Download Greece : National Report

Flexibility and Competitiveness:
Labour Market Flexibility, Innovation and Organisational
Performance (Flex-Com)
National Report: Greece
Final Report
Lena Tsipouri
Aliki Mouriki
Stavros Gavroglou
Aggeliki Papanagnou
Eric Gazon
This Project is funded by the European Commission DG Research
in the framework of Contract HPSE-CT-2001-00093
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TABLE OF CONTENTS
LIST OF TABLES
EXECUTIVE SUMMARY
1. Introduction ........................................................................................................................................ 1
2 Labour market legislation................................................................................................................... 3
2.1 The legal framework of the Greek labour market: increasing numerical flexibility in the ‘90s ..... 3
2.2 Employment protection legislation ................................................................................................. 5
2.2.1 Overall protection in Greece ranks high compared to other OECD countries ......................... 5
2.2.2 Overtime: legal provisions, agreements and remuneration ...................................................... 5
2.2.3 Collective dismissals and lay-offs ........................................................................................... 6
2.3 Conclusion on labour market legislation ........................................................................................ 6
3. Labour market organisations and institutions ................................................................................. 7
3.1 Public Organisations ....................................................................................................................... 7
3.1.1 The Ministry of Labour ........................................................................................................... 7
3.1.2 The Labour Force Employment Organisation (OAED) ........................................................... 8
3.1.3 NEEKA / PEEKA .................................................................................................................... 8
3.1.4 The National Labour Institute and National Employment Observatory .................................. 8
3.2. Independent Institutions ................................................................................................................ 9
3.2.1. ELINYAE ............................................................................................................................... 9
3.2.2. Economic and Social Committee (OKE) ............................................................................... 9
3.1.7 SEPE (Labour Inspectorate) .................................................................................................... 9
3.3 The trade unions ........................................................................................................................... 10
3.3.1 The Greek General Confederation of Labour (GSEE) ........................................................... 10
3.3.2. Representation at firm level : Work Councils and union. ..................................................... 11
3.4. The employers associations ......................................................................................................... 12
3.4.1 The Industrial Federations ..................................................................................................... 12
3.4.2 The Federation of Commercial Associations of Greece (EESE) ........................................... 14
3.4.3 The General Confederation of Greek Small Businesses & Trades (GSEVEE) ..................... 14
3.5 The collective bargaining system and collective agreements ....................................................... 14
3.5.1 The traditional collective bargaining system ......................................................................... 14
3.5..2 The new collective bargaining system (law 1876/90) .......................................................... 15
3.5.3 The National General Collective Labour Agreement (NGCLA) .......................................... 15
3.6. Industrial conflicts ....................................................................................................................... 16
3.7 The informal sector ...................................................................................................................... 17
3.8 Conclusion on the organisation and institutions of the labour market .......................................... 18
4. Labour market structure analysis ................................................................................................... 19
4.1 Employment trends ....................................................................................................................... 19
4.2 Flexible forms of work ................................................................................................................. 20
4.2.1 Part-time employment ........................................................................................................... 21
4.2.2 Fixed term and temporary employment ................................................................................. 22
4.2.3 Tele-work .............................................................................................................................. 22
4.3 Unsocial hours .............................................................................................................................. 23
4.4 Unemployment ............................................................................................................................. 23
4.5 Overtime ....................................................................................................................................... 24
4.6 Earnings ........................................................................................................................................ 24
4.7 Education, skill level .................................................................................................................... 25
4.8 Training : on the job training and long life training. ..................................................................... 26
4.9 Conclusions on labour market structures: ..................................................................................... 27
5. Economic performance analysis ...................................................................................................... 27
5.1 Economic growth .......................................................................................................................... 28
5.2 Labour remuneration, labour productivity, labours cost unit and national investment. ................ 29
5.2.1 Earning and productivity ....................................................................................................... 29
5.2.2 National investment ............................................................................................................... 30
5.3 Competitive position ..................................................................................................................... 30
5.4 Innovation .................................................................................................................................... 31
5.4.1 A brief description of the NIS ............................................................................................... 31
5.4.2 Conclusions from the NIS: priority areas to be addressed in the future ................................ 34
5.5 Conclusion on the Greek economic performance ......................................................................... 35
6. Synthesising labour market flexibility and competitiveness in Greece ........................................ 35
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LIST OF TABLES
Table 1.1: The evolution of the legal framework
Table 3.1: Average annual working hours lost by strike activity (private and public)
Table 4.1: Employment per sector in %
Table 4.2: Evolution of the labour force (Change in population in employment aged
15-64)
Table 4.3: Evolution of the activity rate (Change in population in employment aged
15-64)
Table 4.4: Evolution of the employment rate (Change in population in employment
aged 15-64)
Table 4.5: part time as share of total employment
Table 4.6: Fixed –term contract as share of total employment
Table 4.7: Working "Unsocial" hours
Table 4.8 : Unemployment rate
Table 4.9: Youth unemployment
Table 4.10: Average hours worked
Table 4.10 : Earnings in Greece
Table 4.11 : Earnings
Table 4.12: All employees by educational attainment level (% of employees)
Table 5.1: Real GDP growth in Greece
Table 5.2: Real GDP growth 1994-1999
Table 5.3: Productivity, earning and unit labour cost.
Table 5.4: Gross fixed investment (Percentage of GNP)
Table 5.5: Global competitiveness ranking
Table 5.6: Balance of payment (share of GDP)
Table 5.7: GERD and BERD evolution in Greece (million drachmas)
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EXECUTIVE SUMMARY
Greece is an interesting case study for the competitiveness-flexibility relationship:
1. Economic performance: Greece is a small, cohesion country, with a well below
EU economic growth and productivity until the mid ‘90s, above average then,
which now struggles to transform its competitive basis from a low wage into a
knowledge economy.
2. Employment structure: Compared with the other EU member states Greece has a
considerably higher share of activities in the informal sector1 (estimated between
25-35%) and a low share of salaried workers (55% of total employment).
3. Productive structure: Production is characterised by an extensive rural sector, a
still oversized public sector, the predominance of microfirms and traditional forms
of work organisation, which together explain the very low level of investment in
human capital.
4. Regulatory system: OECD benchmarking ranks Greece lowest in terms of EPL
(high hire and fire costs and social security contributions). Moreover, the
institutional framework is still characterised by complex, confusing and
sometimes contradictory legal provisions. Recent amendments, though reflecting a
systematic effort to introduce flexibility, have met with limited success partly
because they affect less than 45% of the workforce, as explained above, but also
owing to a pervasive resistance to change.
In the last decade a number of changes tried to improve the labour market structures,
mainly through legislation aiming at flexibility but also through (even if limited)
structural interventions.
Amendments in labour market legislation aimed at the reduction of unemployment by
increasing labour market flexibility: Annualisation of working time, encouragement
of part-time work, rationalisation of the collective dismissals, fixed term work,
reduction of indirect labour costs for low paid workers, interim and alternative forms
of employment, employment agencies.
These changes produced mixed results with few signs of progress towards greater
labour market flexibility.



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Considerable improvements: The reduction of indirect labour costs and the
removal of flagrant irrationalities in the collective dismissal system.
Limited effects: Part-time did not prove an efficient tool for flexibility and
was not adopted except for very few sectors, fixed-term contracts did not
change anything as it was already operational based on general civil code
provisions. Annualisation of work was only adopted by a handful of
companies owing to restrictive terms of implementation and reluctance of the
social partners. Telework, interim and alternate work, agencies and
externalisation are very marginal, possibly because of discrepancies with
business practices and behavioural characteristics.
Adverse effects: Employers’ associations claim that the year 2000 provisions
on overtime work diminished rather than improved flexibility and it may have
As informal sector we define the activities not included in the National Accounts
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had an adverse effect in the effort to transfer activities from the informal to the
formal sector.
Structural interventions may be considered as more successful in certain cases, yet
still totally absent in others. Little progress is recorded in the productive structure
characteristics that are inhibiting rapid change. Training and functional flexibility
remain neglected both in state policies and business practices. However in the last two
years policies aim at an improving structural adjustment have become more explicit,
yet not necessarily demonstrating real changes:

Considerable improvements: A considerable effort to increase effectiveness
is undertaken currently through the Employment Plans but their effect remains
to be seen. The legalisation on migrant work, allowing less scope for the
violation of labour legislation in this large category of cheap labour, may have
supported the exit from the massive informal activities.

Limited effects: Despite the upgrading of the Labour Inspectorate violation of
labour legislation remains very widespread. Apparently the benefits of
violation still outweigh the cost of sanctions imposed. Despite a rise education,
on-the-job-training and life-long training continue to absorb very limited funds
and demonstrate low effectiveness compared to other EU member states.
Legislation to increase incentives for mergers and acquisitions was adopted,
yet the average size of Greek companies has not changed (yet).

Adverse effects: All the new legislation and incentive schemes create in
certain cases confusion, sometimes even legal extremities and contradictions
(e.g. in certain cases the law regulates social security in a way that it is
beneficial to both employer and employee not to declare the labour relation or
parts of it) and this reinforces tendencies to informality.
In conclusion as far as labour markets and economic performance are concerned
Greece was a unique case in the Union and despite efforts of modernisation in all
aspects problems remain: the Greek labour market was very rigid in terms of formal
legislation and the best way to eliminate these barriers for entrepreneurs was to partly
or totally operate informally. Modernisation policies were introduced throughout the
last decade, which tries to balance employment and competitiveness. Flexibility was
used as a tool for both. The results of new legislation in this tool were mixed:
Employment was given priority so overtime regulation diminished flexibility for the
manufacturing sector. At the same time the encouragement of part-time work, which
did not increase overall levels, diminished costs in the retail sector and selective
services. In the same line the encouragement of fixed time work, which pre-exited,
mainly benefited the agricultural and tourism sectors. As a rule one can observe that
the legislation facilitating and/or encouraging flexibility had selective positive effects
but limited overall impacts, because of the low share of the workforce affected by
regulation on flexibility and partly because the way it was promoted was insufficient
to change long-term rooted behaviours and policies. Thus the initially observed
characteristics of a large share of informal activities and violations continue, while the
formal part of the market has hardly increased flexibility. Low levels of earning may
also be a cause of resistance to change.
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It is even more disappointing that during the period studied, and despite an increase of
growth and productivity, one cannot observe significant and effective efforts of
structural changes. Incentives for firm reorganisation, education and training have
increased (partly due to the CSFs), but there are no quantitative indicators
documenting progress in this direction.
The need to proceed towards a competitive knowledge economy with increasing
employment and earnings needs further steps. To achieve the change the State as a
legislator, but also facilitator of change needs to adopt systematic and clear steps
towards genuine market flexibility, balancing voluntary and involuntary aspects,
competitiveness and earnings. This can only be dome through consensus with the
social partners, increasing skills and organisational models. The high share of
“informal” flexibility that compensated for the observed real rigidity in the past is
becoming counterproductive. In this spirit the report includes certain directions for
recommendations applicable to countries trying to change their development model
from a low wage into the knowledge economy.
