The Impact of the Financial Crisis on Wages and Salaries in Greece: A Comprehensive Analysis
During the financial crisis in Greece, which began around 2009, wages and salaries experienced significant declines. This period was marked by severe austerity measures, high unemployment rates, and economic contraction, all of which played major roles in the substantial decrease in real incomes across various sectors.
Austerity Measures and Public Sector Cuts
To address the budget deficit and reduce public spending, the Greek government implemented significant austerity measures. These included substantial cuts to public sector wages and pensions, which were part of broader austerity packages (Figure 1).
Unemployment and its Impact on Wages
The financial crisis resulted in soaring unemployment rates, reaching a peak of around 27% in 2013. High unemployment rates placed downward pressure on wages as many workers were willing to accept lower pay just to secure employment.
Private Sector Wage Cuts
In addition to the public sector, the private sector also faced wage reductions. Many companies adapted by reducing salaries, and the minimum wage was slashed by about 22% in 2012. For younger workers, the cut was even steeper, reflecting a broader trend of economic instability among this age group (Figure 2).
Economic Contraction and Reduced Demand
The Greek economy contracted significantly during the crisis, leading to a reduced demand for goods and services. This factor further affected wages and employment, creating a ripple effect throughout the workforce (Figure 3).
Economic Hardship and Widespread Instability
As a result of these factors, many workers in Greece experienced a substantial decrease in their real incomes. This period led to widespread hardship and economic instability, impacting not only individuals but also families and communities (Figure 4).
Specific Salary Examples
Between 2008 and 2017, the salary for a junior system engineer in the private sector saw a notable decline. In 2008, this position was compensated with 1500€ while in 2017, the salary ranged between 1200€ – 1300€ (Figure 5).
The impact of the crisis was felt across several sectors, beginning with the public sector, moving on to pension payouts, and finally, affecting the private sector. Losses in these areas are estimated at between 20% - 50% of pre-crisis numbers.
Affected Generations
The financial crisis not only affected the current workforce but also significantly impacted younger generations. Prior to the crisis, people complained that the younger generation was underpaid, leading to phrases such as "The 800€ Generation." Just before the first cuts, a TV series was being written about young Greeks, meant to be titled "The 700€ Generation." When it was finally aired in October 2010, it was renamed "The 592€ Generation" (Figure 6).
Additional Economic Pressures
A reduction in gross and net salaries was exacerbated by increases in insurance premiums and taxation. Additionally, the creation of "flexible positions" and "work mobility" further put pressure on the salaries, even if the official unemployment numbers were reduced.
It is essential to understand that the financial crisis did not focus solely on the monetary aspect of employment. The reduction in salaries may not have fully supported individuals' living conditions, but the act of being employed itself was crucial in maintaining a semblance of normalcy and sustaining official employment rates.
Conclusion
In conclusion, the financial crisis in Greece had far-reaching and profound effects on wages and employment. These changes were not limited to a single sector but spread across various sectors, including the public and private sectors. Understanding these impacts is crucial for policymakers, stakeholders, and individuals seeking to navigate and recover from similar economic downturns in the future.