Last week, 7.11.24 the official annual record of the European Union Wage Survey was announced by Eurostat with the latest annual data (2023).
The average wage in the EU is €37863 (an increase of 6.24% compared to 2022).
The picture is disappointing for Greece. The average annual salary in Greece is 17013 Euros, which puts us in third place from the bottom (we are only outperformed by Bulgaria and Hungary). But at the rate we are going ( increase in Greece 3.69%, Bulgaria 13.66 % and Hungary 17.46 %) we are quickly heading for last place.
The sad thing is that Greece is the only country in the EU where the average wage is lower than before the crisis (2009).
The above was reported by many media. But I don't think it gives the full picture.
I was struck by the following: ¨How can we have such a mess when the economy in general is growing, faster than the EU's growth rate in recent years (another debate what kind of growth is this and whether it is sustainable)?;
An investigation is therefore attempted, summarised below in the second graph comparing GDP and wage growth rates in the EU and in 3 selected countries (Germany, Greece, Portugal). I have chosen to focus on the period just before the pandemic (2019) until today (2023) to see what happened (Eurostat data processed for the study).
Let me explain. I use the CAGR % (combined real growth rate) indicator which shows the evolution of a quantity (wages, GDP per capita, etc.) over a period, in our case 2019-2023.
The average EU salary goes from 32799 Euros in 2019 (with a slight decrease in 2020) to 37863 in 2023. The combined annual growth rate is 3.7%.
Similarly, GDP per capita goes from 31640 Euros to 38130 Euros, i.e. a combined annual growth rate of 4.8%.
We note that while the economy was growing at a rate of 4.8%, workers got only 3.7%. I call the relationship between these two (wage growth / GDP growth) (for lack of a better term) the (re)distribution coefficient (%). When this coefficient. is above 100% it means that workers get a larger share of the growth «pie». When it is lower they get a smaller one.
In the case of the EU this ratio is 76,9%. I.e. workers got only 76.9 % of growth. While apparently others (mainly corporate profits got more than 100%). In some cases there is also redistribution via taxes.
You will see in the table the relevant figures for Germany (distribution 84.6%) , Portugal (107.4%) and Greece (only 29.4%)
Comments
In the EU and in all countries there is a significant improvement in wages. Greece is an exception with the average wage in 2023 evolving at a rate of 1.6% over the four years
In the EU and in most countries there is a slight redistribution at the expense of labour (and above profits) (this is true for most countries not shown here for brevity). In some countries (Portugal, Belgium, Czech Republic, Estonia, etc.) the distribution is in favour of workers (coefficient above 100% (only Portugal is shown here for brevity because it shares characteristics with Greece. In the others there is negative redistribution with rates usually between 80-90%.
In Greece the distribution in favour of wages is 29% the lowest in Europe. Second worst is Malta with 42% and 3rd worst is Italy with 45%.
We observe that in Greece, more than in any other country in the EU, there is an «unfair» transfer of wealth at the expense of working wage earners (and not only). The main winners are:
Α. The profits of companies (which reach incredible sizes e.g. the taxable profits of legal entities in 2019 were 14 billion and in 2022 25 billion Euro, annual growth rate 21% - data of the Greek Tax Authority) and
Β. Taxes (as everyone knows first hand) from 51.4 billion in 2019 skyrocketed to 61.65 billion in 2023, an annual growth rate of 5% (AADE data)
To remove the injustice, wages (and pensions) should be increased faster than growth to return to decent levels. For a country like Greece, this is a matter of survival for both wage earners/pensioners and for small businesses which, quite simply, if there is no disposable income for consumers, risk closing down.
Unfortunately, in Greece, in the era of the memoranda and after 2019 (when there are no monetary commitments) the legislative environment tends to facilitate this injustice. E.g. the memorandum provision of setting the minimum wage administratively by the state is maintained, as it should not be, collective agreements are not mandatory, etc.
To begin with, in my opinion, collective bargaining between workers and employers on both the minimum wage and sectoral agreements should be liberalised. These should be compulsory for all. It is not possible for some people to invoke the free economy but for the remuneration of work to be (disparagingly) interfered with by the state.
Finally, obviously the tax scales should be (at least) indexed so that taxes do not eat up all the wage increases.
It is obviously a matter of political will and choices of the rulers. But at least we the people should know and act accordingly.