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1. Introduction
This report, prepared in the framework of the Project “Flexibility and
Competitiveness: Labour Market Flexibility, Innovation and Organisational
Performance (Flex-Com)” aims at an analysis of both the labour market and the
economic performance of Greece, as an input to a subsequent process of testing
potential linkages between the two.
The objective of the overall research is to identify to what extent the pursued labour
market flexibilities contribute to long term competitiveness, as well as to socially and
economically sustainable development in small open economies. Flexibility,
advantageous as it may be for certain type of firms, it may also well exacerbate social
inequalities and phenomena of marginalisation. This has in many cases created
tensions between employers and employees’ associations and has contributed to a
debate on the “limits to flexibility”. In addition, it as been noted that the pursuit of
numerical flexibility by firms undermines the possibilities for functional flexibility
and thus, although cost-cutting in the short term, it may prove innovation-curtailing in
the long run. If this is the case small economies (which by definition need to focus to
few technologies and competitive edges) and cohesion countries (which by definition
lag behind in technological terms) may be disadvantaged in their development
policies, when adopting numerical labour flexibility. This report, examines this
question, using a qualitative approach, based on the interpretation of general statistics
and interviews with key policy makers in Greece.
Greece presents a particular interest as a case study for the competitiveness-flexibility
relationship, because it is a small, cohesion country, with a moderate economic
performance over the last decades, which now struggles to transform the basis of its
competition from a “low-wage” into a “learning” economy. Its major achievement
was considerably lower unemployment than in the rest of the EU until the mid ‘90s,
when the situation gradually deteriorated. The wage-productivity ratio is constantly
low (with wages sometimes rising a lot more rapidly than productivity), while at the
same time all technology indicators (business expenditure on R&D, patents, outward
licences) demonstrate a very traditional economic structure. Yet, while on the one
hand the need to cut costs is clear and urgent, the long term need to assure structural
transformation is equally, if not more important. It is thus crucial to check the
compatibility of the (undoubtedly imperative) need to cut costs goes with the strategic
vision of an economic model based in high value added.
The Greek economy is a typically late-industrialising economy with a relative
specialisation in consumer goods, low technology and labour intensity, yet with a
changing nature. Its key characteristics are:
A: The structural composition of the economy: With about 17% of employment the
primary sector is considerably more important than in the other EU countries. The
tertiary sector, contributing to almost 60% of employment, is by far the most
important one, with the public service and tourism being more important than in other
member states. The combination of high shares in agriculture and tourism, two
activities with typical seasonal occupational patterns, constitutes a considerable
need for numerically flexible labour modes. Only 23% is employed in industry, of
which manufacturing is only 17%. Retail trade, hotels and restaurants are the most
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important sectors with a share over 10% of the establishments, followed by wholesale
and construction with a share between 5% and 10%. The highest number in the
manufacturing sector is in food and apparel.
B: The predominance of SMEs and microfirms: The relevance of microfirms is the
crucial feature of the Greek economy. They represent 91.8% of the number of
establishments, 41% of employment and 39.7% of sales. With the exception of
tobacco, primary mining/extraction, and financial intermediation in all other sectors
microfirms dominate. Divergences are self-evidently higher in terms of employment
and sales. There are some serious limitations to the universal acceptance of this data:
as there is no special survey for microfirms, the data was compiled from the Register
of Legal Units of the Ministry of Finance. The definition of the Registry includes not
only 0 employees companies, but also self-employed that extend beyond a certain
limit of turnover. Small firms may be considered as more interested in flexible
forms of employment, but flexibility is inherent in their organisation; it is also
highly probable that to a large extent microfirms prefer informal to flexible forms
of labour.
C: The relevance of the informal sector: OECD statistics2 demonstrate a very large
divergence of the informal economy as a GDP share. With 1998 data (and all the
reservations for their validity) Greece appears as a the EU member state with the
highest share of informal forms of employment:
Country
Germany
Greece
Ireland
Italy
Spain
Informal economy as % of GDP
14.7
29.0
16.3
27.8
23.4
Internal Greek studies (IOBE 2001) estimate this share to be even higher. Given these
dominant routines and informal rules in the economy one may formulate the
hypothesis that the institutionalisation of flexible labour forms will not improve the
competitiveness of small companies (which will continue to favour the informal
sector) but will rather be adopted by other types of companies.
D: The lack of modern business attitudes may be considered as the most serious
disadvantage for the transformation of the economy. Before the accession to the
European Communities in 1981 trade regulation was a national competence, so the
Greek government strongly protected its market from external competition, but
thorough studies demonstrate that this policy failed to play a developmental role.
Despite a resurgence of competitiveness in the late ‘90s the business sector
demonstrates low research, limited share of value added and exports in high tech
sectors and corporate responsibility, employability and human resources management
in an embryonic state. In-house training and functional flexibility are not only the
lowest in Europe but practically only subsidy-driven.
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OECD statistics seem to be rather conservative. For comparison a detailed recent study in Greece
(Tatsos and Tragaki) suggest that the Greek informal sector represents 36.7% of GDP (excluding
criminal activities, which would further increase the share) compared to 29% estimated by the OECD
2
The four interrelated characteristics mentioned above, a difficult structure in terms of
size and sectoral composition, a high share of the informal sector and limited
investments and conviction in new business practices are the environment that shapes
economic tendencies and the labour market conditions.
Labour market legislation, the labour market institutions, the labour market structure
and the economic performance of Greece will be presented hereafter, in an effort to
conclude on their interaction and potential longer-term impacts.
2 Labour market legislation
Greece is a country with no historic roots of tripartite agreements and self-regulation.
Labour legislation has always played a more important role than collective
agreements and industrial disputes were traditionally high. A long term governance by
the Christian-democratic party succeeded in an almost uninterrupted socialist party
government since the ‘80s, which relied on its popularity with the labour class. This
gave politics a more prominent role than in other member states where interchange in
power has helped labour relations to mature in a more progressive way.
The retrogression of competitiveness during the ‘80s gave all political parties the sign
for a need of improving business performance and legislation changed often and
considerably in the decade, but as described hereafter this was to a large extent topdown rather than based on agreements and negotiations.
2.1 The legal framework of the Greek labour market: increasing numerical
flexibility in the ‘90s
In an economy with a large informal sector, a considerably lower unemployment rate
than in the rest of the EU and comparatively low cost, it is not surprising that the
employers did not perceive flexibility as a priority. In 1990, the short-life conservative
government introduced the first changes in labour legislation, aiming at making the
Greek labour market less rigid and leading to higher numerical flexibility.
“Law 1892/1990 on modernisation and development” introduced part time work, the
fourth shift (weekend shift), the re-arrangement of working time (9 h per day/48 h per
week) and the linking of wages with productivity. Economic actors and academic
researchers considered this law as too general and too rapidly and prematurely
introduced, leaving many crucial issues open, and thus unable to shape new structures
and institutions. It constituted, yet, a first step towards the direction of bringing Greek
labour market legislation in line with legislation already in place in most European
countries.
“Law 2434/1996 dealt with the promotion of active labour policies”, the issue of
“employment cards”, the creation of Employment Promotion Centres, the
establishment of Information Offices for the Unemployed and Companies and the
legalisation of foreign migrant workers.
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“Law 2639/1998 on the regulation of labour relations and the establishment of a
Labour Inspectorate” may be considered as the most serious attempt to modernise the
system, after a long negotiation with the social partners and the longer experience
with flexible labour forms in a period of increasing unemployment and a new
economic model. The most important provisions include:
 Annualisation of working time in agreement with the union
 the introduction of part time work in the public sector in ancillary jobs;
 the introduction of regulations regarding interim and alternate work;
 regulation of fixed term work, contract work and teleworking;
 the creation of a Labour Inspectorate (which was the reinforcement of a
previously existing organisation);
 the permission for the operation of private employment agencies;
 the adoption of 7 territorial employment pacts.
“Law 2874/2000 on stimulation of the employment” was adopted in an effort to
eliminate counter-incentives for new job creation. Its main provisions include:
 the annualisation of working time in agreement with the union, combined with
a reduction of the average statutory working week by 2 hours (from 40 to 38
hours) with no loss in pay;
 the reduction of legal overtime work by 5 hours per week and the increase in
the cost of overtime, in view of encouraging firms to hire new labour;
 the reduction of indirect labour costs for low paid workers by 2%;
 the increased remuneration –by 7.5%- of small part-time jobs (less than 20
hours a week);
 the possibility for long-term unemployed persons to take up a part-time job
and continue to receive one/third of the unemployment benefit;
 the rationalisation of the threshold for collective dismissals for medium-sized
firms;
 the upgrading of the Labour Inspectorate .
Law 2956/2001 on the “Restructuring of the Labour Force Employment Organisation
(OAED)’’ continues the efforts initiated in earlier legislative initiatives to upgrade the
services offered by the Public Employment Services, by pushing forward the drastic
restructuring of PES; it also regulates:
 the establishment and operation of Temporary Employment Agencies and
 the terms and conditions of temporary agency workers.
Temporary Employment Agencies are companies whose scope of activity include the
provision of labour by their employees to another employer (indirect employer) in the
form of temporary employment, for a limited period of time. A prior written fixedterm or open-ended contract is required in order to provide labour through temporary
agency work.
Summarising the institutional framework, one may conclude that since 1990, there is
an increasing legislative intervention to make the Greek labour market more flexible
whilst at the same time improving public policies and the effectiveness of public
labour market institutions, and offering compensations to the flexible work force in
the form of better employment protection.
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Table 1: The evolution of the legal framework
Law
Law 1892/1990
Law 2434/1996
Law 2639/1998
Law 2874/2000
Law 2956/2001
Economic situation
Low wages, low
competitiveness, low
unemployment
Increasing wages,
increasing competitiveness,
unemployment close to EU
average
Increasing productivity and
competitiveness,
unemployment above EU
average
Increasing productivity and
competitiveness,
unemployment above EU
average
Increasing productivity and
competitiveness,
unemployment above EU
average
Major direction and rationale
First introduction of part time work
in the private sector, support
competitiveness
Effort to promote active
employment policies
Part time work in the public sector
and new forms of flexible work plus
improving organisation of public
policy
Major intervention to increase
flexibility with trade offs for labour
protection
Mainly improvement of organisation
of public policy
In addition to this legal framework two laws were adopted regarding the legalisation
on migrant workers, which, although not directly in the focus of this research, may be
considered as having an indirect labour market flexibility, since the documentation of
illegal migrant workers entails enhanced protection for this
2.2 Employment protection legislation
2.2.1 Overall protection in Greece ranks high compared to other OECD
countries
Greece ranks very high in employment protection legislation (EPL). Amongst 20
OECD member states [ECO/WKP(99)18] Greece ranks 19th. This is particularly
stressed in the last economic survey on Greece. High firing costs and the restrictive
lay-off procedures reduce incentives to recruit new labour . Severance payments for
white collar workers represent up to 24 months salary, being less generous for blue
collar workers. Non-wage labour costs are also very high and as the tax system is
under revision there may be improvements in this direction.
