Empty pockets knocked down turnovers in the market – 2024-02-23 08:55:50

The government raised workers’ nominal wages but made them poorer as the cost of living in Greece crushes their incomes

Anyone who listens to Kostis Hatzidakis or Pavlos Marinakis may believe that the Greek economy is going to hell thanks to the “liberal” politics of the ND. After all, evidence is cited. For example, as soon as ELSTAT published the December 2023 unemployment figures and the Ministry of Labor the Ergani information system figures for 2023, Hatzidakis and Marinakis cited as a sign of the government’s economic success the reduction of unemployment to 9.2% in December 2023 compared to 11.7% a year ago, the creation of 47,246 new jobs in the private sector in 2023 and an increase in the average salary by 6.4% in 2023, from 1,176 euros in 2022 to 1,251 euros last year .

Government officials certainly concealed or avoided any further reference to the more detailed data of the Ergani system, which show that:

01 The reduction of unemployment on paper goes hand in hand with the deterioration of the conditions in the labor market, as the new jobs that are created are part-time with hunger wages of 300 and 400 euros.

02 The working poor remain the norm for the country as one in four earns less than 800 euros a month, one in eight earns less than 500 and one in two earns less than 1,000 euros gross, which means less than 880 net.

Salaries in the private sector in 2023

Specifically, according to the data of the Ergani information system that captures the jobs and wages in the private sector, in 2023 the workers employed in the private sector amounted to 2,296,845, with an increase of 2.1% compared to the previous year, as they were created 47,246 new jobs.

Regarding their salaries, Ergani data showed for 2023:

• 284,134 employees (12.37%) had monthly salaries of up to 500 euros.
• 425,578 workers (15.53%) received between 501 and 800 euros.
• 423,319 workers (22.78%) received between 801 and 1,000 euros.
• 373,163 workers (16.25%) received between 1,001 and 1,200 euros.
• 257,574 workers (11.21%) received between 1,201 and 1,500 euros per month.
• 208,623 people (9.08%) had earnings between 1,501 and 2,000 euros.
• 224,444 workers (9.77%) had a salary of more than 2,000 euros per month.

To support a picture of an improvement in wages, the Ministry of Labor also released comparative data for the years 2022-23 wages which showed:

In 2023, the number of employees who had a salary below 500 euros decreased by 52,266 people compared to 2022, and the number of employees paid with salaries between 501 and 600 euros increased by 6,707 people.

In 2023, the number of employees paid with a salary between 701 and 900 euros decreased by 163,610 people and the number of employees with a salary between 901 and 1,000 euros increased by 82,575 people.

But what exactly do these and the rest of the Ergani system numbers show? They show that there was indeed little improvement through 2023 for those at the bottom of the wage ladder, that is, those working part-time or shift work or full 40 hours but paid the minimum wage due to the 9.4% increase in the minimum wage from April 2023 at 780 gross.

They show that the increase in the minimum wage in 2023 did “pull” all wages upwards but moderately, as the average pay in the private sector stood at €1,251 against €1,176 in 2022 with an increase of 6.4%, about two-thirds of the increase in the minimum wage which increased by 9.4%.

They show that despite all this, 1,132,031 workers, i.e. half of the employees of the private sector in Greece (50.56%), were paid with a salary of up to 1,000 euros in 2023, which means – as these amounts represent gross earnings – that half of private sector workers in Greece are paid a salary of up to 880 euros at a time when the country is facing an explosive problem with the rising cost of living.

Falling real wages and living standards

But the biggest problem with all these supposedly positive numbers for wage increases recorded in 2023 is that they concern nominal wages, not real wages, for which the GSEE Labor Institute (INE/GSEE) in its interim report on Greek economy in 2023 points out that they are still being compressed due to high inflation, respectively compressing the purchasing power and living standards of workers.

For the salaries of 2022, the INE/GSEE had calculated that due to high inflation the increase in the minimum wage by 9.7% on a nominal basis translated into a decrease in the real wage by 3.4%, while the increase in the average net annual income from wage by 1.43% in nominal terms translated into a decrease in average net real wage income of 11.62%.

