Labour Market Flexibility and Informality in Greece: An Empirical Study

10th Annual MIBES International Conference TEI of Thessaly Labour Market Flexibility and Informality in Greece: An Empirical Study Anagnostopoulos A.* ,** Bitzenis A*., Kontakos P.* *University of Macedonia, Greece & **TEI of Thessaly - - ( ) : , MIS 380420 .

As Jean-Claude Juncker, prime minister of Luxembourg and President of Euro Group, said memorably in 2007: We all know what to do, but we don t know how to get re-elected once we have done it (The Economist, July 8, 2010)

The purpose of the presentation To report the Greek employment characteristics To determine the situation of flexible/informal employment To focus on labour rigidities in the Greek Economy To discuss the flexible working arrangement findings from Greek survey To investigate the groups who are affected most from the crisis

The Greek Labour Market during pre-crisis ..is still characterized by low employment & participation rates, and a high level of unemployment, particularly among long-term (56%), youth (25%) and women (14%) (OECD, 2007) ...has an inefficient and protected public sector (20% of the total employment based on the Greek LFS, 2008) ..is ranked 143 among 181 countries with regard to the employment index of rigidity (Word Bank-Doing Business, 2008) .. is considered the fourth strictest in EPL (labour legislation index) out of the 26 OECD countries with many regulations (OECD, 2004) ...presents high percentages of self-employment (36% - OECD, 2008) and consists of micro-enterprises which characterized by family ownership

Unemployment rates (%) by Sex in Greece & OECD (1983-2007) Women Men 10 18 16 14 8 12 10 6 8 6 4 4 1980 1985 1990 1995 2000 2005 1980 1985 1990 1995 2000 2005 Years Years OECD Greece OECD Greece Women aged 15-24 Men aged 15-24 45 25 40 35 20 30 25 15 20 15 10 10 1980 1985 1990 1995 2000 2005 1980 1985 1990 1995 2000 2005 Years Years OECD Greece OECD Greece

High Youth & Long-Term Unemployment in OECD countries

Basic Characteristic of Greeces LM Based on dual s labour market theory Greece has 1. a full-time & permanent work-force, core employees, or insiders (both males and females); 2. a flexible workforce with weak attachment to employment, either due to personal reasons or lack of choice, who are the outsiders and form the bulk of a secondary labour market (mainly females and youths).

Why Flexible Employment? Greece has followed the European path of social and employment protectionism - Greece s law is based on the French legal model, which might explain the regulatory tendencies of Greek labour market law (Botero et al, 2004) Greek scholars argue that the primary characteristic of the Greek system of labour relations is its legal structure, which arises from the interventionist role of the Greek State Greece also follows the southern European labour model, along with Italy, Spain, Portugal and Cyprus which accommodates the seasonality and informality in the economy as well as its socio-cultural heritage.

Legal Origins European Variations Djankov et al (2004) and La Porta et al (1999)

Greece is a peripheral/secondary economy which linked to a) The male breadwinner model. Traditionally and still informally , the adult male is the provider, who is financially responsible for the family. Greek labour law protects full-time careers that are generally taken by males, thus leaving little space for dual-earnership. b) Female participation in employment. Recent OECD statistics show that in the last ten years, despite small increases female employment in Greece remains significantly lower than the average of OECD countries. Many Greek women are socially convinced that their role is to be a homemaker. Such conformity to the perceived subjective norms is reflected through weak attachment to employment.

Greece is a peripheral/secondary economy which linked to (2) c) Youth unemployment. Youth cohabitation with parents until their early thirties, a Greco-Italian contemporary phenomenon and currently also increasing in the UK and other EU countries, retains the extended dependant household model d) Rigidity of the labour market. Labour laws have long normalised full-time employment and segmented the workforce. Additionally, a strong union presence, which opposes FWAs, reinforces full-time employment as the desired working mode. Furthermore, corruption, as illustrated via high levels of no- contract employment and illegal flexibility, defines Greek labour relations and therefore FWAs

Employment Facts & Figures

Structure of the Economy Average across 2000-2012 period (as % of the GDP) Sector , by value (% GDP) Greece Euro- area Diff Agriculture; fishing 5% 2% 3% Industry (with construction) 19% 26% -7% Wholesale/retail trade; hotels and restaurants; transport Financial intermediation; real estate 33% 21% 12% 20% 28% -8% Public administration 23% 23% 0% 13 Source: UN

Greek Employment Figures in Greece (2015) Number of Employees Employment Category Public Servants General Government Public Servants Public Corporations Employees Private Sector 580.000 60.000 1.600.000 1.200.000 Self-Employed 3.440.000 SUM Source: Own Estimation http://apografi.yap.gov.gr/apografi/2015/Flows_May_2015.htm http://www.ika.gr/gr/infopages/stats/stat_report_results.cfm http://www.ypakp.gr/uploads/docs/7676.pdf https://data.oecd.org/emp/self-employment-rate.htm#indicator-chart