2.2.2 Overtime: legal provisions, agreements and remuneration
Reducing mandatory overtime and offering better reward conditions is the labourfriendly aspect of the new legislation. Before 2000 working time was 40 hours per
week and 8 hours per day (with exceptions for certain branches). Up to 8 additional
hours overtime work were at the discretion of the employer and were paid +25%.
Then the employer could use 120 hours per salary, but they are not compulsory.
Employees must agree. The first additional 60 hours were paid +25%, then the 60
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following hours were paid +50% then overtime was paid +75% or +100% without the
agreement of the Labour Inspectorate.
The new law 2874/2000 changed the regulation on overtime work introducing a tradeoff between reduction of working time and flexible working time. Firms can decide,
with workers’ consent, to average out total working hours over the course of a year,
provided the average working week is reduced by 2 hours, from 40 to 38 hours. In
total, 138 hours a year can fluctuate which means that some weeks employees will
work more than 38 hours and other weeks they will work less than 38 hours or they
will get time-of-in lieu.. The agreement can be signed either by the workers’ union at
plant level or –in the absence of a workplace union- the work council can sign the
agreement.. If neither a workplace union or a works council exist, or in case of
enterprises, which employ less than 20 employees, the entrepreneurs can sign the
agreement with the workers’ union at branch level. In case of disagreement, the
procedure of mediation and/or arbitration can be used.
The same law also stipulates increased compensation for overtime work.. Five hours
of additional overtime work above the 43 hours a week that were imposed at the
employers’ discretion, are abolished and the cost of overtime premium payment is
substantially increased: the extra three hours are paid an additional premium of +25%.
Employers can always use 120 extra hours for overtime work . However, they receive
a premium payment of +50% and beyond 120 hours they are paid at a 100% premium
rate if they are authorised, or at a +250% rate if they are not authorised by the
Labour Inspectorate (SEPE).
2.2.3 Collective dismissals and lay-offs
Law 1387/83 stipulated state permission for collective dismissals and constituted the
main protection mechanism against abuses. Although this provision was in line with
the equivalent EU directive, the way it was implemented in Greece presented major
problems that led to constant requests of amendment on behalf of employers. Indeed,
the different quotas imposed according to the size of the firm, created a paradoxical
situation, whereby small firms with less than 50 employees could lay-off more
workers than medium-sized firms with between 50-200 employees.
Firms with up to 50 employees
Firms with more than 50 employees
Dismissal of up to 5 persons a month
does not require formal approval of
the competent authorities
Employees may dismiss up to 2% of the work
force (i.e. between 1-4 employees in firms
employing less than 200 employees)
Law 2874/2000 (article 9) lifted this paradox but the procedures remains difficult
and time consuming and are among the rigidities that the employers’ federations are
still keen to eliminate.
2.3 Conclusion on labour market legislation
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Labour market policy during the 90s is characterised by an effort to introduce greater
flexibility in the forms of employment and in working hours, in view of transforming
the economy from a low wage model to a learning economy. Legislation gradually
institutionalised atypical forms of employment that were already widespread, such as
fixed-term contracts and part-time work, while it allowed for the first time in 1998,
the operation of private employment agencies. As numerical flexibility increased,
employees were offered as a trade-off higher remuneration and improved premium
payment for overtime work.
Despite the introduction of greater labour market flexibility, important rigidities still
remain, especially regarding labour protection, where Greece ranks very high in the
O.E.C.D. list.
3. Labour market organisations and institutions
This section describes the national institutions, i.e. actors, formal and informal rules
and their enforcement characteristics (North 1990). The key actors are, as in all
member states, the representatives of employers and employees, whereas formal rules
are the laws governing industrial relations. The collective bargaining system
constitutes the informal routines and the way the system is finally governed.
3.1 Public Organisations
3.1.1 The Ministry of Labour
The Ministry of Labour and Social Security is responsible for the design and
implementation of labour policies.. It also supervises a number of independent
agencies, which will be described below. The Ministry has around 850 employees
and a budget of about 40 million Euros.
The most important institution within the Ministry is the Supreme Labour Council, a
tripartite body which advices on any subject related to the implementation of the
labour and social policy. There are two more tripartite bodies representing the
willingness to improve the social dialogue and policy efficiency:
 The National Council for Vocational Training and Employment (ESEKA:
Linking Education and Training with Employment) a recently agreed initiative
in the framework of the Employment Action Plan. Social partners have agreed
and ESEKA is planned with the mission of improving the quality and
relevance of training mechanisms. In this context a National Council is
established, supported by a technical secretariat, which is trying to design
automatic mechanisms of penalties and rewards for the publicly funded
training centres. ) and
 the Council for Vocational Training and Rehabilitation of Disabled Persons
give advice and make propositions on vocational training and employment and
rehabilitation programmes for the Disabled, respectively.
The mere existence of these bodies denotes the willingness for social dialogue and
consultation, but owing
to the notorious inefficiency of the Greek civil
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administration these councils have not contributed to a real improvement of industrial
relations or the labour market situation
3.1.2 The Labour Force Employment Organisation (OAED)
The Greek Labour Force Employment Organisation (OAED), supervised and (partly)
funded by the Ministry of Labour, is a central player in labour policy implementation.
Its mandate is to match labour supply and demand and implement employment policy.
The unemployed must register at their Local Employment Office and employers
willing to hire may contact the Employment Office (Law BD 2556/1953). OAED thus
not only pays the unemployment allowances but also acts as an employment agency.
Yet, employees do not seem to favour this channel for hiring new employees. The
organisation manages large amounts of EU funding (structural funds, Community
Support Frameworks); it also pays out benefits and social security allowances or
subsidies for the creation of new jobs in the private sector. OAED provides guidance
and information to the unemployed on job placements and training issues. It also
provides vocational training in its own vocational training centres.
OAED has between 3500 and 4000 employees and a budget of about 1 billion Euros.
The regional offices are executive bodies consisting of Regional Directorates,
Prefectural Offices and local offices. There are local offices in every municipality of
more than 3000 inhabitants. The unemployed in municipalities with less than 3000
inhabitants, are registered at the local Town Hall.
Law 2956/2001 on the restructuring of OAED voted recently in Parliament aims at
making policy implementation more effective, rationalising management through the
creation of subsidiaries and improving the terms and conditiond of the flexible
workforce. Chronic OAED inefficiencies have created a need for private employment
agencies in the market, which were eventually introduced in 1998. .
3.1.3 NEEKA / PEEKA
The Regional Committees for Vocational Training and Employment (PEEKA) were
created in order to submit written proposals to ESEKA in an effort to improve the
qualifications of the labour force and facilitate functional flexibility. Their existence
recognises the role of the regional dimension in an effective labour policy, as they
belong to the Regional Council. At a lower level the Prefectural Committees of
Vocational Training and Employment (NEEKA), also a tripartite body, may submit
propositions to the regional Committees and supervise the implementation of the
vocational training policy.. The relatively recent growth of local and regional
institutions, their inadequate budgetary resources and political interventions limit the
effectiveness of these committees, which operate effectively more as an exception in
some regions or prefectures than as a rule.
3.1.4 The National Labour Institute and National Employment Observatory
8
The Experimental Institute of Vocational Training and Employment (PIEKA) was
established 1989 at the initiative of OAED. The function of the PIEKA was to
develop regional databases for employment and to enhance national and local labour
market analysis. It started its activity in 1995. In 1996, it was renamed as National
Observatory for Employment (EPA). In 2001, it merged with the National Labour
Institute, a tripartite scientific organisation charged with assisting the Labour Ministry
in formulating and implementing labour policies. EPA operated under the supervision
of OAED, until the recent law on the restructuring of OAED stipulated the
establishment of three independent subsidiaries, one of which is the continuation of
EPA under a different name and status.. The Administrative Board consists of
representatives of the State (Labour Ministry, OAED, National Statistic Office), as
well as representatives of employers’ and union organisations.
3.2. Independent Institutions
3.2.1. ELINYAE
ELΙNYAE (the Hellenic Institute for Occupational Health & Safety) was launched in
1988 as a bipartite institution and began its activity in 1992. . Its purpose is to pursue
the analysis and investigation about working conditions, to promote information and
to offer training on these topics and to contribute to finding solution to health and
safety at work problems. It is managed by the employers’ and unions’ confederal
organisations.
3.2.2. Economic and Social Committee (OKE)
The Economic and Social Committee (OKE) was established in 1994 with the
mandate to advise on labour market, labour relations, social protection, consumer
protection and competition issues. The social partners can also, at their own initiative,
express their opinion on subjects, which are not linked to legislation. This institution
is the national equivalent of the European ESC and its originality lies in that there is
no representative of the State.
Greece has a long tradition of a similar committee, such as the National Council for
Growth and Planning, a tripartite body established in 1985. However, due to the
absence of technical support, clear objectives and political willingness, these
committees have never been operational.
During the 1997 social dialogue process, OKE participated as an observer and had
only minor influence on the outcome of concertation . . In any case, no agreement was
reached on the thorny issues ofcompetitiveness and flexibility.
3.1.7 SEPE (Labour Inspectorate)
In view of dealing with the extensive and chronic violation of labour legislation and
the collective agreements, in 1998 the Ministry of Labour decided to transfer back to
the central administration the labour inspection authorities that had been decentralised
9
in 1994 to the prefectures. Law 2639/98 tried to upgrade the Labour Inspectorate and
to endow it with the necessary means required to monitor the implementation of
labour legislation and the respect of employees’ rights. Labour inspectors are
responsible for controlling if employers comply with the regulations on working
conditions and social security contributions. They have the right to impose fines and
even to close the enterprise for a period up to 6 days. A smooth functioning of the
market depends on the enforcement possibilities of the laws and agreements and in
that sense the role of SEPE is crucial.
Despite limited human resources, SEPE has currently multiplied its controls and
imposed considerable fines. Despite improved efficiency of the inspection authorities,
there is still a very strong tendency of firms to violate the current legislation, which
increase as size diminishes.
Indicatively in its last press release SEPE confirmed the following type and
magnitude of illegal acts:
 11% of 943 firms controlled jointly by SEPE and the Social Security
Foundation (IKA) 11% employing 183 people were not at all registered in the
Social Security catalogues.
 From the 89% of registered companies 458 out of 2360 employees, i.e. almost
20% were not declared;
 One out of three companies had no labour programmes of their personnel.
 One out of five companies had no leaves book
 111 firms had used their labour force beyond the legally provided working
hours.
For these acts SEPE files 63 suits and imposed fines for 782674 Euros.
According to the Labour Inspectorate the biggest problem in Greece is that the
institutions are not mature and there is no mutual respect: employers try to circumvent
legislation and during their controls they identify very often undeclared or unpaid
overtime, whereas at the same time employees often feel no identification with the
company where they work and are a lot less productive than expected.
3.3 The trade unions
3.3.1 The Greek General Confederation of Labour (GSEE)
The Greek private sector workers are represented by the Greek General Confederation
of Workers (GSEE), a confederal organisation with an official social partner status in
collective negotiations. It is the only union, which can sign the national general
collective agreement with employer organisations in the private sector. GSEE consists
of sectoral federations (approximately 60) and local labour centres (approximately
75). It also represents about 2400 primary level unions.
