourth consecutive year of
recession against a rising unemployment rate, which doubled in two years to 21% in
November 2011. The reduction of the fiscal deficit from 15% of GDP in 2009 to 9%
of GDP in 2011 also came at a social cost, with cuts in average wages of almost 30%,
and in average pensions of almost 18%.
As a small catalyst within a rather complex global background9, the Coalition
Government (in power from December 2011 – till May 2012) introduced severe
austerity measures in the social protection field, such as the reduction in the rate of
ordinary unemployment benefit, pension cuts, stricter rules for the provision of the
rather popular among elderly ‘Social Solidarity Allowance for Pensioners’ (EKAS)10,
wage and labour income reduction, increase in VAT on domestic fuel, increase of 4%
in standard VAT and the suspension of the rent subsidy programme for low income
employees. A new solidarity contribution was introduced because of the increased
expenditure for unemployment benefits (due to the rapidly increasing number of the
recipients). Some benefits have become means-tested (e.g. the large family benefit),
some others have been reduced (e.g. family benefits for public sector employees).
The austerity measures have pushed more people into poverty. In 2009, 19.6% of the
Greek population was poor11. The rate would increase only marginally after the
economic recession and the introduction of the austerity measures in 2010 and 2011.
This modest increase is not surprising as the median income fell. However, measuring
poverty taking as a base the 2009 median income, i.e. the pre-crisis income, suggests
a significant increase in poverty. With the combined effects of austerity and recession,
the poor would account for 25.83% in 2010 and 30.49% in 2011 (Table 2).
9
For further arguments see OECD, OECD Employment Outlook 2011, 2011 and International Labour
Organization, Eurozone Job Crisis – Trends and Policy Responses, 2012.
10
EKAS was introduced in 1996 as a non-contributory means tested benefit paid to poor persons
receiving an old age, survivor or invalidity pension under a social insurance scheme supervised by the
Ministry of Labour, Social Insurance and Welfare (except farmer pensioners).
11
This figure is based on the Eurostat calculation of poverty rates, which uses the percentage of the
population that has an annual income of less than 60% of the median income, including old age and
survivor pensions.
5
2. The Greek approach to Social Security
The Greek social security system is a rather complex model that supplements the
traditional role of families and community networks as the main providers of care
against risks, needs and ills12. It is promoted through the application of three different
techniques: social insurance for persons active in the labor market, social assistance
for needy uninsured persons and a national health scheme for all persons living in
the Greek territory. As far as administrative issues are concerned, the social insurance
system is regulated and supervised by the Ministry of Labour and Social Insurance,
while health care and welfare policies were monitored till mid 2012 by the Ministry of
Health and Social Assistance (the term “Assistance” is replaced by “Solidarity” since
2004, after the general elections of March 2004). Since July 2012 the Ministry of
Labour and Social Insurance took responsibilities over the welfare sector and is now
on called Ministry of Labour, Social Insurance and Welfare.
Ministries involved in the field of social protection (in particular the Ministry of
Labour, Social Insurance and Welfare and the Ministry of Health, but also the
Ministries of Interior, of Competitiveness & Development, and others) enjoy a high
degree of freedom in determining policies and proposing expenditures. Coordination
is a particularly weak feature of the Greek social administration, which prevents a
comprehensive overview and favours fragmented measures with no mechanism to
ensure coherence and financial sustainability.
The Parliament also has a limited role in the social security process and review. In
past years, the so-called social budget was not a real budget but a simple working
document retracing budgeted expenditures and resources ex post. Recent reforms are
changing this: the 2012 budget process proposes a presentation of expected
expenditures and resources ex ante. Related reforms will also be needed to give
Parliament the means to carry out an effective scrutiny of budget proposals, for
example a streamlining of the budget presentation, strengthening of Parliamentary
structures and capacities for review as well as a longer period for examination of
texts.
The Social Insurance System (Systima Koinonikis Asphalisseos) is the basic
cornerstone of the domestic social security model. Its function, as has been developed
since the 1950s, aims at covering traditional social risks of workers, employees and
self-employed through the provision of cash benefits and services, which address
problems related to the reduction or loss of income gained through employment. The
system is based on three insurance pillars: (a) the first pillar corresponds to the public
schemes of compulsory main and supplementary insurance, which function through
legal entities supervised by different ministries, (b) the second pillar is promoted by
occupational funds at the level of enterprises and (c) the third pillar is developed
through individual and collective insurance plans.
The administration and provision of social insurance benefits is organised across
several funds providing pensions, health care, supplementary pensions,
unemployment assistance, housing benefits, and supporting recreational activities.
There are six funds providing main pensions: IKA for the majority of salaried workers
and new entrants to the civil service, OAEE for the self-employed, ETAA for a
For a broad overview see M. Petmesidou, “Social Protection in Greece – A brief glimpse of a welfare
State”, Social Policy and Administration, 30, 4, 1996, pp. 324-347, G. Amitsis, “Greece”, pp.157-185,
in D. Pieters (ed.), The Social Security Systems of the Member States of the European Union, 2002.
12
6
selected group of professionals (including doctors, engineers, and lawyers), ETAPMME for the press industry, OGA for farmers and agricultural workers, and the Bank
of Greece Pension Fund. These funds often include other smaller funds. These main
pension funds are generally responsible for providing social security benefits other
than health, supplementary pensions, unemployment, housing and recreational
activities. For those affiliated with IKA, OAED (Manpower Employment
Organization) provides unemployment benefits and employment services, while OEK
and OEE provide housing and recreational benefits, respectively.
The health care system is characterized as a mixed system, given that health care
branches of the various first pillar social insurance schemes co-exist with the
National Health System (E.S.Y.- Ethniko Systima Ygeias). The ESY was
established in 1983 by law, designed to guarantee free health care for all residents of
Greece. It covers the entire Greek population, without any special entitlement
condition, regardless of professional category or region. Within the ESY context,
primary health care services are provided through rural health centres and provincial
surgeries in rural areas, the outpatient departments of regional and district hospitals,
the polyclinics of the social insurance institutions and specialist in urban areas.
Secondary care is provided by public hospitals, private for-profit hospitals and clinics
or hospitals owned by social insurance funds.
Since 2011 health care funds have been largely integrated into a central health care
fund (EOPYY). This Fund now includes all the insured under IKA, OAEE, OGA, and
those in the civil service covering about 90 percent of the population. The individuals
that remain out of the EOPYY systems are those that belong to ETAA, ETAP,
TAYTEKO (a fund that offers supplementary pensions and health care funds for some
state-owned enterprises), and TYPET (providing health care to the employee of the
Bank of Greece).
The Social Welfare / Assistance System (Systima Koinonikis Pronoias) forms the
final safety net for needy persons without sufficient means. It is based on categorical
minimum income schemes, which cover specific welfare target groups, as the elderly,
the handicapped, single parent families and children in need. These schemes were
introduced in the 1960s and developed during the 1980s.
2.1. Social insurance schemes for unemployed persons
Social insurance coverage due to unemployment is restricted to persons affiliated to
the I.K.A. Fund. Eligible persons receive cash benefits and integration services from
O.A.E.D. (the Manpower Employment Organisation), a legal body of public law
supervised by the Ministry of Labour, Social Insurance and Welfare, acting as the
responsible agency for integration and passive employment measures within the
Greek social policy context.
The main benefit is the ordinary unemployment benefit. In order to become entitled
to this benefit under O.A.E.D., an I.K.A.-insured person must satisfy the following
conditions: to be capable for work; to be involuntarily unemployed; to be registered
with the labour exchange; to establish a contribution record of 125 working days
during a period of 14 months preceding the two months prior to the commencement of
unemployment (in cases of first claims, proof must be given of at least 80 working
days in each of the three years prior to the commencement of unemployment).
7
Both for manual workers and white-collar workers the rate of unemployment benefit
is 50% of the estimated income within the relevant earnings class. Furthermore, there
are dependency additions of 10% in respect of each dependent (subject to a maximum
of 70% of the basis of calculation). The minimum level of unemployment benefit is
equal to two thirds of the statutory minimum daily wage for unskilled workers. The
level of reduced benefit payable after expiration of the initial benefit period is 50% of
the benefit previously enjoyed.
Those who are not eligible to receive ordinary unemployment benefits may in certain
conditions (catastrophes, violent stoppages of work and long-term unemployment)
receive special benefits for a period of maximally 45 days after a discretionary
decision taken by the Minister of Labour and Social Insurance.
Apart of ordinary or extraordinary insurance type unemployment benefits, additional
special benefits are provided to persons non-active in the domestic labour market.
Relevant benefits, as introduced during the 1980s and 1990s, include the payment of
cash allowances, voluntary insurance cover and health care treatment:
a) Young people between the ages of 20 and 29 years, who have recently entered the
labour market and have been unemployed for more than one year, are entitled to a
flat-rate unemployment benefit during a period of maximally five months.
b) Long- term unemployed aged 45-65 who have exhausted their right to ordinary
unemployment benefits are entitled to receive a means – tested monthly relief
allowance.
c) Long-term unemployed persons engaged in a part-time contract (at least four hours
working time daily) are entitled to receive an additional sum in top of their salary for
12 months.
d) Unemployed persons who were jobless for at least 12 continuous months, have
completed the 60th year (male) and the 55th (female) and who still require five
working years before becoming entitled to their full old-age benefit may voluntarily
continue their insurance with I.K.A. and the auxiliary branch (I.K.A.-T.E.A.M.) for a
given period of 5 years. This period of voluntary insurance for the above persons is
not recognised as working time for unhealthy and hazardous occupations. Payment of
the contributions is reimbursed by LAEK, a special branch for employment and
vocational training measures that was established within the OAED scheme in 1996.
e) Unemployed persons who were jobless for at least 12 continuous months,
completed the 55th year (male) and 50th year (female), are insured by I.K.A. for
unhealthy and hazardous occupations and who still require five working years before
becoming entitled to their full old-age benefit may voluntarily continue their
insurance with I.K.A. and the auxiliary branch (I.K.A.-T.E.A.M.) for a given period of
5 years. This period of voluntary insurance is not recognised as working time for
unhealthy and hazardous occupations. Payment of the contributions is reimbursed by
LAEK.
f) Unemployed persons, who take part in vocational training programmes, enabling
them to acquire working experience are covered by I.K.A. for the risks of sickness
(only for benefits in kind) and for employment injuries. Beneficiaries who receive
ordinary unemployment benefits may also receive a training allowance during their
participation in vocational training programmes. Nevertheless, unemployment
benefits are not paid whether the rate of the training allowance exceeds their daily
amount.
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g) Young unemployed people aged under 29 are entitled to receive benefits in kind in
the case of illness. Not covered are young unemployed people who are insured in their
own right, young unemployed people covered as a family member of an insured in
their own right, young unemployed people covered as a family member of an insured
person or students studying at a Greek or foreign university. The contributions for
these young unemployed people are paid to IKA out of the LAEK branch.
h) Employees are entitled to reservists’ benefits. These benefits are paid by the OAED
scheme to employees who remain in military service for a longer period than their
regular service term, or to employees who are called up for military training for the
second or subsequent time. On a loss of income as a result of military service a person
may receive benefit at a rate of 50% up to 100% of the lost income.
As a sum up, contemporary unemployment benefits include:

