Ministry of Labour raises minimum wages on Brunel advice
The need
In 2008, Greece was affected by an economic crisis that produced an unprecedented recession and led to the introduction to a structural adjustment programme agreed by the Greek Government, the European Commission, the European Central Bank, and the IMF in 2010. As part of the programme, the Greek Government enforced a minimum wage reduction across all employees in 2012, which was larger for employees younger than 25 years. These reduced minimum wages remained in force until September 2018 when the structural adjustment programme was completed.
There was a need for new and robust evidence on the impact of minimum wages on the distribution of wages and employment. This was necessary, first because of the lack of up-to-date evidence on the impact of minimum wages on the Greek Labour market and second, to inform the recommendations of the experts’ committee on minimum wages to the Minister of Labour, Social Security, and Social Solidarity at the time, regarding the magnitude of the rise in the minimum wage. As suggested by the Minister, the ministry needed “new evidence on the potential impacts of the minimum wage, at a time when existing evidence was scarce, that could provide the ministry with a clear direction on how much the minimum wage should be raised”.
In 2018, the then Minister of Labour, Social Security, and Social Solidarity appointed Dr Georgiadis as an adviser on minimum wages, as the Government was looking for solutions to address low wages caused by the long-term recession.
The solution
Brunel experts used the most relevant data on wages, including a large sample of employees drawn from administrative social security records that contain information on all wage and salaried employees in Greece, and state-of-the art statistical/econometric methods to produce estimates of the impact of a range of the most recent changes in the minimum wage.
The outcome
- Increase in the minimum wage of 10.8% for those 25 years old or older and of 27.5% for those younger than 25. In monetary terms, this is an increase from EUR586, equivalent to GBP528 (12-2020), to EUR650, equivalent to GBP586 (12-2020), per month
- The increase has benefited approximately 15 to 20% of all private sector employees, which is equivalent to 400,000 to 600,000 individuals
- The increase has also benefited indirectly an additional 31% of all private sector employees (equivalent to 600,000 individuals), who are expected to receive wage increases despite the fact that their wages exceed the new minimum wage, as employers seek to maintain wage differentials between low-wage and higher-wage employees
- Moreover, the increase in the minimum wage has benefited between 200,000 and 300,000 individuals who receive social benefits, such as unemployment and maternity benefit as these benefits are increased in line with the minimum wage
- Employment grew by 125,000
- Brunel's research has enabled the Greek Government to address major social problems and, in turn, benefited some of the most disadvantaged people in the county by reducing the risk of poverty for approximately 1,300,000 individuals in the private sector who make up approximately 15% of the Greek population
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Case study last modified 23/11/2022