SMEs in Greece Basic Figures & Comparisons with EU28 Number of Enterprises Number of Employees Greece EU-28 Greece EU-28 NumberProportion Proportion (%) Proportion (%) Proportion (%) Number (%) Micro 629,811 96.2 92.4 1,130,794 55.2 29.1 Small 21,669 3.3 6.4 398,503 19.5 20.6 Medium 2,464 0.4 1.0 227,832 11.1 17.2 SMEs 653,944 99.9 99.8 1,757,129 85.8 66.9 Large 423 0.1 0.2 290,547 14.2 33.1 Total 654,367 100.0 100.0 2,047,676 100.0 100.0 Source: EC (2014):SBA in Greece

Self-employed (%) in Greece & EU countries GEO/TIME European Union (28 countries) Belgium Denmark Germany Ireland Greece Spain France Italy Netherlands Austria Poland Portugal Finland Sweden United Kingdom Turkey 2005 2010 2011 2012 2013 14.9 14.6 14.5 13.1 13.1 12.9 : 7.1 8.5 10.8 10.4 10.4 : 15.4 15.0 29.3 29.7 30.4 16.3 16.0 15.6 9.8 10.7 10.7 24.0 22.7 22.5 11.8 14.2 14.3 11.7 11.3 11.4 20.0 18.8 18.8 20.0 17.5 16.6 11.7 12.3 12.5 : 9.4 9.1 12.3 13.3 13.5 : 24.3 23.4 14.6 13.1 8.4 10.5 14.8 31.4 16.3 10.6 22.4 14.7 11.1 18.5 16.8 12.6 8.8 13.9 22.7 14.5 13.8 8.9 10.1 15.5 32.0 16.9 10.3 22.3 15.5 11.1 18.2 16.9 12.5 9.0 14.0 22.1 Source: stats.oecd.org

Small Businesses & Self-Employed Both Characteristics play a Significant Role within Informal Economy Labour Regulations have been designed more for Large Firms Many Small Firms Benefit from Omissions in the Laws & from the Difficulty that the OfficialAuthorities have in Enforcing Them The rate of Self-Employment within Total Employment can been seen as an indicator of undeclared work (Schneider, 2011) Undeclared Work Represents A Starting Point for Entrepreneurs Launching their Enterprises

Survey Methodology

Previous surveys on Labour Flexibility Kufidu and Michail (1999 & 2003) carried out with twenty two manufacturing firms employing < 200 employees Papalexandris (2000) during Cranet survey studied flexible working practices from 10 multinational large scaled firms Voudouris (2004) examined the use of temps & contractors as forms of flexible employment from 75 companies National wide surveys conducted by Research Employment Observatory (OEAD) in 2000 & by Institute of Employment (GSEE) in 2002

Methodology The SAMPLE Four (4) prefectures in Greece studied (Thessaly region) Chamber of Commerce & Industry was selected as the source of our data (for each of the four prefectures) In order to have a representative sample of businesses, a proportional stratified sampling was chosen The sample was chosen from the total number of businesses of the databases and its stratification deals with the main business activity and the prefecture

Methodology (2) The QUESTIONNAIRE & INTERVIEWS Funding derived by the ESF to run a survey in Central Greece Our methodology is based on international standards and makes this survey unique / Design of the questionnaire was based on Workplace Employment Relations Survey (WERS) by UK Data collection took place in 2007 337 firms visited 226 questionnaires administered (67%) In depth interviews with manager/owner/accountant provide mainly quantitative information The strong points of our study are (a) the inclusion of micro- enterprises in the sample (b) the idea of researching family workers

Greek Employment Evidence based on Workplace Survey (2007) Funding derived by the ESF to run a survey in Central Greece 293 firms visited 226 questionnaires administered (67%) Our methodology is based on international standards and makes this survey unique / Design of the questionnaire was based on Workplace Employment Relations Survey (WERS) by UK Similar questionnaire /survey has not been carried out in Greece The strong points of our study are (a) the inclusion of micro- enterprises in the sample (b) the idea of researching family workers

Data for businesses & employment Comparisons of Thessaly with Greece No of businesses per prefecture (%) in Greece (%) in Population of Thessaly represents almost 7% of the total population in Greece & 5.5% of the total business population. Prefecture Enterprises Thessaly GREECE Karditsa Trikala Magnisia Larissa TOTAL 879 377 7 642 8 113 15 568 16 876 48 199 100 0.87 0.92 1.77 1.92 5.48 15.86 16.83 32.30 35.01 100 Distribution (%) of businesses per employment size Businesses per Employment Size Thessaly Greece 90.3 up to 5 employees 6 to 10 employees 11 to 49 employees 51 to 500 employees >500 employees TOTAL 92.8 5.8 1.2 0.1 High percentage of the workforce work is occupied in the retail and wholesale sector 5.9 3.4 0.3 0 0 100 100

Greek Employment Evidence based on survey

Employment Distribution(%) by Workplace 80 67 Percentage (%) of Workplaces 60 40 30 20 1.1 .97 .064 .13 0 2-4 5-9 11-19 20-49 50-99 100+ Base: All workplaces with 2 or more employees. Figures are weighted and based on responses from 206 firms.