As is in general the case in Southern European countries, the degree of unionisation is
not very high and union influence is steadily diminishing, at least in quantitative
terms. . Union membership declined from564 000 members in 1992 to 442 000 in
1998. At the plant level, unionisation is even weaker and unions are unable to attract
10
young workers and women, despite the increasing participation of women in the
labour force.. Low union density in the private sector can be attributed, on the one
had, to the excessive fragmentation of the union movement (there exist more than
5000 primary unions and 180 second-level organisations), and on the other, to the
entanglement between union factions and the political parties. Union factions function
as a transmission belt between the party leaderships and the electorate, thus
perpetuating the system of political exchange. which Moreover, the credibility of
GSEE leadership is reduced, as it is considered as having too strong links with the
government (several union leaders have become MPs or Ministers of thePASOK
government). The funding mechanisms are also a major point of discord . Unions are
financially dependent on the state, as they continue to be funded through the
compulsory contributions paid by all employers and employees to the Workers’
Welfare Foundation (Ergatiki Estia).
The internal organisation of GSEE has improved considerably over the past few years.
Its scientific and analytical abilities were boosted by the creation of the Labour
Institute (INE) in 1990. This Institute has gained a good reputation and provides
GSEE with ample documentation for its negotiations.. Bilateral relations with the
major employers’ organisations have greatly improved and assumed a less hostile
form.
In general the side of the employees agrees that the labour market conditions are hard
for unskilled workers and those in part-time employment are also “partly surviving”.
While the representatives agreed on the legalisation of flexible forms of work, in
particular in the belief that this would facilitate parts of the population willing or able
to work only part time (mothers with small children, elderly people etc), ex post they
consider that there has been a massive abuse of the legal conditions:
 In the tourism areas as well as in supermarkets a combination of overwork and
undeclared work ended up in offering less employment in total working hours
after the adoption of flexible legislation
 What one can observe most in the Greek market is “passive” flexibility, that is
an abuse of the legal framework
 There are no effective controls and inspections either for the respect of
legislation (thus allowing a considerable abuse of workers) or for the training
funds, which would improve the conditions for employees.
3.3.2. Representation at firm level : Work Councils and union.
Law 1767/1988 introduced the Workers’ Councils into enterprises with a double
target: on the one hand the improvement of the working conditions and on the other
the prosperity and the development of the enterprise. The function of the councils is
participatory and advisory.
The workers of the enterprise may create Workers’ Councils, provided that a
(primary) trade-union organisation of the personnel exists and is operating and the
enterprise employs at least 50 persons. Workers councils may also be established in
enterprises employing less than 50 persons, provided they are anticipated in collective
bargaining concluded between the employer and the trade-union of the enterprise or,
if there is no trade-union, the most representative trade-union in the area. The
11
possibility of establishing workers’ councils exists also in the level of a separate
business of the enterprise.
In 1995, the Ministry of Labour carried out an evaluation of Works Councils. The
findings of the research were disappointing. Only 126 Works Councils were found to
operate out of 6.441 eligible enterprises that is just a 2% reaction.
The introduction of workers’ councils have not yielded the results anticipated. In
practice, development of this institution has been minimal. A lot of confusion (and
maybe competition) has been created as to the councils’ role where a trade union is
already in existence. Competition grew after the introduction of law 2639/1998
concerning “regulation of labour relations”, which utilises the institution of Works
Councils, as a means of removing competencies from the trade unions. Despite
difficulties there is a need to assure the complementary function of the two
institutions.
3.4. The employers associations
The employers are represented by three different national organisations :
 The Industrial Federations
 The national Confederation of Greek Commerce (ESEE), which represents
shopkeepers.
 The General Confederation of Craftsmen and Small Manufacturers of Greece
(GSEBEE), which represents handicraft professional and small entrepreneurs.
All three employers’ unions are entitled to sign collective agreements.
3.4.1 The Industrial Federations
There are two major industrial federations in the country, the Federation of Greek
Industries (SEV), which is the main body taking part in the labour market
negotiations, and the Federation of Industries of Northern Greece (SVVE), which has
a more pro-active role in regional development policies.
The Federation of Greek Industries (FGI) is an independent, non-profit association,
sustained by dues paid by members. FGI members are individual enterprises or
employer organisations, both sectoral and regional. The member-firms of such
employer organisations are considered associate members of FGI.
Companies that are regular members of FGI represent a broad spectrum of economic
activity, ranging from very small entities, to small, medium and large corporations.
The majority are small-to-medium enterprises (SME), according to the definition
prevailing in the European Union. These enterprises are especially important for the
nation' s economy, and they require special support. therefore, FGI places particular
emphasis on ensuring that its activities, initiatives, and, in general, its services to
members reflect the concerns of SMEs.
The main body of FGI members (more than 85%) are manufacturing enterprises and
the corresponding sectoral or regional employer organisations. The remaining
12
members are firms or employer organisations belonging to the service sector,
contributing to the development of industry and supporting its operations - such as
administration, auditing, financing, computer services, personnel training, public
relations, advertising and distribution. Firms in which the state is a shareholder may
be members of FGI if they operate on market economy principles. (www.seb.gr)
The Federation of Industries of Northern Greece (F.I.N.G.) was established in 1915
and since then has been active in its efforts in not only industrial development but also
economic and social progress in Northern Greece. It proposes and contributes in the
interventions aimed at promoting and establishing the competitive benefits of
Northern Greece, as well as in the development of the overall economic
development of the region.
The principal aims in the strategy for development for F.I.N.G. , for many years,
have been based on the overall regional growth and development, the industrial
development and international competitiveness of the Greek industries and the
Balkan and Black Sea economical co-operative ventures.
In the preceding years the Federation of Industries of Northern Greece has worked
ceaselessly to achieve these goals and is continuing its efforts to maximize and
channel the benefits of these activities not only in the development of industry, but on
a more general level, the economic and social progress of Macedonia , Trace and
Epirus.
Today, the paramount goals of the Federation of Industries of Northern Greece are:
1.
2.
3.
4.
5.
The protection and promotion of the interests of its members
The industrial development of the area
The regional development of the area
Co-operative ventures with the Balkans and the Black Sea area
The promotion of Thessaloniki as an international city and as an Economic
Centre for the Balkan region
6. The economic collaboration with the Greek community abroad (www.sbbe.gr)
The position of the employers’ related to labour market flexibility is that the
manufacturing sector does not really need numerical flexibility in the form of parttime incentives or similar arrangements. Seasonal3 or ad hoc peaks are better covered
by overtime. Thus the requests of the manufacturing sector in terms of increasing
labour market flexibility in Greece are:


An easier process for the annualisation of work, meaning that the agreement
of time management should be arranged between the employer and the
employee and not request the agreement of the union. Unions are reluctant to
agree for political reasons and this explains the marginal use of this law.
A more flexible and less costly process of dismissals, which is considered by
the employers’ as being among the most severe and less reasonable ones in
the European Union.
3
This is not only the case in the manufacturing process itself but also in back-office work, like the
work effort needed by the accounting departments when balance sheets are concluded or just before the
General Assembly meetings.
13

A better management of mandatory employment (affirmative action): The
Greek law imposes an 8% of the labour force of each company coming from
special categories like disabled persons, veterans of war and people with large
families. While the federations agree in this process from a social point of
view they request the right to choose their employees with a normal recruiting
procedure between the potential employees suggested by the state. In addition
they propose a process of training of these people before sent to work.
3.4.2 The Federation of Commercial Associations of Greece (EESE)
The Federation of Commercial Associations of Greece is less influential and its
organisation is less structured than that of the industrial federations. Nevertheless its
role for the labour market legislation is important because it represents the employers
of a substantial share of the Greek blue-collar work.
EESE is very active in lobbying against price controls and was among the most
supportive organisations for the numerical flexibility of work.
3.4.3 The General Confederation of Greek Small Businesses & Trades
(GSEVEE)
Like the Federation of Commercial Associations of Greece GSEVEE is less
influential and its organisation is less structured than that of the industrial federations.
The confederation has made some efforts to promote training for its members, in
particular in its regional offices.
3.5 The collective bargaining system and collective agreements
The free collective bargaining system, set down in law 1876/1990, has opened new
possibilities for the Greek industrial relations and is a new practice in Greece.
3.5.1 The traditional collective bargaining system
The former collective bargaining system was based on the law 3239/1955 and, as
organised with the then dominant political characteristics it was characterised by a
predominant role of state control. It was the local employers union, which had the
right to sign. It was also limited because the right to sign agreement at plan level was
recognised just if local actors could justify “specific conditions”. Otherwise, they had
to refer to branch and national collective agreements. The scope of the collective
bargaining was also limited. The Supreme State Council forbade agreement on subject
where it existed agreement at branch or national level. This was only modified in
1977.
The second important point is the state control about agreement on wage increases. It
passed through the compulsory arbitration system. In case of disagreement, the
administrative court for arbitration made a compulsory decision. This Court was
controlled by the state. As a result employers disagreed systematically and the
14
administrative court applied the wage policy of the government. The final objective of
the government was to implement its policy without meeting any obstacles.
After the re-establishment of the democracy the system became fluid. The legal
framework was not changed but major companies tried to circumvent it, by direct
industrial relations. Yet demand was emerging from all sides for a real modernisation
of the system.
3.5.2 The new collective bargaining system (law 1876/90)
The law 1876/1990 came to fill this gap and regulate private-law employment in both
the private and the public sectors. It permits four categories of collective agreements:




The National General Collective Agreement, which includes all employees
and is signed by GSEE and SEB, GSEVEE and ESEE.
The Sectoral or Industry-specific Collective Agreements, which cover
employees of companies in the same industry and is signed by the industry
federation of employers and workers.
The Company Collective Agreements, which cover employees of a particular
enterprise and is signed by the plant trade union and the management.
The national Occupational and local occupational Collective Agreements,
which cover employees in a specific occupation and is signed by occupational
trade union and employers’ federation.
This new law has opened the real possibility to sign an agreement at plant or local
level.
This law abolished the compulsory arbitration system and thus deprived the state from
its central role. The new system created an innovative procedure based on a new
institution named “Organisation of Mediation and Arbitration” (OMED) which is an
independent body because the government does not control it. If the bargaining
process fails at any level, then the social partners can request the services of a
mediator or ask for arbitration. All interested parties select the mediator out of a
special list. If the social partners do not come to an agreement in less than 20 days,
then the mediator can submit his own proposal to them. If not accepted by all the
partners, the labour union can apply for arbitration under the condition that they agree
with the mediator’s proposal. One party can also apply for arbitration if the other
party has refused mediation. Social partners can also apply for arbitration at any phase
of the bargaining process, if they both agree on it. The arbitrator is chosen in the same
way than the mediator and the final decision is compulsory.
Finally, the new law has also enlarged the scope of the bargaining. It is written that
can be negotiated everything which influence directly the labour relations. So, the
scope is almost unlimited.
