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High growth in Greece has failed to create new jobs

02/09/2003 12:37
The high growth rates of the Greek economy have not helped create additional employment, two studies show.

One study, by the Foundation for Economic and Industrial Research (IOBE), an affiliate of the Federation of Greek Industries (SEV) examines the period 1991-2002, not all of which was a high-growth period. The other, by the Employment Institute of the General Confederation of Greek Workers (GSEE) and the civil servants’ union (ADEDY) is part of its annual series of studies on the Greek economy.

The IOBE study shows that the country’s workforce, which includes all employed and unemployed actively seeking employment over the age of 15, has declined from 4,446,000 individuals in 1998 to 4,375,175 in 2002. This means that the workforce, as a percentage of the total population over 15, has declined from 50.95 percent in 1998 to 48.65 percent in 2002, the second lowest percentage among European Union members after Italy. The EU average is over 56 percent.

The factors for this low participation are the low participation of women in jobs and the early retirement of many people. Perversely, this helps keep the unemployment rate lower than it would be if more people were part of the workforce.

The Employment Institute’s study focuses on the increase in income inequality that higher growth brought and documents that inequality by region.

The IOBE study’s main focus is why high economic growth did not create new jobs. On the contrary, there is a negative correlation between economic growth and overall employment. In other European countries, this correlation is positive: In Portugal, for example, a percentage rise in the country’s gross domestic product (GDP) increases employment by 0.50 percent. In Ireland, the respective increase is 0.60 percent and in Italy, 0.71 percent. The IOBE study adds that this failure to create employment through growth holds true for the past 20 years. This is in contrast to what happened in the 1960s and the 1970s.

IOBE is not very optimistic,as far as future employment prospects are concerned, for several reasons.

First, employment in the agricultural sector will continue to decline. In other countries, especially Ireland, this decline was more than compensated for by employment growth in other sectors. Not in Greece.

Second, manufacturing will continue to modernize but will not be in a position to offer many additional jobs.

Third, the dynamic growth of construction firms, boosted by Olympics and other infrastructure projects, will not continue at the same pace.

Fourth, the concentration of economic activity will hurt self-employment.

Fifth, the State can no longer act as a bulwark against unemployment by hiring more and more people. There is general agreement that its role as an employer must be diminished.

These findings are especially pertinent in view of the prime minister’s pending announcement of his new social policies. What more can he offer people, unless he makes radical reforms in the way the economy works? The dilemma, especially acute now that we are a few months from an election will probably not be resolved this time.