Almost nine years since the onset of the Greek debt crisis, the country’s deep and prolonged recession has led to a substantial decline in ordinary financial activity and has swept away a quarter of Greece’s Gross Domestic Product (GDP), an aftermath usually observed in times of war.
The ongoing crisis has had an extremely negative effect on Greece’s labor market as well, as more than one million jobs have been lost (in a country of 11 million people). Unemployment has reached 27% – the highest percentage in the EU and more than twice the average in the Eurozone – and twice that among ages 15-25.
Besides the already-existing structural problems of the Greek labor sector, austerity measures have definitely played a significant role in the rise of unemployment; namely, in an attempt to reduce huge budget deficits, Greece had to implement a severe fiscal consolidation program by dramatically reducing government and public spending and implementing important reforms and restructuring procedures in practically all sectors of social, business, and economic life.
Extensive labor market reforms have been effected amid efforts to restructure the labor market, improve competitiveness, boost the economy, and thus reduce unemployment. Prior to the debt crisis, the Greek labor market was a highly-regulated market in comparison to the markets of other EU countries. Such enhanced regulatory activity continued post-crisis, as a series of legislative reforms were enacted in order to address market rigidities, obtain a higher degree of labor market flexibility, reduce the cost of wages, and encourage businesses to employ more workers, especially of younger ages.
Such reforms included, inter alia: Reducing the minimum wage, which was reduced even more for young employees (ages 15-25); reducing overtime costs; extending the probation period; reducing the severance payment upon dismissal; facilitating part time and rotation work; increasing the retirement threshold; and abolishing the requirement that governmental authorization be obtained for collective dismissals.
Such measures have had little impact on the overall unemployment picture, however, as the fundamental problem remains: The persistent lack of labor demand. Meanwhile, budget constraints and cuts in public spending stand in the way of expanding temporary subsidized public work programs (most of which are EU-funded), the majority of which are targeted towards young people.
In these circumstances, the situation seems bleak both for those who have managed to maintain their employment status and for the underemployed, who are floating in and out of low-paid, temporary, part time, or uninsured jobs.
Of course, the worst and most worrying problem is that unemployment is not simply an economic figure or an economic problem. It is foremost a serious social problem that tends to have a detrimental effect on individuals, often tearing into the fabric of society. Unemployment causes misery, poverty, and indebtedness, is catastrophic for people’s self-esteem, leads to depression, desperation, and suicidal thoughts, and wastes any potential they have. It is directly linked with increases in the crime rate. The longer people stay out of work, the more unemployable they become.
In contrast with the common pattern in other EU countries, in Greece, highly qualified persons holding university degrees have a higher risk of being unemployed or underemployed. That leads talented and highly skilled persons, especially young ones, to emigrate in search of a better future. As a result, Greece is not only faced with serious economic problems but also with a Brain Drain – suffering the loss of the most significant factor for economic growth and development: Its young, highly-educated workforce.
In the absence of a rapid and dramatic economic turnaround, an entire generation faces a grim future. Despite measures taken at different levels, it is clear that the ever-growing unemployment rate will not stop or slow down until the debt crisis is finally over and the economy stabilizes and improves.
By Georgia Konstantinidou, Partner, Drakopoulos
This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.