In the debt crisis era, labor cost in Greece was attacked as one of the reasons of the country’s low competitiveness.
The loss of international competitiveness of the Greek economy was associated with a rapid increase in labor costs in the period up to 2009.

Under the three Economic Adjustment Programs, Greece cut drastically wages (both in the public and private sector).

Still, the export performance of the Greek companies did not meet expectations.

A recent study entitled: “Openness, Expοrts and Wage Environment in the Greek Economy” highlights the most important factors determining export behavior.

The writters, Τh. Kakoulidou, S. Kalyvitis, M. Katsimi, Th. Moutos, have come to the following conclusions:

  • the average export company pays its workforce higher wages than the average private sector company, and
  • the companies with the best export performance pay higher wages and the difference is more pronounced for the wages of the specialized workforce.

The average export company also employs a significantly smaller percentage of employees who are paid with the minimum wage.
That is why, according to the empirical analysis carried out in the context of the study, the reduction of the minimum wage in 2012 does not seem to have affected the export behavior of companies with employees who were paid the minimum wage.

Factors such as productivity, workforce quality, innovation, lending capacity and product promotion seem to be positively related to the companies’ export performance.

It is worth noting that after the labor market reform in 2012, there was a positive effect on the value of exports for all export companies, probably because the reform allowed export companies to deviate from the wages set out in the collective bargaining agreements.

The main conclusion that emerges from the present study is that the most decisive factor for export activity is the size of the company. Given that large enterprises export much more than small οnes, the existence of a relatively small number of large companies in Greece affects negatively the country’s export performance.

In this context, the study proposes the creation of a Greek ‘export chain’: Greek small and medium-sized enterprises (SMEs) can be suppliers of large export companies, which will form the ‘export hub’ for the promotion of Greek products worldwide. Thus, SMEs can become indirectly competitive as part of a wider production process by substituting part of the imports.

The full study, conducted with the support of the A. G. Leventis Foundation Research Chair at ELIAMEP, is available in Greek, here.