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20 February 2019

Greece: a first policy effort to re-reinstate the minimum wage process after the end of the bailout

The Greek government has announced a long-awaited increase in the minimum wage. It marks the first wage improvement in the country in almost a decade and represents an effort to reverse some of the unpopular reforms the country had to implement under bailout supervision.

The government decided to increase the minimum wage with effect from 1 February 2019. The changes will lift the monthly minimum wage to 650 euro, and the government will abolish the ‘sub-minimum’ wage that existed for youngsters (under the age of 25). The deep cut imposed on workers below 25 years in 2012 was part of the austerity measures prescribed by international lenders to make the labour market more flexible and the economy more competitive. Until 2012, the country’s minimum wage stood at 751 euros, but this was reduced to 586 euros for those over the age of 25 and 510 euros for youngsters under 25.

The pay rise, in percentage points, is 27.5% for the under-25s and 11% for all other workers. The decision was motivated by plans for a stimulus to domestic demand and aims at a fairer distribution of the wealth generated after the recovery. According to the labour ministry, an estimated 880,000 people will benefit from the changes. The country’s former creditors have expressed deep concern about the decision and referred to the first proposals of an expert pay committee for a more modest increase ranging from 5 to 10%.

Since the autumn of 2018, the government has been speaking about a return to a more decent (minimum) pay and a restoration of the country’s labour market system. In the following months, several concluded collective agreements were made generally binding and, as a consequence, the minimum pay in sectors like banking, tourism, hospitality, mining and shipping has increased. During the course of 2018, the labour market recovered slightly, with the largest amount of new jobs created since 2001. However, most of the new jobs are part-time positions.

The decision brings an end to a long period of wage cuts. According to an ILO-study, real wages in Greece fell by 3.5% in 2017, the biggest decline recorded since 2013. The study found that, in the period of austerity between 2008 and 2017, real wages declined at a rate of 3.1% every year. Observers have criticised the reform changes in 2010-2018 that brought a steady increase in flexible forms of employment, a fall of the wage level, leading to an increase of in-work poverty in the private sector, and did not bring a sustainable, job-creating economic recovery.

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