(Percent of Workplaces) Distribution by Employment Type Distribution by Employment Type Workplaces with more than 11 employees Distribution by Employment Type Workplaces with less than 10 employees Types of Employment Types of Employment 80 68 60 48 per cent 40 36 20 13 12 7.1 6 5.6 3.2 1.8 0 OECD (2006) Employment Outlook Short-time Full-time Part-time Temp-time Family empl. Graphs by vsmall

Descriptive Findings of the survey Source and Notes: Figures are from the Thessaly Employment Relations Survey (TERS). Survey weights have been used to calculate the percentages of workplaces employing family members. The oversampling of larger workplaces in the TERS can be seen clearly here

Descriptive Findings of the survey Source and Notes: Figures are from the Thessaly Employment Relations Survey (TERS). Under full-time contracts - in the first three rows we see remarkable differences between small and large workplaces

Descriptive Findings of the survey Source and Notes: Figures are from the Thessaly Employment Relations Survey (TERS). A combination of young and female seems to be a major problem in the Greek labour market because females present an extremely low percentage. In addition, old aged are considered skillful and trustworthy and thus end up continuing to work for the same owner until retirement

Descriptive Findings of the survey Sources: TERS 2007 - Notes: Survey weights are calculated all percentages. Part-time is defined when employees work shorter than the normal hours (40 hrs) per week The overtime figures are approximate, interpolated from categorical answers. Note the WERS 1998 figures refer to a sample which excluded public limited companies which were not asked the family ownership question (whether a single individual or family has a controlling interest over 51% ownership over this company)

The Labour Inspector Small < 11 11 or more a) Workplace consulted with Labour Inspector before workforce reduction (% of workplaces with reductions) 24 52 a) Labour Inspector gives advice on dismissals (% of workplaces asking advice from inspector) 31 70 a) Labour Inspector gives advice on temps (% of workplaces asking advice from inspector) 29 38 b) Hiring/firing laws are an obstacle to recruitment (% strongly agreeing or agreeing) 52 45 b) Labour Inspector easily gives permission to employ temps (% strongly agreeing or agreeing) 33 39 b) Temp workers are to be preferred because they are easier to fire (% strongly agreeing or agreeing) Sample numbers 10 10 126 80 Notes: a) Rows are answers to questions with a simple yes/no answer. b) Rows are derived from questions of the form I would like to find your views on aspects of labour regulation , scored on a Likert scale ranging, 1=strongly agree, 2=agree, , 5=strongly disagree 31

Advice on Employee Relations - TERS contrasted with WERS Sources of Advice on Employee Relations TERS - advice over past 24 months Small, < 11 62 27 WERS 2004 advice over past 12 months Small,< 11 18 17 11 or more 69 52 11 or more Accountant Lawyer 6 34 Management Consultants 4 17 9 17 Labour Inspectorate 20 58 NA NA Public Employment Services 37 49 NA NA Social Insurance Institute 24 44 NA NA Chamber of Commerce & Industry 21 19 NA NA DTI or govt dept NA NA 28 59 Employers Association 5 12 3 4 Advisory and Conciliation Service NA NA 18 46 No advice Sample numbers 21 126 15 80 49 278 25 1985 32

Pay Determination Small, < 11 11 or more a) Determinants of pay in workplace (% of workers in the workplace): National or sectoral wage agreement 59 82 Enterprise agreement 14 5 Individual agreement 26 12 b) Percent of workplaces in which pay of majority is determined by national or sectoral agreements 52 81 33

Wage Distribution of Employees Gross wage categories (in 2007 Euros per year) Small, < 11 11 or more a) Distribution of pay in workplace (% of workers in the workplace): 11,000 (= gross minimum wage) 11,001 13,500 13,501 18,000 18,001 23,000 23,001 30,000 More than 30,000 64% 36% 25 7 0.5 1.3 1.5 42 17 1.5 1.5 0.5 b) Percent of workplaces in which pay of some workers is at or below 11,000 65 31 34

Conclusions

Conclusions The most important factor that should be considered in the mapping out of a policy for the Greek labour market is the size of a company Significant differences between micro & large workplaces on employment types, concentrating on family employment (35%) Family firms are mainly sole proprietorships which present higher flexibility/informality , mainly related to informal work Temporary employment was the only source of flexibility open especially in the large size companies

Conclusions (2) Survey and Figures confirmed that flexible employment is used less in Greece, when compared to the rest of Europe Flexible Employment Contracts are a means to fight the unemployment rates in those groups that are most severely affected However, the legalization of Flexible Employment drives employers and probably employees in the Informal Employment

Conclusions (3) Consistent with dual economy theory and the conceptualisation of Flexible Employment in Greek literature, - part-time and temporary employment are in fact forms of secondary employment and illustrate numerical flexibility in the Greek labour market, - while, telework and work from home are forms of low usage and they are extremely rare in Greece In sum, firms, which cannot afford the national wage rates , attempt to escape these standards by employing temps (the large ones) and family workers (the smaller ones)

Thank you!