Greece. Labor market reforms
1. There should be no backtracking on recently passed labor market reforms. The mission welcomes the social dialogue as a means to consult with social partners, and to address the remaining challenges in the labour market. The labour reforms introduced in March, including the needed re-alignment of wage floors, need to be preserved well beyond the present round of social dialogue, and the government should act accordingly to ensure this.
2. The government should take the next steps towards better functioning labour markets and employment creation (Table 1):
• The framework for setting the minimum wage needs to be overhauled to help ensure that wage dynamics support full employment. After the measures taken in February to re-align wage floors, the objective—as agreed in the programme—should be to adopt a timetable for establishing a single-rate statutory minimum wage on a permanent basis legislated by the government after consultation with social partners. This system should provide a basic floor for labour income.
• Non-wage labor costs and barriers to employment must be addressed to support competitiveness and alleviate the pressure on wages:
➢ The labor tax wedge should be reduced. Concrete measures should be proposed to reduce social contribution rates by 5 percentage points in a fiscally-neutral manner (as envisioned in the second programme).
➢ Other non-wage labour costs which ultimately affect entry and exit costs should be reviewed and reduced, taking into account the effects of recent labor market reforms.
➢ Excessive regulatory burdens should be reduced, while regulatory effectiveness should be increased. These include cumbersome data reporting to and approval requirements from the labour inspectorate. A comprehensive strategy is needed to reform the labour inspectorate. A roadmap should be adopted and an independent assessment of Labour Inspectorate by international experts contracted, covering mandate, activities, structure and the enforcement and penalty structure for infringements of labour law (including undeclared work) consistent with the principle of proportionality. The government should be ready to promptly take the needed corrective actions soon after that.
➢ Work schedules can be made more flexible. Required actions include increasing the maximum number of weekly workdays, new modalities of working time and daily working hours arrangements and take up of annual leave. Revising labour legislation for specific sectors or professions within the context of product and service market reforms is necessary to help the latter reforms to succeed.
➢ Unemployment is too high, and policies are needed to prevent it from becoming structural. The ESF can provide resources which can be used to help integrate the unemployed into those economic sectors with higher growth potential. The procedures related to ESF schemes (i.e. those combining work and training together with the social work programmes) should be completed as soon as possible, with a view to begin implementing the schemes by end-September.
Table 1. Greece: Labor Market Reforms
Area: Wage setting
Measure: Overhaul framework for setting the minimum wage:
• Adopt a timetable for establishing a single-rate statutory minimum wage legislated by the government after consultation with social partners.
• New system should provide a basic floor for labour income which ensures that wage dynamics support full employment.
• Consultation with social partners should be on designing the mechanism, and must not lead to an increase in the minimum wage adopted under the EFF until unemployment rates are low.
Area: Non-wage labour costs
Measure: Propose measures to lower social security contribution rate for employers by 5 percentage points in a deficit neutral manner:
• Adjust pensions (with protection for low-income pensioners).
• Broaden the base for contribution collection.
Reduce administrative burden to employers and employees related to cumbersome reporting and preapproval requirements:
• Remove existing requirements for submission of working schedules, notification and/or pre-approval by labour inspectorates of overtime work, compensatory work time arrangements, and rotational work.
• Adopt a roadmap for the gradual increase of electronic record keeping and for reporting by employers to the Labour Inspectorate, with full digitization of relevant data on labour arrangements by end-2014.
• Accept electronic signatures in electronic submissions to the Labour Inspectorate.
Review and reduce high entry and exit costs to bring them in line with the practice in other EU countries, taking into account the effects of recent labour market reforms.
Area: Flexibility of labour arrangements
Measure: Increase flexibility of work schedules:
• Increase the number of maximum workdays to 6 days per week for all sectors.
• Set the minimum daily rest to 11 hours.
• Delink the working hours of employees from the opening hours of the establishment.
• Eliminate restrictions on minimum/maximum time between morning and afternoon shifts.
• Allow the consecutive two week leave to be taken anytime during the year in seasonal sectors.
Area: Effectiveness of Labour Inspectorate
Measure: Adopts roadmap and contracts an independent assessment of Labour Inspectorate covering:
• Mandate, activities and structure.
• Enforcement and penalty structure for infringements of labour arrangements (including undeclared work)