3.5.3 The National General Collective Labour Agreement (NGCLA)
The National General Collective Labour Agreement is the culmination of negotiations
held evey two years between the union confederation GSEE and the three employers’
15
organisations SEV, GSEVEE and ESEE . Its content includes the guaranteed
minimum monthly wage according seniority and then different items which change
from year to year as family status, the maternity leave, the parental child care leave,
the exam leave, the family leave, the sick leave, annual holidays, unemployed benefit
for aged long-term unemployed, social security, working conditions, vocation
training, compensation etc.
Social partners have never negotiated larger items as labour organisation, economic
modernisation or working time. The latter could have been a matter of negotiation,
especially about overtime work, but it was not. The government took the initiative in
2000 and decided to reduce overtime work. We want also to mention that social
partners entered into negotiation about working time reduction and its social and
economic consequences for the first time in 2000. The article 14 of the NGCA
concludes that social partners disagree on this matter.
We could say that it existed an unofficial pact between the leaders of the worker union
and the government from 1994 to 2000 in order to bring Greece into EMU. The
worker unions were also ready to make compromise in order to achieve this goal. In
any case, we could speak about National Pact on this matter. It was an arrangement
and it was not official agreement. The tripartite National Social Dialogue launched in
1997 and closed in 1999 on competitiveness, development and employment failed in
the sense that the social partners and the government did not succeed to an agreement
on important matters as pension system or flexible working time.
3.6. Industrial conflicts
The overall system seems improving as industrial conflicts demonstrate a clear
decrease during the 1990s. Strikes are almost exclusively limited in the wider public
sector. The unemployment rate increase explains partly this trend. It was 4% in 1981,
7,7% in 1991 and has been stabilised around 10% since 1995.
Table 3: average annual working hours lost by strike activity (private and public)
1985
1996
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
Number of
strikes
497
257
288
382
250
265
224
166
124
56
43
31
Number of
strikers
1071842
1514689
1937391
447006
961365
2013389
607870
969484
675884
226155
120250
233674
16
Number of hours
lost
9826482
12116068
21876703
7783195
12262073
30511988
7909449
7072008
4731442
1872899
660630
1633508
1997
36
1998
38
Source : Ministry of labour
216799
214546
1522577
1515374
3.7 The informal sector
Institutions are governed by informal rules as well as by formal organisations and
legislative acts. In that sense the size of the informal sector in Greece is a key
component in the way labour markets behave.
OECD statistics4 indicate a very large incidence of the informal sector in the Greek
economy. According to 1998 data (and bearing in mind all the reservations regarding
their validity), Greece appears as a the EU member state with the highest share of
informal sector:
Country Informal economy
as % of GDP
Germany
Greece
Ireland
Italy
Spain
14.7
29.0
16.3
27.8
23.4
Domestic studies (IOBE 2001) estimate this share to be even higher. A specific
feature of the informal sector is the recent inflow of legal and illegal migrant workers,
which is in the order of magnitude of 10% of the labour force5.
The high share and the socially tolerated6 informal sector affect labour market
relations considerably. There are several issues related to this behaviour, which
probably differentiate the Greek labour market to others:
1. Informality triggered by legal extremities: In certain cases the law regulates social
security in a way that it is beneficial to both employer and employee not to declare
the labour relation or parts of it. Such examples are: Blue collar workers get the
same retirement whether they have 4500 or 7500 days covered by social security.
Thus employers and employees have every interest not to declare additional
working days and share (usually with a higher share kept by the employer) the
social security allowance. Along the same lines construction workers, because
4
OECD statistics seem to be rather conservative. A detailed recent study in Greece (Tatsos and
Tragaki) suggests that the Greek informal sector represents 36.7% of GDP (excluding criminal
activities, which would further increase the share), compared to 29% estimated by the OECD
5
This is a phenomenon of the last decade in Greece, triggered initially by the changes in Central and
Eastern Europe and intensified by the high growth rates of the last years. The Greek labour market was
not used to immigration as until the ‘70s the country was poor enough itself to export labour to the
major OECD economies.
6
It was suggested during the interviews that transactions in the informal sector are almost considered
as an heroic act, and this is linked to the recent history of Greece where resisting against the state meant
resisting against invaders. Independently of this explanation not declaring dependent work or not
paying taxes are actions for which often people boaster.
17
they fall under the category of an “unhealthy” profession get an unemployment
allowance after 125 days of social security paid. Thus again additional working
days are often not declared and OAED has an disproportionately high share of
construction workers in its unemployment lists, which cannot be explained by the
current economic condition of the construction industry.
2. Sectoral differentiation: The Greek economy has a very high share of its activities
in agriculture, tourism and retail. These are typically activities that need numerical
flexibility and with the exception of tourism do not have very high needs in terms
of skills or contribution of their blue-collar employees to the redesign of the
business processes. For these sectors, where informal labour was and continues to
be high, introducing flexibility legally is an important step. Yet this is not the case
in the major manufacturing industry: Manufacturing firms, in particular over a
certain size, need long term commitment to the enterprise and are not interested in
part-time of temporary work. They rather cover their needs with overwork that
with short term contracts. This is well corroborated by the evidence of the
manufacturing sector having 1.5% part-time workers compared to 8-9% in the
retail sector. In that sense the recent legislation balancing increasing incentives for
part-time work and increasing cost of overtime turned out to favour agricultural
and services at the cost of the manufacturing sector.
3. Differentiation by size: The smaller the company the higher its degrees of freedom
to partly operate informally. Bigger companies would not take such risks and are
in that sense disadvantaged.
4. Links between flexibility and informality: The perception of the trade unions is
that to a large extent the introduction of part-time work with reduced social
security contributions has led to an abuse by employers, who cover their needs of
a 10 hours working day by two part-timers with marginal, undeclared overtime (1
hour per person) instead of one employee formally paid 2 hours of overtime. The
rationale behind that is that about 1 hour of overwork is almost invisible and parttimers are hardly expected to protest. Overall social security contribution statistics
in selected agricultural and tourism areas seem to confirm that as unemployment
goes down and so do total contributions to social security.
Given the high share of the informal sector we can assume a very high share of
“informal” flexibility in Greece. This informal flexibility distorts the needs and
responses to formally introduced flexibility and its benefits are very unevenly
distributed across sectors and size. Smaller firms, retail, tourism and agriculture are
the main users of informal flexibility. Attempts to convert informal into formal
flexibility favour mainly those beneficiaries, yet as yet there are no signs that the
current legal framework has significantly reduced the informal sector. At the same
time it becomes clear that manufacturing and bigger companies benefit less from the
recent attempts to introduce flexibility legally.
3.8 Conclusion on the organisation and institutions of the labour market
The public and collective organisations that exist in Greece match with a modern
welfare state. Over the least decade most of them demonstrate both a willingness to
improve their internal organisational performance and get the necessary data that will
help them document their position but they also appear more collaborative with the
other side. The latter is best demonstrated through the tacit pact that allowed the
18
country to meet the Maastricht criteria and join the EMU but also through the
reducing number of industrial conflicts.
The institutions, as formal and informal rules, are also in place. Yet serious problems
remain, as far as the implementation of the legal and regulatory system is concerned.
The national and regional public authorities lack the financial and human resources to
follow up and enforce legislation and policies. In particular there is no streamlining,
limited interaction and sometimes inadequate statistical coverage.
On the other hand there is considerable improvement in the interaction between
employers’ and employees’ associations. They agree that the very high share of the
informal sector is damaging the employees and undermines competitiveness and they
both request an increased efficiency in training and the promotion of employability.
These latter notions, leading to functional flexibility seem to be still a major problem
in Greece.
4. Labour market structure analysis
4.1 Employment trends
The Greek economy has a very strong agricultural sector, which, despite rapid
productivity increases, remains the highest contributor to employment in the EU. At
the same time there is a market de-industrialisation, despite the fact that Greece never
really benefited from a highly competitive manufacturing sector.
Table 4.1: Employment per sector in %
Sector
1987
1994
1998
Primary
27
20.8
18,5
Secondary
28
23.6
24,2
Tertiary
45
55.5
57,3
OECD : Economic Surveys 1989/90, 1997, 2001
These transformations were accompanied by a slight increase of the labour force. So
that the activity rate (labour force (employed and unemployed) as a share of total
population aged 15-64) increased from 61,7% to 64,4%. Taking into account the
unemployment and focusing on the employment rate (Employed divided by
population aged 15-64), which is a more pertinent indicator, we can see that the level
of employment is almost stable. It was 54,7% in 1985 and it is 55% in 1999. Mainly,
we can explain it (see part 5) by the low growth rate during this period. The situation
seems to have changed the last three years, especially because of the increase of the
female labour.
Table 4.2: Evolution of the labour force
(Change in population in employment aged 15-64)
Year
Labour Force
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
3892 3888 3884 3960 3967 3963 - - 4118 4193 4249 - 4294 - 4463
19
Annual change 1.5 in
employment(%)
Source: Employment in Europe 2000
-
0.7 2.3 -
-
1.4
-
0.4 -0.3 3.4 1.2
The constant slight rise in the labour force is due to demographic trends, women
entering the labour market and inward migration of unskilled workers.
Table 4.3: Evolution of the activity rate
(Change in population in employment aged 15-64)
Year
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
Activity rate 61.2 - - - - 60 58.4 - - 61 - 61.6 61.6 63.1 64.4
Source: Employment in Europe 2000
Table 4.4: Evolution of the employment rate
(Change in population in employment aged 15-64)
Year
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
Employment 54. - - - - 54. 52. - - 53. - 53. 53.6 54.6 55
rate
7
4 6
7
6
Source : Employment in Europe 2000
Economic restructuring and the effort to reduce the public service employment have
led to increasing unemployment, despite increase of population in employment. This
is associated with the increasing intervention for more flexible forms of work.
4.2 Flexible forms of work
Despite the gradual introduction during the last 12 years of legislation that enhanced
labour market flexibility, the new forms of flexibility (part-time work, fourth shift,
teleworking, etc.) still remain marginal, as firms tend to prefer informal forms of
flexibility, overtime and seasonal work.
Yet, the picture is mixed and statistical information from different sources not
necessarily compatible. Fixed-term employment, always legal as governed by the civil
code and suitable to the needs of agricultural production and tourism was and
continues to be the most popular form of numerically flexible work. Part-time and
telework are new forms, legally promoted, which have failed to raise to comparable
levels with the other countries compared with in the project.
In response to the open coordination of European Employment Policy the National
Scheme for Employment focuses on the Modernisation of Work organisation
through:
- Reduction of overtime work, in combination with flexible arrangement of
working time, reduction of the non-wage cost and rationalisation of the
layoff limit
- Encouragement of part-time employment
20
-
Following the changes in the labour market and the employment as they
appear in the Information Society
Study and Applications of new forms of work organisation
The following snapshot indicates limited implementation of these guidelines. Yet the
barriers are now connected to the market conditions rather than of legislative origin.
4.2.1 Part-time employment
Part time employment has increased considerably in the last years, almost doubling as
a share of the labour force in the decade, yet still remaining very low in comparison to
the 17,7% European Union average. Apparently there is a lack of further demand.
The normalised data presented on Table 4.5 is not compatible with the figures
suggested by the Greek statistical office suggesting part time to be 4% of total
employment.
