The government often mentions among its achievements that the wages of workers in our country have increased, especially in its successive decisions to increase the minimum wage. Instead of report of the Bank of Greece on Monetary Policy 2023-2024highlights the asymmetric change in salary distribution between the years 2016 and 2023 and points out that there may be a successive increase in the minimum wage, but stagnation prevails among the highest salaries.
According to the Bank’s analysis, wages for more skilled workers, who are generally at the higher end of the distribution, have not increased. As it specifically mentions, in real terms, there are wage increases of low wage jobs, while in the highest paid jobs (more than 1,650 euros in 2016) there are significant reductions. The wage increase is more moderate in small businesses (employing up to 10 employees) in low-wage jobs, while for high-wage jobs there is a decrease of about 10%.
Low wages are a barrier to Brain Regain
One of the policy priorities set in recent years is to provide incentives for the return of Greeks who left abroad to find work during the crisis (especially after 2010). According to the relevant research of the Brain Regain initiative, the main obstacle to return to Greece for almost 1 in 4 Greeks living abroad is low wages and working conditions. Consequently, the improvement of wage conditions in the labor market is the main motivation for the repatriation of workers who left Greece, who are often skilled and highly qualified. Also, recent surveys highlight the great difficulties companies face in finding qualified personnel. Therefore, due to the increased demand for skilled personnel, we can expect to see an increase in wages for these workers.
Using data from the annual censuses of the information system (P/S) ERGANI for employees with private law employment relationships, Chart A shows the evolution of the distribution of wages for full-time private sector employees between 2016 and 2023. During this period, the wage distribution shifted to the right, mostly for lower-paid jobs. This finding is linked to the increase in the minimum wage because at this time the priority is to stabilize the minimum wage, so that households can cover their basic needs. The cumulative increase in the minimum wage from 2016 to 2023 is about 33%. The increase in the minimum wage also has a positive effect on the higher wage scales, with a reduction in the rate up to the level of 1,100 to 1,200 euros (diffusion effects). However, at higher levels of gross pay, where more skilled workers are usually found, the shift in distribution is very small.
Developments in the distribution of low and high wages
Of particular interest is the evolution of wages over time by focusing on occupations with similar employer and employee characteristics and comparing their wages between the years 2016 and 2023. The left graph of Chart B shows the distribution of wages for full-time workers with high wages. to 850 euros in 2016 and the distribution of wages for the same categories of workers in 2023. The rightward shift in distribution, ie the increase in wages for low-wage jobs in 2016, is clear and largely due to successive increases in the floor salary as explained above. On the contrary, for jobs with a salary of more than 1,650 euros in 2016, the main finding is that there are no significant changes between the years 2016 and 2023.
It also appears that a small fraction of high-paying jobs in 2016 receive lower wages (less than €1,650) in 2023. This is likely due to the replacement of some workers by others lower wages or to new employees in similar jobs who receive lower wages.
Fee changes
From the diagrams above, it can be seen that the evolution of wages over time differs between the individual scales of the general distribution. Specifically, for low-wage jobs (up to €850 in 2016), controlling for employer and employee characteristics, the average rate of change in nominal wages is 26.9% from 2016 to 2023 .
In contrast, high-wage jobs (over €1,650 in 2016), again controlling for employer and employee characteristics, had an estimated average increase in nominal wages of 0.7%, which means that in average wages remain unchanged. Considering that during the period 2016-2023 the price level based on the Consumer Price Index has increased cumulatively by about 16%, it follows that, in real terms, there will be increases in wages in low-paid jobs, while in higher paying jobs (more than 1,650 euros in 2016) there are more reductions. The increase in wages was more moderate in small companies (employing up to 10 workers) in low-paid jobs, while in high-paid jobs there was a decrease of about 10% (see Table 1 ).
In large companies, it was observed that for high paying jobs, the increase was very small. In particular, a job that pays 1,750 euros in 2016 in a company with more than 1,000 employees, in the same industry, for the same profession, with the same type of contract, with employees in the same age group , with the same gender, full-time work in 2023 is paid with an average of 1,781.50 euros. In real terms, in 2023, due to inflation, the payment will be around €1,495 (a 16% reduction).
Using the same method, a job that in 2016 was paid 750 euros, in 2023 was paid an average of 975 euros nominally, while in real terms the salary was 819 euros (an increase of 9.2%).
Wage changes in low-wage jobs are greater than in high-wage jobs, regardless of worker age. The wages of workers aged 15-24 increased by 37.6% during the period 2016-2023, while the increase of workers aged over 65 was correspondingly high (40.4%).
However, for high-paying jobs, the results are different. The increase in wages was observed only in the youngest age groups, 25-34 and 35-44 years. For the over 45 age group the corresponding occupations will have lower nominal wages on average in 2023 compared to 2016.
This may be due to the gradual retirement of workers with higher statutory salaries (for example due to “three years”) before the memorandum and they are replaced by younger workers.
Conclusions
The analysis of the data of P/S ERGANI highlights the asymmetric change in the distribution of wages between the years 2016 and 2023. The successive increase of the minimum wage, accompanied by the stagnation of the maximum wage, led to a compression of the distribution towards the center with a slight shift to the right. The findings of the analysis lead to the conclusion that wages do not increase for more skilled workers, who are usually at the higher end of the distribution.
Therefore, to the extent that workers’ incentives to return are affected by wage levels, in recent years the appropriate wage conditions do not seem to have been created to attract those who left the country in the last major crisis. In fact, attracting more skilled personnel became more difficult, as wages for the corresponding jobs eventually fell significantly in real terms due to inflation. Therefore, the country risks not only not being able to attract workers who migrated abroad during the crisis, but also continues to lose valuable human capital, which has a negative impact on development prospects. of technology and economic development.