Ordinary Unemployment benefit

Special unemployment benefits

Long-term unemployed benefits

Emergency financial assistance

Special assistance after end of unemployment rights

Special assistance after a 3-month period of unemployment

Special financial assistance for released prisoners

Conscription allowance

Financial assistance for political refugees

Young professional benefits

Administrative leave allowance

Benefit for insolvency

Special seasonal benefits.
Unemployment beneficiaries are subject to “loose” activation requirements,
given that they may receive benefits on the condition that they make marginal
efforts to re-integrate into the labour market, accepting particularly offers for
training or employment subsidies. There are no effective motivation techniques
to bring interested persons outside the benefit cycle, while sanctions for no
compliance with back to work opportunities are not imposed in practice.
As far as active employment measures are concerned, traditional vocational training
and job-placement schemes are supplemented by innovative measures developed
during the 90’s under European Social Fund initiatives. Special subsidies have been
planned for business, which recruit older unemployed people or the long-term
unemployed13. Moreover, unemployed people of any age (the young unemployed up
to 29 years of age, unemployed people between the ages of 29 and 55 and the longterm unemployed over 55) are entitled to receive free medical care (benefits in kind).
S. Zartaloudis, “Follow the money: Tracing the Europeanization of Greek Employment Policy with
regard to Public Employment Service’s Reform”, 2010.
13
9
The ordinary unemployment benefits provide income replacement at a flat rate of
470€14 (about two-thirds of the current level of the minimum wage) for up to a
maximum of 12 months of unemployment. Unemployment benefits are only available
to those who have made unemployment insurance contributions and to those aged 4565 under certain conditions. Figure 1 highlights the fact that most of the
unemployment benefit system is geared to contributory (insurance based) benefits.
Those who have never been in work (such as some unemployed youth) fall outside the
system.
776.307 persons (43% male and 57% female) were registered with the OAED scheme
in May 2012, 216.889 of whom received unemployment benefits.
42,27% were registered more than 12 months and 57,73% less than 12 months.
Many unemployed receive no unemployment-insurance benefit, as shown in the
Table 3. Approximately 20% of those having been unemployed from 9 to 12 months
over the year received some benefit (most often unemployment insurance). This
means that requiring to have exhausted insurance rights in order to be eligible to
receive unemployment assistance will reduce strongly the number of eligible people.
It should be noted here that only 17% of the persons declaring themselves
unemployed received unemployment benefits in Greece in 2009 (Figure 1), compared
to 26% in Portugal and 53% in France. This is in sharp contrast with the fact that
unemployed are a group especially at risk of poverty. Figure 2 shows that the
unemployment rate has risen sharply in line with negative GDP growth.
Unemployment benefits are low in international comparison. Greek unemployment
benefits relative to net earnings when on the job have been consistently below those
of France, Germany, Italy, Norway and Portugal since 2001 (see Figures 3 and 4).
2.1.1. The case of long term unemployed
The proportion of long term unemployed (those out of work for at least 12 months)
was 45% of total unemployment in 2010 according to the Labour Force Survey (LFS)
and could reach or exceed 60% (see Figure 5). In 2009, according to the ILO
definition, the average number of long-term unemployed reported by the LFS was
about 190.000 persons (right axis of Figure 7) and the share of long-term unemployed
in total unemployment was 41%. This ratio is comparable with estimates from SILC,
which indicate a total of 376.000 people who declared themselves as long-term
unemployed (different from the ILO measure). This represents about 55% of the
people who declared themselves unemployed as of December 2009. The level of
unemployment in SILC is twice that accounted in the LFS, because LFS figures are
based on the ILO definition of unemployment which requires people not only to be
without work, but also to be available for work and looking for work at the time of the
interview.
According to SILC, in 2009 less than 15% of the long-term unemployed received
some kind of income-replacement benefit related to unemployment, notably thanks to
an exceptional benefit that seems to have been paid only once that year. If we focus
on the only specific benefit for long-term unemployed (the so called Unemployment
14
It was reduced to 350€ after the major legislative reform of February 2012.
10
assistance for older workers) the coverage rates are even lower (less than 1%) for a
cost of about 3.3€ million in 2010.
This benefit is paid to workers aged 45-65 only who have been unemployed for more
than 12 months and have already exhausted the right to ordinary unemployment
benefits, if their annual family income is below 5.000€. The income threshold is
increased by 587€ for each dependent child. In 2008, the benefit was 200€ per month
(unchanged since 2003), payable for a period of 12 months. Available data show that
the number of beneficiaries varies between 3.000 and 5.000 people.
2.2. Social welfare schemes for unemployed persons
Social welfare schemes are administered at the local level under the supervision of the
Ministry of Labour, Social Insurance and Welfare, given that the welfare sector
passed in July 2012 under the competence of the central employment
administration. Each municipality runs a social services department, which bears
responsibility for the implementation of welfare programmes in the area concerned;
this department administers cash benefits financed by the Ministry and promotes
personal social services financed both by the Ministry and the prefecture concerned.
The current welfare system provides cash benefits, benefits in kind and personal
social services through municipalities and decentralised legal bodies supervised by the
Ministry of Labour, Social Insurance and Welfare. Social services are also provided
through local communities and a network of voluntary bodies and NGOs actively
involved in the framework of policies for children, refugees and persons with special
needs.
The Greek social welfare system consists today of a number of specific benefit
programmes for selective groups of needy persons, e.g. poor families with children,
handicapped people, single parent families and the elderly. They include emergency
relief programmes, derived from an out of date legal instrument (Legislative Decree
57/1973) that introduces welfare principles (need, subsidiarity) for the protection of
persons without sufficient resources. This emergency programme is implemented by
the Social Welfare Departments of Municipalities. In practice, it only covers persons
affected by extra-ordinary events, not related to the consequences of poverty and
social exclusion. Benefits under this programme consist of discretionary lump-sum
payments, paid to individuals or households not covered by social insurance funds,
unable to cover their subsistence needs through their own means.
Social welfare practice in Greece is characterized by the limited application of the
subsidiarity principle in comparison with the implementation of the insurance
principle for the coverage of the working population. There is not any single social
assistance scheme covering the whole population but distinct programmes directed to
specific target groups15. As a rule, only people who are not eligible for any social
insurance benefit are entitled to assistance, with the exception of certain categories of
disabled persons who may receive both insurance type pensions and welfare
P. Papadopoulos, ‘Greece’, pp. 178-194, in T. Eardley et al., Social Assistance in OECD Countries,
1996, G. Amitsis, “The effect of legal mechanisms on selective welfare strategies for needy persons –
The Greek experience”, pp. 175-202, in L. Williams / A. Kjonstad / P. Robson (eds.), Law and Poverty
– Poverty Reduction and the Role of the Legal System, 2003, M. Matsaganis, “The Limits of
Selectivity as a Recipe for Welfare Reform: The Case of Greece”, Journal of Social Policy, 34(2),
2005.
15
11
allowances. The levels of assistance benefits vary considerably from scheme to