Table 4.5: Part time as share of total employment
Year
Part-time
1991
3,8
1992
1993
1994
4,8
1995
1996
5,3
1997
1998
6
1999
6,1
Source : Employment in Europe
At any rate part-time employment is both sectorally and socially very differentiated.
Part time workers are concentrated in the retail sector (and supermarkets in particular)
in order to meet the needs of shifts. It is almost exclusively concentrates in unskilled
labour. It was 2,3% of men employment part-time and 7,6% of women employment in
2000.
In addition representatives of the labour unions claim that in Greece part-time
employment is actually an excuse for reducing costs and exploiting the labour force.
While the unions agreed with the introduction of the new system, believing that it
would facilitate shifts of the population, which would wish part-time work (young
mothers), they now consider that what actually happens is hiring of two part-timers
instead of one and informally asking them to work an unpaid hour of overtime each.
This affects overall employment, social security payments and contributes to cost
cutting when it is not necessary.
21
4.2.2 Fixed term and temporary employment
Unlike part-time fixed-term employment has always been high in Greece. It is not
based in specific labour legislation but makes use of the Civil Code provisions. The
agricultural nature of the economy and the relevance of tourism explain this deeply
routed habit.
Table 4.6: Fixed –term contract as share of total employment
Year
Fixed-term
contract
1991
10,2
1992
1993
1994
10,3
1995
1996
11
1997
1998
12,8
1999
Source : Employment in Europe
Fixed-term employment in both the private and the public sector constitutes the major
source of flexibility in the Greek labour market. The overall size is above the
European average and that of the small open economies in the context of this project.
Statistics are again not in agreement. In a recent article on temporary employment,
which to a large extent includes fixed-term employment, J. Kouzis suggests that there
is a decrease in this type of employment. While it was close to 19% (compared to 9%
EU average) in the ‘80s, it is now down to 13% (15.7% for women and 11.5% for
men), which is very close to the European average. It is also linked to unskilled
labour, as 27% are unskilled workers and 16% are in sales forces. This share includes
both fixed-term contracts, seasonal employment and indirect work placements
through employment agencies.
The two laws, law 2639/1998 and law 2874/2000 (article 12), have open the
possibility of temporary work by permitting the existing of private job placement
agencies for temporary work. Yet, there has been limited use of this facility as yet, the
most widely quoted examples coming from the banking sector, which hired
temporarily employees from bank subsidiaries, to avoid giving them full rights in the
collective agreements of the banking sector. Anecdotal evidence of cross hiring
personnel within holdings is increasing.
As with part time employment the employees’ representatives consider that there is an
abuse of the fragmented legal framework and there is a strong exploitation of fixedterm employment, which reduces instead of complementing full time employment.
4.2.3 Tele-work
22
A new form of flexibility is telework, in the sense that it allows for working hours and
wage flexibility. Many tele-workers work also as sub-sontractors.
Telework is defined as paid workers carrying out all or part of their work away from
their normal places of activities, usually from home using information and
communication technologies. It is poorly developed in Greece with 1,75% of the
labour force though their annual growth is 160%. It is typically a flexible form that
may be of value to both the employer and the employee and does not apply to
unskilled but to skilled labour only. Only recently has legislation assured the rights of
teleworkers, who may increase in the future as Greece wills tart catching up with ISindicators.
4.3 Unsocial hours
Flexibility in the forms mentioned above may not be needed, if employers can cover
irregular (or even semi-regular) needs through access to overwork. One type of access
to an additional pool are unsocial hours, i.e. hour work on weekend and night work.
Because of the role of agriculture and tourism many workers work on Saturday
(43%), which is the higher percentage in the EU and on Sunday (14,3%). As the
manufacturing sector, needing third and fourth shift, is underdeveloped (in particular
bigger firms) night work (work performed between 22 p.m. and 6 a.m.) is less
frequently encountered. Workers in hospitals and other welfare activities work
constitute the highest share of night workers.
The law 1892/1992 article (38-42) permitted the creation of the fourth shift and it is
the most important change during the 1990s on this topic.
This kind of flexibility (shift work) has increased during the 1990s.
Table 4.7: Working "Unsocial" hours
Year
1992 1993 1994 1995 1996 1997 1998
Usually shift
7.3 7.6
7.5
7.8 13.3
work
Usually night
4.4 4.8
3.8
3.6 4.1
work
Usually Sunday 13.8 15.1 - 14.2 - 13.7 14.3
work
(as % of employees)
4.4 Unemployment
During the 60s, despite highest growth rates in the OECD, unemployment was about
6%, i.e. higher than in other EU member states. The economic transformation
accompanying the miracle liberated a substantial share of rural population, with both
internal and external migration shifts. This rate of unemployment started to decrease
during the 70s through an active recruitment policy in the public sector. It increased
again during the first part of the 80s and then was stabilised at 7%. Hidden
23
unemployment but also a strong informal sector helped keep the real unemployment
low. Unemployment rose systematically during the 90s, initially because of a
persistent economic crisis, then due to the austerity policy designed to meet the
Maastricht criteria. It seems to be stabilising around 10% and government targets are
to limit it to 8% in 2005. The emphasis on reduced overwork and part-time work is
partly associated with the need to fight against unemployment.
Table 4.8 : Unemployment rate
Year
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
Unemployment
7 - - - - 6.4 7 - - 8.9 - 9.6 9.8 10. 11.
rate (%)
9 7
Source : Employment in Europe 2001
The youth (aged 15-24) and the women are the most disadvantaged shift.
Table 4.9: Youth unemployment
Year
91 92 93
Men unemployment 4,4 5
Women
11.8 13
unemployment
Youth
22.9 25.1 unemployment
Youth male
16 17.4
unemployment
Youth female
31.3 34.3
unemployment
Source : Employment in Europe 2001
94
-
95 96 97 98 99 00
6.2 6.1 6.4 7.1 7.5 7.3
14.1 15.2 15.2 16.7 17.6 16.7
-
28.5 31 30.8 31.3 31.3 29.6
19.8 21.5 22 21.7 22.8 22.2
38.3 41 40.4 39.7 40.4 37.9
The long-term unemployment concerns around 5 or 6% of the total labour force and
more than 50% of the unemployed.
4.5 Overtime
The number of overtime hours is not documented in the literature. It is estimated in a
study led by the GSEE (labour union) that around 33% of the employees work is
overtime. In the same study it is mentioned that around 20% have at least a second job
and another 20% look for a second job. Greece and Italy are the two countries in EU
where the average hours worked remained stable or increased during the 1990s.
To a large extent overtime, either within the formal employer or in a second job, are
unregistered. There are no social security benefits from overwork, thus employers and
employees prefer to share the indirect costs and avoid declaring overwork. This has
led to overwork as a major source of flexibility, which the current legislation is trying
to reverse.
4.6 Earnings
24
The Greek real earnings fluctuate considerably. The increase earnings in the period
1975-1985 are linked with a strong movement of union wage claims and a socialist
government for the first time in power. The last period, 1994-1999 the average
earnings increased only marginally than productivity in an effort to increase
competitiveness and meet the Maastricht criteria. During the 1990s the average real
earnings have increased less than productivity per hour with respectively 0.2% and
1.4%
Table 4.10 : Earnings in Greece
19751985
Average real earnings
2.8
19851990
-0.5
19901994
-2.8
19941999
2.6
19901999
0.2
Table 4.11 : Earnings
Year
85 86 87 88 89 90 91 92 93 94 95 96 97 98
Hourly
100 113 124 146 176 210 117 133 147 166 188 204 117. 121
earnings:
1
Manufacturing
The labour cost is lower in Greece than in European Union, but the productivity per
hour is also lower
The very low wages, which often do not allow for a decent living, if only one member
of the family works, are a source of distortions in the labour market: a second job in
the informal sector, undeclared benefits etc, are the easiest way to deal with it from
the workers’ point of view.
4.7 Education, skill level
Greece, being one of the poorest member states, has also a deficient structure of
human capital:
Table 4.12: All employees by educational attainment level (% of employees)
Year
92 93 94 95 96 97 98
Less than upper secondary 58.1 53.8 - 49.9 - 46.7 33.4
Upper secondary level
27.1 28.2 - 30.6 - 32.4 41.1
Third level
14.8 18 - 19.5 - 20.9 25.3
Source : Labour Force Survey, eurostat.
The real problem in the Greek labour force is not the third level education (partly
financed through private funds as families pay for the third level education of their
children abroad), which is very close to the European average, but the very high share
of less than upper secondary education. The new generations are better educated and
the number of higher education places in the country is constantly increasing,
25
including post-graduate departments. The category educational attainment level is the
most rapidly decreasing.
4.8 Training : on the job training and long life training.
The major deficiency of the Greek system in structural and longer term considerations
comes from training. Vocational training was something absolutely unknown up to
the end of the 1980s. It started as a policy-triggered instrument through the design of
the Community Support Frameworks yet with limited success. During the first half of
the 1990s, the vocational training programme worked more as income distribution
rather than as training for enhance qualification or for changing of qualification.
The index of participation in career of job-related training for employees aged 25-54
years out of 24 countries made by the OECD ranks Greece in the last position. The
share of the adult population involved in a training programme is 1.4% only, which
ranks Greece not only lowest in the comparison sample but less by orders of
magnitude. With this performance in training it is very unlikely that Greece can
promote models of functional flexibility.
The National Scheme for Employment is again well aware of these problems and
concerned with the adaptability as an element of life long learning. More
specifically, the key points of this guideline are the followings:
1. Training actions
 Training for the development of ICT skills in order to fight digital illiteracy and to
get informed on the use of Internet services.
 Development of Management skills
 Development of the infrastructure for education
2. Facilitation of the access of the self-employed and of the small enterprises for the
development of key skills in order to better adjust in the new and changing conditions
of the modern entrepreneurial environment.
 Training of executives of Public Administration
 Vocational Training of the employees in the collective negotiations of the social
partners and in collective agreements.
Despite these first development efforts in the Greek regulatory system, enterprises
(which are SMEs or VSEs in their vast majority) continue to be hesitant regarding
initiatives for the introduction of innovations to the traditional work organisation
model.Modernisation and flexibility remain of low priority in the negotiations agenda
between employers and employees, where the dominant issues are that of wage
nature and security issues. Very few of the practices that are already applicable in
European enterprises have been incorporated in the system: the organisation of
working time remains very rigid and traditional, with an excessive use of overtime
work (legal or not), the application of modern production methods, such as just-intime, total quality management, lean production etc., are met in a very poor number
of enterprises. At the same time, the reduction or simplification of hierarchies,
teamwork, the constant improvement and enrichment of the skills of the personnel,
autonomy and the activation of the employees remain issues beyond the options field
of most of the enterprises, as well as of big organisations.
26
The public sector shares responsibility for the situation. Despite a richly designed
programme for extensive training and life long learning, designed in the framework of
the Employment guidelines and amply financed by the EU, OAED (despite various
restructurings) was not in a position to effectively implement this programme.
