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The three ‘thorns’ that limit the further rise of minimum wage

REUTERS/Hannah McKay

Productivity, job vacancies and inflation are the three big “thorns” that limit up to 4% (811 euros) the proposals to increase the minimum wage in the private sector.

In the separate memoranda they submitted to the Ministry of Labor, the Bank of Greece, IOVE and KEPE underlined that the impact on business productivity must be limited, while they also made special reference to the next wage category, which they also estimated will be affected upwards, especially in sectors with many vacancies.

At the same time, they pointed out that especially small businesses (with fewer than 10 employees), which are the backbone of the Greek economy, will be disproportionately burdened by any increase in basic salaries in the private sector, as in them, proportionately, more workers are paid the lowest salary limits.

More specifically, the Centre for Planning and Economic Research noted in its memorandum, after the minimum wage increase by 9.4% in 2023, employment in small businesses was limited to 0.94% due to minimum wage and inflation, while it amounted to 2.97% in larger ones. All scientific organizations, however, admitted that the Greek economy is moving upwards, which should not be affected by a very large increase in basic salaries.

However, they found that there is indeed a large burden on households due to inflation, especially in the food sector, which affects the low-wage earners the most, i.e. those who are paid the minimum wage. In fact, they amount to 23.9% of all employees in the private sector, despite the fact that their number was reduced after the successive increases in the basic salary from 2018 onwards (with a two-year break 2020-2021 due to pandemic).

The report of the scientific organizations focused mainly on job vacancies affecting the Greek economy, more so during the last two years, due to the reduction of unemployment. The most serious problems are located in construction and tourism, followed by manufacturing and trade (BoG).