For the wages of 2023, the INE/GSEE has not yet done the same work, in its interim report, however, it notes that in 2023, despite the nominal increases, there was a compression of real wages due to high inflation, especially of food, which three years 2020-23 reached a total of 32.1% but also housing, energy and transport.

As is well known, food absorbs a large part of consumer spending, especially of households with low and medium incomes, reducing the real wages they receive, and the worrying thing according to INE/GSEE is that the problem persists this year as well, as based on the December data the food inflation remains high in Greece, at 8.9% – it is indeed the second highest among the EU-27 member states.

The actual impact of precision on household living standards depends on how it affects their consumption patterns, INE/GSEE notes, and despite the fact that increases in the minimum wage from 2022 onwards combined with benefits ND policies (current, market pass) limited to some extent the negative pressures exerted by inflation on the consumption of mainly the most vulnerable households, there was a deterioration in the standard of living for households with low and middle incomes and it was recorded as a restriction on their consumption .

Specifically, as the INE/GSEE shows using data from the ELSTAT Family Budget Survey, between 2021 and 2022 the households that had the lowest expenditure on energy reduced the average monthly amount of energy they consumed (main residence heating, gas, electricity) and yet their expenditure increased in excess of that of the rest of the households, while the same was true of many staple foods.

Poor and middle-class households both reduced the amounts of food and energy they consumed and paid a much larger share of their income for their reduced consumption. Because it is quantities that ultimately determine the standard of living, the INE/GSEE concludes, the conclusion is that there is a serious deterioration in the standard of living of the largest share of low- and middle-income households, and that a gap has been created in the level of well-being between the lowest and middle incomes on the one hand and higher incomes on the other.

Stagnant consumption from 2022

Citizens cut markets wherever they can, as trade representatives point out

The sustained fall in real wages due to high inflation that started in 2021 – despite the limited rise in nominal wages has not yet been halted – is leading to changes in consumer behavior. It goes without saying that when food, housing, electricity and transport cost too much and wages are low, there is no money left for clothes, shoes and other similar purchases.

According to the INE/GSEE interim report, real consumption remains stagnant from the first quarter of 2022 due to accuracy and leads to major changes in consumer behavior, which were recorded in the latest survey of the Consumer Goods Retail Research Institute (IELKA), with sample of 1,000 consumers in November 2023.

The IELKA survey showed that the great majority are struggling to save money by cutting where they can because the month is not coming. Three in four (75%) have cut back on entertainment, one in two are putting off maintenance and repair work (52%) or cutting back on food (55%), one in three (28%) are drawing money from savings – whoever has to cover their needs and one in three (28%) – who have no savings – postpone paying bills or don’t pay at all.

Under these conditions, the blow to purchasing power turns into a blow to retail trade, as characteristically shown by the disappointing turnovers made by commercial enterprises in January, the first month of sales, and the comments of representatives of the commercial world.

According to a survey by the Piraeus Chamber of Commerce, six out of ten commercial businesses reported a drop in sales, which for the majority reached up to 20%, two out of ten businesses reported that they had turnover at the same levels as last year, while only two out of ten businesses reported an increase in sales even a small one.

“The first month of the sale was spent with an eye on precision food and with buying traffic in the rest of the retail trade moving with an inflationary rise in turnover. Although discount rates range from a high of 40-50%, lower value purchases were nevertheless made as the strain on household finances led to cuts in essentials and lower value goods. A lot of people passed by the shops of Attica, but the shops that opened on Sundays did not have the expected sales”, said Vassilis Korkidis, the president of the Chamber of Commerce and Industry of Piraeus and the Chamber Council of Attica, summarizing the situation.

Makis Savvidis also spoke about the brake on sales and sluggish movement in the market with the root of the evil “the limited disposable income of consumers”, giving the picture on behalf of the Trade Association of Athens. “Consumers are restrained in their purchases because there is no disposable income, after the big rise in prices of basic necessities and rents,” he said.

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