4.9 Conclusions on labour market structures:
The role of the State, as a legislator, in promoting flexible working modes was found
very supportive in earlier sections. Yet, combining the legal interventions with the
real trends and rigidities and working conditions it may be suggested that the role of
the State is insufficient and sometimes unreasonable. On the one hand the State has
traditionally favoured rigid legislation to protect labour but on the other it has been
unable to modernise and impose a regulatory environment that would improve
working conditions. In some cases this creates total confusion, in others the State is
simply not in a position to implement its own legislation with the necessary human
and physical infrastructure. In addition the State is sometimes unable to either adopt
the necessary legislation and more often than not, the administration is not in a
position to produce the necessary statistical coverage, which has been a problem
throughout this study.
Educational policy may be the worse failure of the Greek State: OECD data shows a
remarkable distortion in Greece, which has high share on both ends of the scale: the
highest share of uneducated labour force but a respectable share of the population in
tertiary university and non-university education. There is a lack in the middle
qualifications, which does not seem to preoccupy the political authorities, who have
put all the emphasis of the educational policy in the elimination of the uneducated and
the increase of tertiary education.
In that sense, if labour market flexibility is interpreted widely, one cannot justify an
increase which goes in pace with the legislative framework. Part-time work is
increasing but temporary work is decreasing. Labour flexibility based on overtime
hours, undeclared works and self-employment does not follow a steady pattern. What
is more disappointing is that flexibility, as a state priority, seems to take only its
numerical form into a priority policy. New forms of flexibility, aiming at human
capital development, specific conditions meeting social needs and telework are either
absent or follow a market logic as permitted by the general economic framework.
Despite the increasing funding for training and lifelong learning in the new CSF, these
policies are not linked to the enhancement of functional flexibility. The latter is left to
the market forces and business strategies.
5. Economic performance analysis
In the first post-war7 years Greece has demonstrated well above OECD and EU
average GDP, export, industrial productivity and investment growth reminding more
of Asian tiger growth than its own average rate of development in previous or later
years. With this spectacular performance Greece was expected to rapidly catch up
7
Due to a civil war, which followed the second world war Greek reconstruction and development
efforts practically started in the early ´50s
27
with other European countries and adapt its production system accordingly. But these
trends were rapidly reversed and the growth period proved to be only one additional
growth episode. As Thomadakis (Thomadakis, 1997) argues in the hundred and sixty
seven years of independent statehood Greece has been in a state of economic
stagnation, even crisis, interrupted by two growth episodes per century.
In the early ´70s Greece goes into a persistent crisis. The first studies explain this
crisis mainly with the inability of the manufacturing industry to take advantage of
favourable international circumstances and change its position in the international
division of labour. Giannitsis (Giannitsis 1985:15ff) suggests that these missed
opportunities are related to the absence of an endogenous industrialisation capacity,
the export of cheap labour and the absence of a technology orientation as the
transborder transfer of technology as the only source of production. Later Vaitsos and
Giannitsis (Vaitsos and Giannitsis 1987:32) conclude that the industrial dynamism of
the last growth episode was based on a very limited basis, while important
technological relations, like low intersectoral linkages, degree of local transformation,
scale of production and technological dependence remained unchanged.
Overall one may summarise the growth period as based on cheap labour and
exploiting the high demand in the European market. Greek manufacturing flourished
in a seller’s market. In this period the statistical analysis shows a concentration of
Greek exports in traditional sectors only: 28% comes from textile and leather
products, while 42% is somehow related to agricultural products or primary raw
materials. Even the specialisation index of textiles demonstrates a specialisation in the
most traditional among textile products (Mitsos: 215), although a dynamic analysis
suggests that in the mid ´80s the country a slow improvement of export performance
start in sectors which are internationally dynamic (ibid.:243). At the same time the
low propensity to invest is demonstrated in the diminishing imports of capital
equipment (ibid: 326).
The 1990s are characterised by the realisation by all major actors, political parties,
industrial federations and trade unions that unless the situation reverses the country’s
economic performance will continue to deteriorate. Macroeconomic stability in view
of joining the EMU becomes an important focus of economic policy. Industrial
production improves in particular in the most recent period.
5.1 Economic growth
Compared with the EU average real GDP growth was low during the 1980s and the
first half of the 1990s, but systematically higher thereafter, closing a long-term
increasing gap. During the current slowdown Greece demonstrates one of the highest
performances.
Table 5.1: Real GDP growth in Greece
Year
91 92 93 94 95 96 97 98 99 00
Real GDP
3.1 0.7 -1.6 2 2.1 2.4 3.5 3.1 3.4 4.1
growth
GDP at 1995 market prices in annual average % change
28
Despite the improvement Greece is still well behind the Irish miracle and the other
Southern European cohesion countries.
Table 5.2: Real GDP growth 1994-1999
Country
Real GDP growth 19941999
Greece
3%
EU-15
2,3%
Portugal
3,2%
Spain
3,3%
Ireland
8%
Greece should increase considerably its economic performances in a close future if it
wants to converge with the European average real GDP per head the coming 10 years.
5.2 Labour remuneration, labour productivity, labours cost unit and national
investment.
5.2.1 Earning and productivity
Purchase power of the Greek workers lags behind the average European Union
purchase power. At the same time the Greek real labour cost was lower than that of
the European Union in the first part of the 1990s. The real earnings fell and the labour
productivity was low. The earnings increased but not as fast as the labour productivity
on average in European Union. Then, the Greek real unit labour cost has become
higher than the European average during the period 1994-1999. So, the Greek
competitiveness is not based on a difference of real unit labour cost. The Greek
government used exchange rate policies for remedy.
Table 5.3: Productivity, earning and unit labour cost.
Year
199019941990- 1995 1996 1997 1998 1999
1994
1999
1999
GDP / total hours worked in
2.3
1.6
1.9
1.8 1.2 2.0 1.6 1.4
EU
GDP / total hours worked in
0.5
2.2
1.4
1.6 2.7 4.5 0.4 1.8
Greece
Average real earning in EU
1.4
0.8
1.1
0.4 0.9 0.9 0.7 1.4
Average real earning in
-2.8
2.6
0.2
3.3 0.3 6.5 1 2.1
Greece
Real Unit Labour Cost in
-0.7
-0.7
-0.7
-1.3 -0.5 -0.9 -0.9 0.1
EU
Real Unit Labour Cost in
-3.2
0.4
-1.2 +1.6 -1.4 +1.6 +0.6 -0.4
Greece
Source: Employment in Europe 2000, in annual average % change
29
The Greek economic model is based on low productivity, low income and long
working day. The very low ranking in both the IMD and Davos scores come then as
no surprise.
5.2.2 National investment
The national investment measured as the gross fixed investment is stable around 20%
of the GNP during the 1990s.
Table 5.4 : Gross fixed investment (Percentage of GNP)
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Gross fixed investment 18.7 - 20.5 - 19.7 - 19.9 - 21.9
The relatively high shares of investment are financed through the Community Support
Frameworks, giving physical infrastructure a considerable priority. Thus it is unlikely
that these investments will lead to direct returns on investment that can allow the
economic sustainability of the Greek development model.
5.3 Competitive position
The World Economic Forum (WEF) has estimated that Greece has improved its
international position these last years in its Global Competitiveness Report. The
International Institute for Management development (IMD) has estimated the same in
its World Competitiveness Yearbook.
Table 5.5: Global competitiveness ranking
Year
1998 1999 2000 2001
World Competitiveness Yearbook Index - 32/50 34/50 30/50
Ranking per country out of total 50
Growth competitiveness index
44/52 41/58 34/75 36/75
Ranking out of 50
Current competitiveness index
38/52 36/58 33/75 41/75
Ranking out of 50
Source : Global Competitiveness report and World Competitiveness yearbook.
Table 5.6: Balance of payment (share of GDP)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Goods
-13.8 -14.2 -13.7 -13.8 -12.2 -12.1 -12.2 -13.7 -14.4 -16.8
Services
5.6 5.8 6.6
Transfer
6.3 4.9 6
Current account
-1.7 -2.1 -0.8 -0.1 -2.5 -3.8 -4.2 -3.2 -4.1 -4,6
Source : OECD Economic Surveys
Traditionally, Greece has a huge trade balance deficit, which is partly made up with
the surplus of the invisible balance (tourism, shipping, migrant remittances). The
importance of the transfer makes current balance deficit around 4% of the GDP. The
30
acceleration of the deficit of the trade balance can be explained by the increase of the
GDP growth.
5.4 Innovation
Explanations of the decreasing competitiveness are linked with the overall
development model, as well as the structure of the productive sector. Many points are
stressed in the literature on the inability of companies to vertically integrate,
technologically diversify and upgrade in the international division of labour. At the
same time the Greek state proves unable to adopt long terms strategies and to exploit
its earlier degrees of freedom or its current massive transfer of funds to help
manufacturing activities to transform and achieve sustainable growth. We argue that
these lost opportunities are too recent a history to be forgotten. They represent
fragmented pieces of effort to promote measures which are under discussion again
and failures of the past overshadow recent initiatives.
The sectoral breakdown still demonstrates an economy that relies mainly on
traditional R&D using (food and textiles) rather than R&D producing sectors
(computers, machinery, electronics and chemicals). The size and dynamism of
existing companies is an additional problem to future competitiveness. The S&T
programme co-financed by EU regional support has not as yet been linked to
economic growth. The transfer of knowledge to the economy did not materialise in a
way to visibly improve productivity and competitiveness.
5.4.1 A brief description of the NIS
The Greek Innovation System has practically emerged in the mid ´80s. Before that
universities and research centres were following agendas of their own, with limited
funding and no peer reviewing or evaluation. Firms spent no funds for R&D and
technology transfer took place only in embodied form. Thus the history of science and
technology policy in Greece is very recent. Since 1985 substantial progress has been
made in the size and scope of academic research and in the creation of new
capabilities and intermediaries.
Table 5.7: GERD and BERD evolution in Greece (million drachmas)
1986
1988
1989
1991
1993
1995
GERD
m.dra
18331.34
27586.74
41002.97
59499.78
100463.7
134674.6
GERD
1986=100
100
150
224
325
548
735
BERD
m.dra
4247.236
6507.36
7905.649
12940.44
20297.15
39707.60
Source: GSRT, various publications
31
BERD
1986=100
100
153
186
304
477
935
GERD rose very rapidly, yet starting at 0.2% of GDP it is still around 0.7%, lagging
behind many of the Objective 1 regions. Research grants remain concentrated to
academic organisations and BERD/GERD persistently remains around 20%, the
lowest in the EU. Despite the relative rise of BERD its share to GERD is slightly
diminishing.
At the same time important legal steps of modernisation took place, universities and
research centres were given the means to manage research, the first research
associations and intermediaries were created and the modernisation of the system of
intellectual property rights started. In this period permanent funding diminished and
the introduction of calls for proposals was adopted as the most appropriate
mechanism. A new multidisciplinary network of research centres located in three
major towns outside Athens was created and became the most competitive of all
Greek research establishments.
Overall the evaluation culture, feed back mechanisms and the adoption of excellence
have suffered in the management process. Evaluations are foreseen and launched but
usually with substantial delays, inhibiting a smooth process of policy redesign.