scheme, but are generally very low, unable to guarantee sufficient means and
adequate living standards. Usually the benefits are subject to a means test, with the
exception of cash benefits for disabled (universal benefits).
The absence of a general welfare scheme is partly covered through the introduction of
assistance elements within the social insurance schemes (such as the minimum
pensions or the social solidarity allowance for pensioners). There were legislative
attempts to introduce a general assistance scheme and to improve existing categorical
programmes, which led to the establishment of the National Social Care System in
1998. Nevertheless, the development of a national minimum income scheme is still a
hot issue in the political agenda.
Personal social services are developed with the scope to address particular complex
needs, which cannot be covered through cash benefits or benefits in kind. Therefore,
they constitute the third pillar of the welfare system, which functions almost
independently from the first pillar (income supplement schemes through cash
benefits) and the second pillar (schemes covering basic needs through the provision of
benefits in kind)16.
Unemployed persons who have exhausted entitlements to insurance benefits are not
entitled to any support from existing categorical welfare schemes; they are only
entitled to discretionary lump sum payments in case of emergency, equal to 580€ per
year, paid by the Social Services Departments of Municipalities. This is the main
reason why unemployment stands as the main poverty risk factor in
contemporary Greece (see Table 4).
On the other hand, welfare beneficiaries are not subject to any activation
condition and they may receive benefits irrespective of their efforts to follow
active employment programmes and re-integrate effectively into the labour
market.
3. Activation principles in the national social policy reform agenda
Activation of unemployment and welfare beneficiaries became a key issue in the
national social policy agenda only during the financial crisis. However, no strong
political steps have been taken so far. This is mainly due to the lack of an integrated
general minimum income scheme that would promote social activation trajectories,
the marginal involvement of welfare claimants / beneficiaries in the operation of
social services and the absence of concerted actions to coordinate effectively
employment, anti-poverty and social inclusion strategies. At the policy level, there is
no horizontal policy among key government players (Ministry of Finance, Ministry of
Health, Ministry of Labour, Social Insurance and Welfare, Ministry of Interior), while
social partners focus more on wage setting issues rather on activation of non unionized persons. Since the beginning of 2012 a set of institutional measures was
adopted in order to reduce the relative Unit Labour Cost gap over the next three
years17, while protecting employment in order to enhance competitiveness.
G. Amitsis, “The operation of social services in Greece and Cyprus in the light of the Mediterranean
Welfare Regime”, pp. 145-157, in M. Michalidis, S. Fargion and R. Sanders (eds.), Research Synergies
in Social Professions, 2008.
17
European Commission, Economy, The Second Economic Adjustment Programme for Greece,
Occasional Papers 94, European Economy, March 2012, p. 15, 37 and 68.
16
12
Representative measures focused on adjusting minimum wage; limiting the length and
“after effects” of collective contracts; eliminating unilateral recourse to arbitration;
reducing dramatically non-wage labour costs and adjusting the legacy contacts in the
ex-state owned enterprises.
At the operational level, one may identify serious shortcomings related to: (a) the
motivation of social administrators in public agencies towards persons at high poverty
and exclusion risk; (b) the stigmatisation of beneficiaries, which suggests that services
are self-serving rather than focused on the needs of welfare recipients; (c) the
efficiency of support, which suggests that services impede rather than encourage the
potential for self-help.
However, a proper assessment of the new institutional and policy welfare context
highlights a set of domestic initiatives, which may act as catalyst for the introduction
of concerted activation strategies.
(a) The Hellenic National Reform Programme 2011-201418 introduced three national
targets in the social protection field:
•
Reducing, by 2020, the number of people at risk of poverty and/or social
exclusion by 450.000 which means a reduction of the at-risk-of poverty and/or
exclusion rate from 28% in 2008 to 24% in 2020;
•
Reducing the number of children (0-17 years) at-risk-of poverty by 100.000
until 2020, which corresponds to a reduction of at-risk-of poverty rate for
children (0-17) from 23% in 2008 to 18% in 2020;
•
Building a “social safety net” against social exclusion constitutes a priority,
especially during the crisis.
These targets are supplemented by at least two other national targets, which may play
a rather important role in the fight against poverty and social exclusion: a) reducing
the share of early school leavers, which should be under 10% by 2020; b) increasing
the employment rate target at 70%.
In order to reach these poverty targets, removing barriers to labour market access
becomes the most fundamental challenge. Furthermore, Greece faces an important inwork poverty issue (most of the poor children live in “in-work poor households”),
while the number of the unemployed poor (below the EU poverty line) has also
sharply increased since 2008. Last but not least, the efficiency of active
employment policy towards vulnerable groups by increasing targeting and
activation is also a main challenge.
In this context, efforts have been made to facilitate a smoother and more progressive
distribution of the consolidation burden among the population, while the horizontal
benefits policy has also changed. Additional measures to limit the social
consequences of the crisis include:
 introduction of a new institutional framework on the development of social
innovation and entrepreneurship through social enterprises;
 development of employment programmes for vulnerable groups implemented
by the Greek Manpower Organisation, regional programmes to advance
employment (TOPSA), local social integration projects (TOPEKO);
18
Ministry of Economy, Hellenic National Reform Programme 2011-2014, 2011.
13
 development of integrated care services for poor families with children;
 establishment of a new scheme to support homeless in urban areas.
Efforts have been made in order to make the labour market more flexible and
inclusive. Employment Protection legislation has been deeply modified. The
maximum duration of successive fixed-term employment contracts has been extended
from two to three years. The reference period, during which the renewals can take
place before the contract is automatically transformed into an infinite one, is extended
as well. Furthermore, more flexible conditions for the regulation of working time have
been put in place and collective agreements on working time flexibility are facilitated.
The legislative framework of the Private Employment Services and Temporary
Employment Agencies is revised by simplifying the conditions and procedures
concerning their establishment and by reducing the administrative costs.
A decrease in minimum wage has also been put into effect (since 28 February 2012).
The minimum wage has been reduced by 22% and a sub-minimum wage for
employees under 25 years has been also introduced (-32%). Additionally, any kind of
wage increase imposed by law, collective agreements or arbitration awards has been
frozen until unemployment falls below the threshold of 10% (currently at 20,7%).
(b) Taking into account the need to develop a sustainable national activation strategy,
the Ministry of Labour & Social Insurance commissioned in October 2011 on the
initiative of the OAED an independent Study, aiming at evaluating the balance
between active and passive employment policies and discussing for the very first
time specific proposals/recommendations for the establishment of a new
unemployment protection framework during the financial crisis. Unemployment
had increased dramatically (17.7% in 2011 from 7.6% in 2008 – annual average),
while the effectiveness of benefits schemes for unemployed persons was a critical
issue.
As guiding principles for the development of relevant policy scenarios, the Study took
into account:

