Next Monday, July 26, the cabinet will meet to take decisions on the minimum wage, according to reports.
As we are in the final straight for the decision-making process, the Minister of Labour and Social Affairs, Kostis Hatzidakis, is apparently keeping his cards close to his chest in view of the cabinet meeting. In response to questions, he stresses, however, that all data will be taken into account in a well-founded and scientific manner and based on the strength of the economy.
The Ministry of Labour, which will submit the relevant recommendation to the Cabinet, weighs three factors:
- The contributions of social partners and scientific bodies received in the context of the relevant consultation, which is provided for by the legislation. It should be noted that the model for the determination of the minimum wage by the government, following consultation, is widely applied internationally and is included in a proposal for an EU Directive currently under development.
- The resilience of the economy in the context of the pandemic, the situation of businesses and especially small and medium-sized enterprises affected.
- The needs of workers paid the minimum wage. Recall that the decisions will be taken with a recorded 8.2% recession in 2020, due to the coronavirus. At the same time, for 2021, there are positive estimates for the outlook of the economy, with the European Commission talking about 4.2% growth.
According to information, with regard to the recommendations of the social partners, the data, according to the conclusion of the KEPE, which summarizes the results of the consultation and which was submitted to the Minister of Labour, are as follows:
- All the employers’ organisations, small and large enterprises (SEV, SETE, SBE, GSEBE, ESEE) are in favour of “freezing” the minimum wage at current levels, citing the effects of the pandemic and the impact of a possible increase on the viability of businesses and unemployment.
- The Bank of Greece, IOBE and KEPE are also in favour of freezing the minimum wage.
- The National Institute of Labour and Human Resources (NIIH) recommends two options: either maintaining the wage at 650 euros with parallel measures to increase purchasing power or increasing it by 1.53%.
- The GSEE recommends an increase in the minimum wage. Specifically, it calls for it to rise to 751 euros immediately and to 809 euros by mid-2022.
As for the impact on the economy, the CCI’s conclusion points out that “small businesses, where the use of the minimum wage is more widespread and which have already been hit harder by the pandemic, are more sensitive to changes in the minimum wage” and adds.In the current context, the policies implemented must first and foremost preserve existing jobs, which, until now, have been subject to the ban on redundancies. A large number of businesses are still today under state protection due to the pandemic (subsidies, deferred payments, etc.). The priority is to avoid massive redundancies and the definitive closure of viable businesses, while the improvement in employment and the reduction of unemployment should be restored.“.
In the same direction are the conclusions of the latest (April 2021) survey of the Small Business Institute of the GSEBEE, according to which 4 out of 10 (38.2%) small and micro enterprises express fear of a possible interruption of their activity in the next period, more than half of them expect a decrease in turnover, demand, orders and liquidity, while the 63.1% of businesses believe that the economic crisis caused by the pandemic will last for at least 2 years.
The remarks on the purchasing power of the minimum wage are also noteworthy. As noted, regardless of any decisions taken by the cabinet, real wages in the last twelve months have increased by around 2.5%, taking into account negative inflation and, above all, the reduction in social security contributions.
In relation to the increases given to other EU countries in the previous period, officials point out that only 9 of them have increased by more than 2%, taking into account inflation and the exchange rate (for non-eurozone countries). In 6 countries the real increase was less than one percentage point and in 2 countries the real minimum wage fell.
Finally, officials say that the minimum wage in Greece, which is 650 euros (nominal wage, 758 euros, taking into account that 14 salaries are paid per year), places our country in the middle of the European ranking. Specifically, in 11th place by nominal and 13th place by Purchasing Power Equivalents.
According to reports, the proposals of the social partners and scientific bodies on the minimum wage can be summarised as follows:
GSEBEE
In this highly volatile environment, the priority is to save businesses and preserve jobs. Therefore, any change that increases operating costs can be crucial for both the viability of businesses and the preservation of jobs.
GSEE
For 2021, our proposal is to raise the minimum wage to €751 and then adjust it to 60% of the median wage, based on OECD data, i.e. €809.
ESEE
A possible increase in the minimum wage today would have the effect of damaging the viability of SMEs, which are the country’s largest employer, and would cause severe disruption to jobs paid at the minimum wage (young workers and flexible forms of employment) or in already hard-pressed sectors.
SSE
The minimum wage to remain at 650 euros next year, but necessarily accompanied by tax relief for low-wage earners and consideration of other possible measures to improve their income.
SEV
At least as long as the immediate negative effects of the pandemic last, in 2021 it is not appropriate to make changes to the minimum wage level, especially on a large scale.
SETE
In the current economic climate and the conditions created by the Covid-19 pandemic, an increase in the minimum wage in 2021 is not appropriate.
Scientific bodies
Bank of Greece
There is no room for a minimum wage increase in 2021.
IOBE
The current level of the minimum wage is neither particularly low nor particularly high. Therefore, at least for as long as the immediate negative effects of the pandemic last, in 2021 it seems inappropriate to make changes to the level of the minimum wage, especially on a large scale.
HIEAD
- Option 1: Maintaining the 650 euro level with accompanying measures to support low-wage earners (e.g. revisiting the issue of triennials, small increase in the tax-free allowance).
- Option 2: An increase of 1.53% which is half of the expected productivity growth for 2022.
CDC
It might be advisable for our country to refrain from choices that could burden several already marginal enterprises and have adverse effects on employment and economic growth rates.
Any change in the minimum wage will obviously incorporate recent tax and insurance changes for employees and businesses.
Once the economy returns to normality and consistently records positive growth rates, there is scope for improving the minimum wage.
