Reforming the labor market in Greece was top priority of all three Economic Adjustment Programs the country had to endure to exit its debt crisis (2010-2018).
The emphasis on the labor market was dictated by the fact that the Greek labour market traditionally suffered from
- low productivity
- low participation rate
- high unemployment
- high tax wedge
- low use of flexible employment forms and
- high share of self-employed.
Two major labor market reform laws in 2012 and in 2014 tried to amend these weaknesses, causing angry reactions from labor unions and social turmoil.
So what did they leave behind?
The Hellenic Observatory’s GreeSE Discussion Paper Series by the London School of Economics and Political Science (LSE) published its Paper on “the Impact of Labour Market Reforms in Greece during 2010-2018”.
Its main conclusions:
“From a micro-founded analysis” the Paper says “while the 2014 reduction in social security contributions positively affected incentives for official sector labour participation, those appear to have decreased cumulatively during the overall programme period.
From a top-down macroeconomic perspective, findings suggest that Greece’s 2012 labour market reforms
- had a positive impact on reducing Unit Labour Cost (ULC),
- increasing the use of flexible forms of employment,
- slowing down unemployment rate dynamics and
- slightly accelerating employment growth trends.
At the same time, it appears that the 2012 reforms
- did not improve labour participation rates,
- while they increased average working hours and inequality .”
“Despite the magnitude of policy interventions in the labour market” the Paper continues, “the unemployment rate in Greece increased significantly during the crisis, peaking at around 27 percent in 2013, while only gradually fading out since then, with a negative impact on productivity, poverty rates and inequality indicators.”