the current national institutional and operational framework for employment
and social policies in Greece;

the evaluation of the ESF impact on the delivery and quality of active
employment programmes during 2000s;

international best practices in the design, administration, operation, evaluation
and funding of activation strategies applied in other Member States19;
J. Kvist, Activating Welfare States – Scandinavian Experiences in the 1990s, 2000, H. Sarfati and G.
Bonoli (eds.), Labour market and social protection reforms in international perspective – Parallel or
converging tracks?, 2002, P. Tergeist and D. Grubb, Activation Strategies and the Performance of
Employment Services in Germany, the Netherlands and the United Kingdom, 2006, P. Henman and M.
Fenger, Administering welfare reform – International transformations in welfare governance, 2006, R.
Konle-Seidl, W. Eichhorst and M. Grienberger-Zingerle, Activation Policies in Germany - From Status
Protection to Basic Income Support, IAB Discussion Paper No. 6/2007, Y. Jorens and S. Klosse,
MISSOC Analysis 2008-Social Protection, Aspect of Flexicurity and Active Inclusion, 2008, R. van
Berkel, W. de Graaf and T. Sirovatka (eds.), The Governance of Active Welfare States in Europe, 2011,
S. Jochem, “Nordic Employment Policies – Change and Continuity Before and During the Financial
Crisis”, Social Policy & Administration, 45(2), 2011, S. Betzel and S. Bothfeld (eds.), Activation and
Labour Market Reforms in Europe, 2011.
19
14

stakeholders’ views and attitudes towards the rationale / scope of a new
system;