Evaluations lose thus their primary role, as a real-time monitoring instrument and get
features of mandatory control mechanisms.
Interaction among actors in the various stages of the production of knowledge
remains limited. Despite an increasing number of subsidies for collaborative research
and networking, evaluation work suggests that the culture of interaction8 has not been
adopted and collaborations are cash- or training-driven rather than market oriented.
The quantitative and qualitative improvement has not yet accompanied by a visible
difference in the productive process of the country:
1. Patent indicators show the lowest activity in Europe both in the Greek and in third
markets.
2. Data in the GSRT demonstrates a small share of Greek firms performing R&D.
The first CIS survey in Greece concluded with 305 companies [GSRT, 1996].
3. Research in the data of the development law offering investment incentives with
particular emphasis on technology transfer demonstrates that there are no Greek
investments using technology, which was developed under the subsidised research
programmes.
From the various evaluations of the Greek participation in the Framework
Programme [Planet 1994, Impact 1996], which was the first major source of project
funding in the country the performance of the research system is confirmed:

8
Greece is doing very well in terms of absorption, which rose rapidly to attain very
satisfactory levels in comparison with national funds and researchers as a share of
the population. In the 4th Framework Programme the overall performance of the
Greek research teams in terms of absorption has been spectacular. A participation
indicator designed by M. Sharp relating grants received to the strength of domestic
RTD is 884 for Greece in 1991-1994 (876 for 1987-1990) compared to 100 EU
average [Sharp, 1998].
TSER-ISE, Thematic Evaluation DG XVI
32



The FP has been extremely successful in creating skills, highly qualified research
teams, a basic infrastructure and enhancing the internationalisation of the Greek
researchers. Before the introduction of the CSFs but also in their beginning it was
the sole major source funding high quality research.
The participation in the FP is based predominantly on research laboratories and
much less on companies: only few bigger companies and NTBFs in the software
sector are persistent beneficiaries, some more are occasional participants but
overall they represent much less than 1% of the total population of Greek
companies
The participation to the FP has strongly contributed to the improvement of
expertise, the change of informal rules, the role the university can play for society
and in the mobility of researchers. Yet, in terms of commercial applications
companies hardly ever see a direct benefit. It is mainly information, skills and
networking that they state as their major benefits.
The major national research programmes EPET I, STRIDE and EPET II have
started with the target to increase the quantity and quality of research in the country
and promote university-industry linkages. In the process of evolution more emphasis
was given to bigger projects and to innovation and technology transfer programmes,
though for the latter the emphasis remained more at the level of design with major
difficulties for effective implementation. From evaluations, statistical evidence and
interviews, one can draw the following relevant conclusions




the national policy of the last decade has changed substantially and succeeded in
mobilising and increasing the research potential of the country
evolution shows a tendency towards bigger rather than smaller projects, although
there are still limited strategic considerations and wider areas and types of actors
are all still addressed inhibiting a close focus on a limited but ambitious number of
areas
the number of companies participating in the national schemes is increasing but
there is no policy of selection or dynamics; it is not clear whether there is a
deliberate policy for diversity or there is an intention not to be selective
research output has been more successful than innovation and technology transfer;
organisations created to support ITT have faced broad and diversified problems
and only very few of them fulfil their targets and incentives launches are also
moderate.
The national programmes have strengthened the environment and sensitised Greek
companies but it is less strategic than originally conceived and can thus not shape
innovative behaviour. Interaction has increased but there are no signs of restructuring
or improved firm dynamics. Externalities remain limited.
Under the second CSF there have been three more national Operational Programmes
that are directly or indirectly of relevance to S&T:
1. The National Programme for Education, which has intensified its efforts only in
the last two years, helps strengthen the basic infrastructure of universities, their
deepening of knowledge through the creation of graduate departments and their
opening up to society with teaching programmes for other than full time students.
33
2. The National Programme for Industry including a wide number of measures for
the modernisation of industry and its technological upgrading (including venture
capital support), limited mainly on rationalisation of the productive sector.
3. The Operational Programme of the SME Initiative spending most of its funds in
the creation of networks of companies, preferably with the support of technology
transfer organisations.
All evidence suggests that there is very little interaction among the four O.P.s and it is
not institutionalised. Despite some efforts to co-ordinate the EU support, these
programmes operated in a fairly isolated manner, and this is one of the aspects that
needs to be seriously addressed in the future. The co-ordination unit, created to set up
an efficient mechanism exploiting synergies and avoiding overlapping did not include
EPET.
5.4.2 Conclusions from the NIS: priority areas to be addressed in the future
Greece has gone a long way in the last ten years towards the creation of a science and
technology policy and more recently towards an effort to use technological resources
to improve competitiveness.
1. The target of S&T policy for regional development are firms because only firms
can produce wealth, thus our first expectation is to help firms become more
dynamic, i.e. improve their absorptive capabilities and persistence in innovation.
As globalisation tendencies increase competitive pressures, firms need to be
strengthened and be helped to adapt to technological change. All evidence
suggests that Greek technology policy has not been very effective in the
achievement of this particular goal.
2. The rapid change of technology makes certain activities totally obsolete and
others, more promising emerge. International evidence suggest that the best way
to restructure industry is not through the support of less competitive firms but
through facilitating the exit of outdated companies and the entry of more
dynamic ones. The company culture of the latter is determinant for their success
and thus countries that don’t demonstrate high rates of entry in sectors with
increased demand, are unlikely to keep their competitive position in the
international division of labour.
3. But firms don’t innovate alone. Their environment, i.e. government, universities,
research laboratories and technology transfer organisations is of extreme
importance, but it is the quality and intensity of interaction that will determine
innovation-based growth, not the just quality of research. Interaction is relevant
not only between firms and the environment but also among firms themselves to
achieve spillovers and externalities. Thus an environment favourable to parallel
evolution and interaction needs to be created if technology is meant to benefit the
economy.
The direct linkage between technology and the economy is still very weak. In recent
years both the public research system and companies themselves had important
indirect benefits in terms of improving their knowledge base, train their personnel and
participating in the Framework Programme. But there is no evidence on major
investments resulting from R&D, either in the form of launching successful new
products or restructuring. Yet, this is what the country needs if it want to change its
development model from low cost competitiveness into a learning economy. The
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debate there is how this can be done best: through the modernisation of existing firms,
the creation of new indigenous companies or inward investment. It is argued here that
the former is now being taken care off by the increasing investment and
macroeconomic stability, but it is insufficient for a rapid restructuring. Inward
investment is also a case depending on overall economic performance. For high tech
the economy needs new entries and the best way to do that is through spin offs.
5.5 Conclusion on the Greek economic performance
The Greek economy was and remains the least competitive one in the European
Union, despite signs of recent recovery. The basic problem lies with the development
model it follows and the inability of either the market forces or state intervention to
direct it from a low cost into a high performance economy, based on human resources,
adaptation to new technology and restructuring towards sectors with high value added
and international demand.
Thus the major need of the economy is the creation of a pool of technological
knowledge and an improvement of human capital. State policies have followed this
direction, through CSF funding, yet the success and cost –effectiveness of these
policies is often questioned. In particular it is not yet evident to what extent and which
part of the Greek productive sector has adapted to the new model requirements. In that
sense an effective matching of economic development and labour market policies
becomes a crucial element for development.
6. Synthesising labour market flexibility and competitiveness in Greece
Greece is a small country and the less competitive economy in the EU. State policies
have started an effort towards modernisation but this has as yet neither had the
spectacular effects of Irish policies not the business performance of the big Finnish
businesses.
In this context of modernisation labour market policy in the 90s tried through new
legislative acts to introduce more flexibility into the working hours. Legislation
gradually facilitated not only fixed-time work, which was already important in the
past, but also part-time work and work via employment agencies. This is mainly in an
effort to cut costs in the process of a transformation of the economy from a low wage
to a learning economy.
These efforts though are limited to facilitating numerical flexibility. But serious
problems remain, as far as the implementation of the legal and regulatory system is
concerned. The national and regional public authorities lack the financial and human
resources to follow up and enforce legislation and policies. In particular there is no
streamlining, limited interaction and sometimes inadequate statistical coverage.
Yet, despite legal facilitation of flexible working time and periods important rigidities
remain in the sense of labour protection, where Greece ranks very high in the OECD.
35
Although labour relations seam to improve, and certain cases of tripartite agreements
facilitated economic achievements, there is no general consensus and generalised
pursuit of new concepts in business competitiveness, like employability, functional
flexibility and new organisational modes. The evolution of earnings and public
training policies do not support any evidence in this direction. Educational policy may
be the worse failure of the Greek State: OECD data shows a remarkable distortion in
Greece, which has high share on both ends of the scale: the highest share of
uneducated labour force but a respectable share of the population in tertiary university
and non-university education. There is a lack in the middle qualifications, which does
not seem to preoccupy the political authorities, who have put all the emphasis of the
educational policy in the elimination of the uneducated and the increase of tertiary
education.
Combining the legal interventions with the real trends and rigidities and working
conditions it may be suggested that the role of the State is insufficient and sometimes
unreasonable. On the one hand the State has traditionally favoured rigid legislation to
protect labour but on the other it has been unable to modernise and impose a
regulatory environment that would improve working conditions. In some cases this
creates total confusion, in others the State is simply not in a position to support its
own legislation with the necessary human and physical infrastructure. In addition the
State is sometimes unable to either adopt the necessary legislation and more often
than not, the administration is not in a position to produce the necessary statistical
coverage, which has been a problem throughout this study.
In that sense, if labour market flexibility is interpreted widely, one cannot justify an
increase which goes in pace with the legislative framework. Part-time work is
increasing but temporary work is decreasing. Labour flexibility based on overtime
hours, undeclared works and self-employment does not follow a steady pattern. What
is more disappointing is that flexibility, as a state priority, seems to take only its
numerical form into a priority policy. New forms of flexibility, aiming at human
capital development, specific conditions meeting social needs and telework are either
absent or follow a market logic as permitted by the general economic framework.
Despite the increasing funding for training and lifelong learning in the new CSF, these
policies are not linked to the enhancement of functional flexibility. The latter is left to
the market forces and business strategies.
In conclusion one may assume that labour market flexibility, although adopted and
emphasised by the Greek legislative, it takes a form that
 Has provoked a negative reaction, in the way it is implemented, by the
employees’ associations.
 There are indications of exploiting new opportunities in a way that does not
comply with the spirit of the national policy.
 It has concentrated and possibly limited the policy guidance to issues that are
linked to shorter term development considerations and not the broader needs
of the economy.
The major need of the economy is the creation of a pool of technological knowledge
and an improvement of human capital. State policies have followed this direction,
through CSF funding, yet the success and cost –effectiveness of these policies is often
questioned. In particular it is not yet evident to what extent and which part of the
36
Greek productive sector has adapted to the new model requirements. In that sense an
effective matching of economic development and labour market policies becomes a
crucial element for development. One may even argue that it is more important than in
economies where there is already a reservoir of knowledge available, where a selfreinforcing character can be assumed.
37
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