the overall need to adapt unemployment protection schemes on broader fiscal,
employment, social security and anti-poverty policies20, in line with the social
objectives of the EU 2020 Strategy21.
This Study was completed in March 201222 and concluded in the following main
results:
 There is no horizontal definition of unemployment in the current system; the
existing institutional definition (as laid down in Law No. 1545/1985) focused only
on ordinary unemployment benefits and should not be applied in the broader
spectrum of active policies.
 Subsistence needs of vulnerable beneficiaries (i.e. poor single unemployed) are
not addressed effectively, due to the lack of a non-contributory means tested
unemployment benefit and the absence of a national social safety net (general
minimum income scheme) that would cover every unemployed person in need.
 There are no effective preventive activation motives for unemployed not
interested to enter the benefits cycle.
 There are no effective positive activation motives for unemployed willing to
escape the benefits cycle and re-integrate into the labour market.
 Existing sanctions for non-compliance with “back to work” opportunities are not
imposed in practice by PES administrators.
 Active employment policies do not take into account personal conditions and
expectations of unemployment beneficiaries.
 There are no follow-up techniques in case of beneficiaries who take advantage of
employment grants or entrepreneurship programmes.
 There is limited application of coordination strategies between central government
agencies that design and monitor inclusion policies (Ministry of Health & Social
Welfare, Ministry of Labour & Social Insurance) or finance inclusion policies
(Ministry of Economy).
These key problems were exacerbated by the weakness of standardizing sound policy
objectives of employment, social security and social inclusion schemes and address
fundamental shortcomings related to different targeting techniques (pressure groups
are eligible to benefits and services according to their influence on policy makers and
administrators). Based on these findings, it was rather obvious that the current model
of unemployment protection deviates from the traditional values and principles of a
concerted social activation strategy.
Analysis of findings led to the construction of four basic policy scenarios (their design
was based on a detailed evaluation of primary and secondary data, SWOT and PEST
analyses, macroeconomic and demographic variables, poverty estimations and
institutional factors):
20
Ministry of Finance, Update of the Hellenic Stability and Growth Programme, 2010.
European Commission, Consultation on the future "EU 2020" Strategy, 2009.
22
G. Amitsis/F.Marini et al., A road map for activating unemployed persons in the Greek social policy
framework, Final Synthesis Report submitted to the Ministry of Labour & Social Insurance, Athens,
March 2012 (in Greek).
21
15
 activation as a means to reduce unemployment rates through an institutional
redefinition of unemployment conditions;
 activation as a means to reduce unemployment expenditures (in line with the
First Economic Adjustment Programme for Greece) through a horizontal
reform of eligibility conditions to receive unemployment benefits;
 activation as a means to advance social and economic status of unemployment
beneficiaries;
 activation as a means to support re-entry of unemployment beneficiaries in the
domestic labour market.
In all these scenarios, the issue of financial sustainability was not approached as an
end in itself23 but as a critical factor for ensuring the adequacy of services and
ultimately as a mechanism to safeguard rights of beneficiaries 24. As a starting point, a
combination between the third and the fourth scenario was selected, given that it
received the highest score in terms of:
 direct definition of target groups (distinction between persons able to be
activated and persons not due to objective reasons);
 concerted balance between active and passive employment measures;
 targeted support to most vulnerable beneficiaries.
Key principles of the new "Social Activation Strategy" include:
1. Setting a Code of entitlements and duties of unemployment beneficiaries (this
would remove the ‘postcode lottery’ aspect of current arrangements, which is deeply
disliked by those who feel that they are disadvantaged because the local PES in which
they live is less generous or active in promoting activation measures);
2. Establishing an agreed universal assessment system – important for the
transparency and equity of the scheme.
3. Introducing a supplementary means-tested benefit for poor unemployed who have
exhausted entitlements to insurance benefits and are willing to enter the activation
scheme.
4. Each unemployed person would have access to a concerted set of activation
measures suitable to its personal conditions.
Against this very challenging background, policy makers should consider how best to
develop active labour market programmes, through which registered unemployed
people not eligible to any kind of benefits can receive some support if they participate
in re-inegration measures; and by promoting participation in training and educational
programmes (accompanied by a minimal allowance) for persons not eligible to any
kind of benefits but needing new skills, in order to prepare the workforce for a
restructured economy during the downturn.
23
OECD, Employment Outlook 2004 – Reassessing the OECD Jobs Strategy, 2004 and ILO, Social
Protection and Inclusion – Experiences and Policy Issues, 2006, European Commission, Commission
Recommendation 2008/ 5737 on the Active Inclusion of people excluded from the labour market, OJ L
307, 18.11.2008..
24
F. Twine, Citizenship and Social Rights, 1994; M. Turner et al., Issues raised by users on the future
of welfare, rights and support, 2003; N. Bateman, Practising Welfare Rights, 2006.
16
Improved access to employment, notably through the increased financial support to
entrepreneurship (with focus on new innovative products and services) and the wider
use of wage subsidies for short-term recruitment especially focused on disadvantaged
groups, should be considered to provide temporary economic relief and an
opportunity to those most affected by the crisis to remain in the labour market. The
development of the social economy will also create new employment opportunities
led by social entrepreneurs in key sectors such as social care, services for the
unemployed, local and community development.
4. Activation principles in the international donors’ agenda
In the following years, national social policy makers (Greek Parliament, Government,
Administration) and key stakeholders (social partners, civil society organizations)
should take into account institutional conditions laid down in the Second Economic
Adjustment Programme and recommendations put forward in the much debated
OECD Functional Review of Greek Social Programmes.
4.1. The Second Economic Adjustment Programme (2012-2015)
The Second Economic Adjustment Programme25 was agreed in March 2012 with a
loan package of € 130 billion in addition to the amounts not disbursed from the first
programme. It aims at reaching a primary deficit of 1 % of GDP (projected/ planned)
in 2012 (2.5% of GDP in 2011) and a primary surplus of 4.5% of GDP in 2014 and
social programs (except pensions and health) are required to contribute 1.5% of GDP
to fiscal consolidation.
Over 2013-2014, a further fiscal adjustment of about 5.5 percent of GDP will be
needed to bring the public debt onto a more sustainable trajectory. Fiscal adjustment
will mainly involve reductions on the expenditure side of the budget to limit the
negative impact on the potential growth of the Greek economy. Savings will primarily
come from streamlining and better targeting welfare benefits, while preserving
basic social protection of the most vulnerable.
The Programme includes two important social policy objectives:
(a) The first is related to the reform of welfare schemes, concluding that “Given the
poor targeting of social programmes, there is quite some scope to generate
additional savings in this area, while, at the same time, more effectively protecting
the most vulnerable. So far, social policies in Greece seem to lack a stringent
strategy on how to target those parts of society that are truly in need of government
assistance. In particular, while a wide-range of social benefits are allocated without
means-testing to particular groups of society which are not subject to acute social
hardship, certain groups of households at the lower end of the income distribution
remain unprotected and are subject to pronounced poverty risks. The OECD review
under preparation is expected to highlight areas where there is room for significant
efficiency gains and savings can be generated, while improving social fairness of the
respective policies”26.
25
The full text of the Programme can be found at:
http://ec.europa.eu/economy_finance/publications/occasional_paper/2012/pdf/ocp94_en.pdf.
26
European Commission, The Second Economic Adjustment Programme for Greece, Occasional Paper
94/2012, European Economy, p. 36.
17
Here, targeting becomes the “sacred cow” of the reform process, while no serious
reference is made to the establishment of a national minimum income scheme
that should cover every person in need through cash benefits, social services,
activation and re-integration measures27.
(b) The second objective focuses on the labour market reform, introducing
negative28 and positive activation29 principles.
Negative principles are to be found in exceptional legislative measures on wage
setting that include:
 The minimum wages established by the national general collective agreement
(NGCA) will be reduced by 22 percent compared to the level of 1 January
2012; for youth (for ages below 25), the wages established by the national
collective agreement will be reduced by 32 percent without restrictive
conditions.
 Clauses in the law and in collective agreements which provide for automatic
wage increases, including those based on seniority, are suspended.
Positive principles are to be found in the administrative reform of the Labour
Inspectorate structure and activities. Corrective actions will include changes in the
organisation and work of the Labour Inspectorate, reinforced anti-fraud and
anticorruption mechanisms and reinforced monetary and legal penalties for
infringement of law and labour regulations and for social contribution evasion.
Quantitative targets on the number of controls of undeclared work to be executed will
be set for the Labour Inspectorate.
In its much debated Growth for Greece Communication the European Commission
argued that more efforts should be taken in the employment field, given that30:
“Public employment services should be strengthened to offer better, more individually
tailored services to the rising number of unemployed. More effective and targeted
investment in active labour market policies is needed to support a job-rich recovery
and a more systematic evaluation of the effectiveness of active labour market
measures should be undertaken. Priority should be given to the most vulnerable
groups (low-skilled unemployed, early school leavers, older workers, long-term
unemployed, migrants and minorities, etc). Efforts at skills development should be
geared towards identifying and responding to the needs of the sectors and clusters
which can become the key drivers of future growth.
The EU structural funds can support various schemes for short-term recruitment
especially focused on the needs of disadvantaged groups. These can provide
temporary economic relief and an opportunity to those most affected by the crisis to
develop their skills and remain in the labour market.
27
It should be noted here that Greece and Hungary are the sole EU Member States without any
institutional national minimum income guarantee.
28
They introduce limits on motivation to work, given that entry to the labour market corresponds to
marginal remuneration, particularly for those on minimum wage scales.
29
They strengthen motivation to declared work, given that entry to the hidden or grey labour market is
subject to strict sanctions both for employers and employees.
30
European Commission, Growth for Greece – A Communication from the Commission, COM(2012)
183, 18.4.2012, p. 12.
18
In addition, Greece could use the currently untapped potential of the social economy,
through the support of the European Social Fund, which provides an important
support for new job creation and can address the growing need for social services”.
Same recommendations are put forward by the specially-created Taskforce for
Greece31 that supports Greece in framing and mobilising technical assistance needed
to implement these challenging reforms. The Taskforce is already working closely
with Greek authorities to identify needs, and mobilise expertise from other Member
States and international organisations in the areas of structural fund absorption, tax
administration / public financial management, including the fight against fraud,
smuggling and corruption, the reform of the public administration, business
environment, judicial reform, employment and healthcare reform.
4.2. The OECD Functional Review of Greek Social Programmes
The Ministry of Labour, Social Insurance and Welfare asked December 2010 OECD
to help the Greek Government define reforms to improve the effectiveness,
efficiency and fairness of selected social programmes. The OECD received a
mandate to establish a well-balanced analytical perspective of the current situation,
including the construction of a database, in order to identify gaps and overlaps in
social protection, and highlight areas where there is room for significant efficiency
gains, taking into account the balance between societal groups and the need to
maintain social cohesion.
OECD’s work took the form of an analytical policy Report that constitutes part of a
series of publications entitled OECD Public Governance Reviews. Depending on the
country under review, the series focuses on either public governance as a whole, on a
specific mechanism of public governance, or on a public governance reform
programme. The reviews are carried out within the programme of work of the OECD
Public Governance and Territorial Development Committee, which brings together
the 34 member countries of the OECD and several non-members as observers.
The draft Final Report was published on 1st July 2012. It focuses on social welfare
programmes, which include disability pensions and exclude contributory old age
pensions and the provision of healthcare services. It considers both social insurance
programmes, which provide benefits to individuals on the basis of contributions paid,
and social assistance programmes, which are not conditional on the payment of
contributions.
The OECD has carried out costing of reform options aimed at rebalancing the social
welfare system, taking account particularly of the issues of poor overall targeting of
benefits. Its analysis was also based on a framework that retains distinct programmes
for different groups. There was a critical choice between investing effort in reforms
that are based on the continuation of distinct programmes for different types of
beneficiary even if the programmes themselves are reengineered, and investing effort
in the development of a single universal means tested benefit.
The Report does not recommend the second option, because of the length of time,
transitional cost and administrative difficulties of such a radical development in the
31
European Commission/Task Force for Greece, First Quarterly Report, October 2011 and Second
Quarterly Report, March 2012.
19
current Greek context. Authors argue that the development of a unified scheme
would raise short term costs due to the transition from the old system which
would need to be dismantled, to the new one. They refer to lessons gained from
relevant reforms in other OECD countries, which show that creating a unified system
is costly in the short term, before savings are possible, and that the reform takes
several years to implement. In the OECD experience, universal benefit systems risk
generating high levels of structural unemployment, if the control systems are not in
place to adjust for the incidence of undeclared work. They also risk not being able to
target benefits effectively on those most in need. In Greece, it will be especially hard
to administer a benefit based on the sole criteria of earned income, given the
significant incidence of undeclared work (about 25%). There would also be negative
fiscal consequences, if the system cannot control for people who collect benefits and
work at the same time.
4.2.1. Reform Option 1: A new scheme for the long term unemployed
This recommendation aims to enhance protection for the long term unemployed by
phasing-out the unemployment assistance benefit for older workers and replacing it
by a new programme, called for simplicity as LTUA (long-term unemployment
assistance), means-tested but without any condition on the age of claimants, with an
income ceiling higher than the current one. The LTUA would be paid to workers who
have been unemployed for more than 12 months, if their annual household
equivalised income is below a given threshold. In OECD simulations, the level of the
benefit was set at EUR 460€ per month, i.e. the same level as the basic UI benefit,
payable for a maximum of 12 months.
Three basic scenarios were simulated for 2009: in scenario 1 beneficiaries must have
exhausted their UI benefit rights and received at least this UI benefit for 12 months
(the maximum duration). Scenario 2 lowers this condition to 6 months. Scenario 3
removes this condition: any long term unemployed having exhausted their UI benefit
rights whatever their length, or long term unemployed who never had such rights,
would be eligible (if their household income is below the threshold).
Three scenarios for the new unemployment benefit
Unemployment Previous UI benefit duration
duration
12 months
Scenario 1
Scenario 2
Scenario 3
>= 12 months
Between 6 and 12 months
Any duration or no previous UI
rights
20
Impact of the long-term unemployment benefit reform (based on 2009): high
estimate
Condition
on
previous
UI
eligibility
Scenario
1 min. of
12 months
of UI
Scenario
2 min. of
6 months
of UI
Scenario
3
no
minimum
previous
UI
household
income
below
number of
eligible
unemployed
coverage of
selfdeclared
long-term
unemployed
winners
(full take
up)
Poverty annual net cost net cost
rate
cost
after
after
(before
(M€) creation creation
reform=
of new
of new
20.5%)
prg
prg
(M€)
(%GDP)
20%
5 403
1%
4 464
20.5%
21
18
0.01%
30%
9 396
2%
8 457
20.5%
36
33
0.01%
40%
10 644
2%
9 705
20.5%
41
38
0.02%
20%
9 479
2%
8 540
20.4%
37
33
0.01%
30%
19 600
4%
18 661
20.3%
76
72
0.03%
40%
23 745
4%
22 806
20.3%
92
88
0.04%
20%
141 417
26%
140 478
18.8%
546
543
0.23%
30%
222 316
41%
221 377
18.6%
859
856
0.37%
1 012
0.44%
1
40%
262 711
49%
261 772
18.6%
015
Source: SILC (2010)
Impact of the long-term unemployment benefit reform (based on 2009): low
estimate
Condition
on
previous
UI
eligibility
Scenario 1
min. of 12
months of
UI
Scenario 2
min. of 6
months of
UI
Scenario 3
no
minimum
previous UI
household number of coverage of
income
eligible
selfbelow
unemployed
declared
long-term
unemployed
winners
(full take
up)
Poverty
rate
(before
reform=
20.5%)
annual
cost
(M€)
net cost net cost
after
after
creation creation
of new
of new
prg
prg
(M€)
(%GDP)
20%
2 758
1%
1 819 20.5%
11
7
0.00%
30%
4 797
1%
3 858 20.5%
19
15
0.01%
40%
5 434
1%
4 495 20.5%
21
18
0.01%
20%
4 839
1%
3 900 20.5%
19
15
0.01%
30%
10 006
2%
9 067 20.4%
39
35
0.02%
40%
12 121
2%
11 182 20.4%
47
44
0.02%
20%
72 191
13%
71 252 19.7%
279
276
0.12%
30%
113 489
21%
112 550 19.6%
439
435
0.19%
40%
134 110
25%
133 171 19.6%
518
515
0.22%
Source: SILC (2010) and LFS (2009)
21
4.2.2. Reform Option 2: A new activation paradigm within unemployment and
welfare schemes
The Report argues that coverage of the poorest is inadequate, given that it partly
provides benefits that should be universally available to all people in need (e.g.,
family benefits, minimum income support, and housing benefits) through social
insurance schemes, thus limiting their coverage to the insured population and
excluding some of the most vulnerable groups such as the young unemployed. It
states that rebalancing the Greek social welfare system emerges as a priority in order
to target those most in need. The OECD considers that given the context of fiscal
austerity and the importance of minimising the poverty rate in the current social
context, this is the most appropriate approach. It therefore recommends that the social
welfare system would essentially abandon universal benefits and become anchored in
means testing.
It should be noted, however, that there could be social reactions to such reforms,
especially if the means testing were applied to all benefits, including temporary ones
such as maternity and sickness benefit. There could also be possible legal implications
of removing benefit entitlements (especially social insurance programmes for which
people have paid insurance contributions). Gate-keeping and control of working
ability and job search effort should be strong to ensure that a means tested safety net
benefits only those who cannot work and who are at genuine risk of poverty, and to
maintain its costs at reasonable levels. These caveats would need to be taken into
account in taking forward a new system based on means testing.
The most important recommendations put forward include:
Consider the development of workfare and active labour market programmes,
including training, through which registered unemployed people not eligible to any
benefit can receive some support, in order to prepare them with the skills needed for a
restructured economy.
Close existing family benefits and replace them with a new single means tested
benefit. Close the current family programmes and replace with a new means tested
family programme. Create a single means-tested family allowance financed through
general taxation, with rates depending on the number of children. The allowance
should replace, at no additional cost, the present benefits for multiple children
families, the contributory benefit for families provided by OAED, the welfare cash
grant to low-income families with minor children provided by the Ministry of
Finance, as well as childbirth lump-sum benefit.
Close existing disability benefits and replace with a new single means tested
benefit. Replace existing disability benefits with a new single means tested benefit.
Close the current disability programmes and replace with a new means tested benefit.
Base disability benefits and pension levels on the ability to work, in order to
encourage activity. Ensure that there are incentives to limit the inflow into disability
schemes: workers (through the level of benefits and some conditionality on regular
health tests), firms (through financial responsibility in case of prolonged sickness) and
public authorities.
Close the existing housing benefit and replace with a new means tested benefit.
Replace existing housing benefit with a new means tested benefit. Close the current
programme and replace with a new means tested benefit, or only for households
below the threshold with at least one child.
22
Summary of options for reform
Proposed reform
1. MEANS TEST (NEARLY) ALL
SOCIAL PROGRAMMES
Restrict access to social programmes
to the poorest income brackets before
transfers.
Current programmes are NOT
dismantled as such, but are means
tested.
2. EXTEND
UNEMPLOYMENT
ASSISTANCE BASED ON MEANS
TEST
Ext Extend duration of unemployment
benefits by additional 12 months for
existing eligible unemployed, and
cover those with no initial entitlement
for the same period, based on means
testing.
3. REPLACE HOUSING BENEFIT
WITH A NEW MEANS TESTED
BENEFIT
Cl Close the current programme and
replace with a new means tested
benefit, or only for households below
the threshold with at least one child.
4. REPLACE FAMILY BENEFITS
WITH A NEW SINGLE MEANS
TESTED BENEFIT
Clo Close the current family programmes
and replace with a new means tested
family programme.
Fiscal impact
Poverty impact
Option 1.1
Targeting the 20% poorest Targeting the poorest 20% would
would generate saving of increase the poverty rate by 1.6%.
up to 1.5% of GDP
savings.
Option 1.2
If disability pensions are If disability pensions are also
also excluded from the excluded from the aggregate, the
aggregate the saving from effect on the poverty rate would
targeting the poorest be neutral.
20% would be up to 1.2%
of GDP.
Option 1.3
Targeting the poorest Targeting the poorest 25% would
25% would generate be neutral for the poverty rate.
saving of up to 1.3% of
GDP.
Option 2.1
Targeting the poorest Targeting the poorest 20% with
20%
with
extended extended benefits would reduce
benefits would cost 0.2% the poverty rate by 1.3%.
of GDP.
Option 2.2
If the benefit is only If the benefit is only extended for
extended for those with at those with insurance, the poverty
least six months of rate does not change or only very
unemployment insurance marginally downwards.
behind them, the effect is
neutral.
Option 3.1
Targeting the poorest 20% The poverty rate is reduced by
would cost 0.1% of GDP.
0.1%.
Option 3.2
Under some scenarios Under some scenarios where the
where the benefit is benefit is adjusted, depending on the
adjusted to target family assumptions, the poverty rate does
size the fiscal effect is not changed or can rise by 0.2%.
neutral.
Option 4.1
Targeting the poorest 20% Targeting the poorest 20% would
would save 0.4% of GDP. raise the poverty rate by 0.4%.
Option 4.2
If the benefit excludes If the benefit excludes lifelong
lifelong benefit for mothers benefit for mothers with more than
with more than three three children this would raise the
children this would save poverty rate by 0.4%.
0.3% of GDP.
Option 4.3
Targeting
the
30% Targeting the 30% poorest would
poorest would save 0.4% reduce the poverty rate by 0.1%.
23
GDP.
5. REPLACE
DISABILITY
BENEFITS
WITH
A
NEW
SINGLE
MEANS
TESTED
BENEFIT
Close Close the current disability programmes
and replace with a new means tested
benefit.
Option 5.1
Targeting the 20% poorest Targeting the 20% poorest would
would save 0.6% of GDP
raise the poverty rate by 0.2%.
Option 5.2
Targeting
the
30% Targeting the 30% poorest would
poorest would save 0.4% reduce the poverty rate by 0.2%.
of GDP.
Notes:
The reform options which appear to be the most interesting to pursue are in bold.
The full calculations on which the summary tables are based, assess the effect of targeting
under three scenarios: the population below each of the three income thresholds of 20%, 30%
and 40%. The poorest 20% of the population are those with incomes (before transfers) which
fall within the bottom 20% decile income bracket (and so on for the poorest 30%, 40%).
The calculations use a combination of sources: SILC, supplemented by the data collected
from the Greek authorities by the OECD in 2011-2012, and some other sources such as the
Greece EUROMOD country report
The calculations are based on data which can be two or three years old (for example SILC
data is from 2009)
Negative impacts (for costs and/or the poverty rate) may be underestimated, if beneficiaries
are under declared in the databases used to construct the scenarios (as they probably are)
We assume no change in the contributions to social funds even though contribution-based
benefits will be replaced by new targeted ones
The poverty rate is the percentage of the population that falls below the poverty line. The
poverty line uses the OECD standard, which is 60% of the median equivalised (adjusted for
household size) disposable income before social transfers
Taxation of benefits is not taken into account (because of inadequate information, and recent
changes)
No provision has been made to take account of how households may adjust their behaviour on
the labour market to new programme eligibility conditions (they may adjust their income)
Some non - take up of benefits is assumed. The OECD averages between 40-80% for social
assistance and 60-80% for unemployment benefit. Taking account of documented low Greek
take up of benefits, the assumption is 60% take up for new means tested benefits, and 70% for
unemployment benefit. Adjusting up or down would change the fiscal impact in the same
proportions.
There is no simulation of differential rates for benefits after targeting, which would decrease
the level of benefits as disposable income gets closer to the eligibility threshold. If this is not
done and the threshold for means testing is set close to the poverty line, some individuals
above but close to the line would lose benefits after the reform and could fall below the
poverty line, increasing the poverty rate (but we judge that this effect would be minor).
If poverty/unemployment rises, proposed reforms could be more costly than the simulations.
Source: OECD, 2012
24
5. Conclusion
Greece has not introduced yet a comprehensive Active Inclusion strategy that will
combine and balance measures aimed at inclusive labour markets, access to quality
services and adequate minimum income. Despite the introduction of strict austerity
machineries, there should be a greater recognition of unemployment / welfare
beneficiaries as active citizens in future reforms and innovations.
In the context of the sharp financial crisis, the main policy issue is how to create
stronger employability awareness among unemployment / welfare claimants and
beneficiaries, to promote their access to good quality services provided in an equitable
and accountable way and to guarantee their involvement in the process of developing
such services. This is particularly important for Mediterranean Welfare States, like the
Greek, where the consumer movement and traditions of self-help / self-reliance are
weakly developed in line with the residual role of the state at designing and delivering
active employment programmes.
The development of sound social activation strategies for unemployed and welfare
beneficiaries constitutes a key challenge for the rudimentary Greek Welfare State in
the context of the sharp financial crisis and its implications during the implementation
of the First and the Second Financial Stabilisation Mechanism of the Greek Economy.
It represents a major policy issue in the debate on the reform of traditional
employment and social security policies, given that it may affect a broad range of
interested target groups (unemployment claimants, long term unemployed, welfare
claimants, people excluded from current categorical minimum income schemes).
However, the analysis of internal and external activation trajectories highlights
different perspectives to the scope, values and context of activation strategies.
Internal trajectories focus on the positive impact of activation. Activation is defined
here as a single means that may lead to the social emancipation of benefit recipients,
in order to enable them to enjoy their basic social rights. It is not simply a mechanism
directed to labour market; it addresses broader needs of the beneficiaries (social
participation, self-esteem). However, we should not underestimate that the problem of
unemployment is caused mainly by the dysfunctions of the labour market.
Consequently, despite the activation policies, the labour demand will remain limited
and benefit recipients cannot be re-integrated when no real jobs are available. On the
other hand, activation encourages the shift from regular to more precarious forms of
labour and individualizes the problem of exclusion instead of inciting the business
community to assume social responsibility.
External trajectories focus on the capacity building of activation strategies, but it
seems that they will advance in the near future a selective workfare option, already
identified in other market-driven national initiatives32. Activation policies are hard to
implement now in Greece due to the lack of financial means and human resources
necessary for effective individual counselling and the creation of new jobs. This is the
main reason why a strategic approach and a better coordination between all
stakeholders are crucial to establish the credibility of pilot activation programmes in
line with necessary structural reforms of employment and social welfare policies.
See for instance K. Hohmeyer and J. Wolff, “A fistful of euros: Is the German one-euro job workfare
scheme effective for participants?”, International Journal of Social Welfare, 21(2), 2012, U.K.
Secretary of State for Work and Pensions, Social Justice – Transforming Lives, 2012.
32
25
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26
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27
APPENDIX – STATISTICAL TABLES AND FIGURES
Table 1: Persistent at-risk-of poverty (%)
2008
2009
2010
Total
Men
Women
Total
Men
Women
Total
Men
Women
EU-27
8.7
8.2
9.2
8.8
8.2
9.4
9.7
9.1
10.3
EU-15
8.7
8.1
9.3
8.8
8.1
9.5
9.2
8.6
9.8
Euro
Area17
8.9
8.2
9.5
9.1
8.4
9.9
9.7
9.0
10.4
Greece
13
11.3
14.7
16.1
15.6
16.6
17.6
16.3
18.0
Source: EUROSTAT, 2011
Table 2: Poverty rates before and after austerity and recession
Poverty Rates
2009
2010
Austerity alone
Fixed poverty
line
Conventional
poverty line
2011
Austerity and
recession
Austerity alone
Austerity and
recession
19.96
23.54
25.83
26.26
30.49
19.96
20.24
20.61
19.01
19.83
Note: Calculations are based on the assumption that the 2011 government measures cut public sector
pay and pensions and raised taxation, but left nominal pre-tax incomes and jobs in the private sector at
their 2009 level.
Source: M. Matsaganis and C. Leventi, “The Distributional impact of the Crisis in Greece”
EUROMOD Working Paper No. EM3/11, 2011
Table 3: Unemployment and unemployment benefit recipiency duration in 2009
Months with any unemployment benefit
Months
unemployed
0
1--4
5--8
9--12
0
1--4
5--8
94.4%
56.8%
49.9%
5.3%
36.3%
7.5%
0.1%
5.8%
38.7%
0.1%
1.2%
3.9%
100.0%
100.0%
100.0%
80.9%
6.2%
3.9%
9.1%
100.0%
Source : SILC, 2010
28
9--12
Total
Figure 1. Unemployment benefits recipiency (2000-2010)
8%
Beneficiairies as % of working-age population
7%
6%
5%
4%
3%
2%
1%
0%
2000
2001
2002
2003
2004
Contributory
Source: OECD, 2012
29
2005
2006
Non-contributory
2007
2008
2009
2010
24
12
20
8
16
4
12
0
8
-4
4
-8
0
-12
Unemployment rate (left-hand scale)
GDP (change by quarter, right-hand scale)
Source: Hellenic Statistical Authority, quarterly national accounts and monthly labour force statistics,
2012
Figure 3. Average net replacement rates for long-term unemployment 2001-2009
(67% AW, 2-earner married couple, 2 children)
Benefits as % of eranings when in work
100 %
90
80
70
60
50
40
2001
2002
2003
2004
2005
2006
2007
2008
France
Germany
Greece
Italy
Norway
Portugal
Spain
United Kingdom
30
2009
% GDP, change by quarter
% Unemployment rate
Figure 2. GDP growth rate and unemployment rate
Figure 4. Average net replacement rates for long-term unemployment 2001-2009
(100% AW, 2-earner married couple, 2 children)
Benefits as % of earnings when in work
90 %
85
80
75
70
65
60
55
50
45
40
2001
2002
2003
2004
2005
2006
2007
2008
France
Germany
Greece
Italy
Norway
Portugal
Spain
United Kingdom
Figure 5. Long-term unemployed in Greece
Source for Figures 3-5: Labour Force Survey 2011, OECD 2012
31
2009
Table 4: Poverty rates by household head
2009
2010
Conventional
2011
Fixed
Conventional
Fixed
All
19.96
20.61
25.83
19.83
30.49
Unemployed
51.48
59.58
63.14
58.20
67.45
Employee
(public sector or
banking
0.31
0.42
1.39
0.75
4.16
Employee
(Private sector
excl. Banking)
12.38
11.81
16.41
10.46
20.40
3.79
3.72
3.72
3.69
7.29
Own
account
worker
16.63
18.08
22.96
17.33
25.10
Farmer
46.88
45.48
51.79
43.37
54.96
Pensioner
24.67
24.29
29.14
20.51
31.62
Other
20.65
20.40
28.88
18.07
31.57
Liberal
profession
Source: M. Matsaganis and C. Leventi, “The Distributional impact of the Crisis in Greece”
EUROMOD Working Paper No. EM3/11, 2011
32