the Ministry of Labor announced the following information note on the increase of the minimum wage:
Following the announcements of the Prime Minister Mr. Kyriakos Mitsotakis for the increase of the minimum wage, we send you explanations on how things will be shaped after the new increase of the minimum wage, a. in the form of questions - answers and b. in the form of comparative tables.
1. By what criteria was it decided to increase the minimum wage by 7.5%?
The new significant increase in the minimum wage achieves a golden section between different needs. On the one hand, the mitigation of losses in the purchasing power of wages and the satisfaction of the reasonable expectation of employees to have a dividend from the growth achieved in 2021. On the other hand, the preservation of the competitiveness of the Greek economy and the avoidance of negative effects on employment and unemployment.
2. How is the new minimum wage formed and what does this mean for the employees' pockets?
The new minimum wage increases from May 1 by 7.5%, or 50 euros per month and stands at 713 euros per month, from 663 euros previously. Given that 14 salaries are paid per year, the annual benefit for employees from the increase is equal to an additional salary (50 euros for the monthly increase of 14 salaries = 700 euros). The monthly salary if the payment of 14 salaries per year is taken into account, amounts to 831.8 euros from 773.5 euros today. The nearly 650,000 workers who are paid the minimum wage will earn an extra wage each year. In other words, a 15th salary is henceforth added to their income.
3. Given that a 2% increase was given from 1.1.2022, how is the situation for the employee as a whole?
If we take into account the previous increase of the minimum wage that took place on January 1, 2022, there is an increase of 9.7%, or 63 euros per month (from 650 euros to 713 euros). Given that 14 salaries are paid, the benefit from the double increase of the minimum wage in 2022 is set at 882 euros per year (63 euros for 14 salaries).
In reality, however, the increase in the net salary is even greater and amounts to 11.81% if we take into account the reduction by 1.63 percentage points of the insurance contributions paid by the employees that have already been implemented. The cumulative annual benefit for an employee from the two increases of the minimum wage in 2022 and the reduction of insurance contributions amounts to 906 euros.
4. What will happen to the so-called "three years", ie the previous service of employees who are paid the minimum wage?
The current regime continues, that is, in other words, the "three years" continue to be paid. More specifically, the minimum wage and the minimum wage are increased by up to 30% depending on the years of service completed by the employee before February 14, 2012. Therefore the monthly gross minimum wage for employees with three years can be up to 213 euros higher (713 euros + 30%). In other words, the minimum wage, in this case, can amount to 926 euros plus Christmas, Easter gifts,s and leave allowance.
5. How does the increase of the minimum wage affect the allowances of OAED?
An increase in the minimum wage is dragging up unemployment benefits. Today the daily allowance is 16.29 euros and the monthly 407.25 euros. From May 1, they are set at 17.51 euros per day and 438 euros per month, respectively.
A number of aids and allowances are also adjusted based on the calculation of the minimum wage or salary. These include, but are not limited to, unemployment benefits for the self-employed, job creation schemes, special unemployment benefits, severance pay, special seasonal benefits for tourism and food workers, builders, foresters, etc. special maternity benefits, the parental leave allowance, the unpaid salaries due to the insolvency of the employer, the provision of availability, the compensation of the students in the Vocational Schools (EPAS) Apprenticeship of OAED, the compensation for the work experience programs, etc.
6. The government had promised that the increase in the minimum wage would double the growth rate, which in 2021 was 8.3%. An increase of more than 16% should therefore be approved in order to implement the pre-election commitments;
Indeed, in 2021 the economy grew at a rate of 8.3%, but was preceded, due to coronavirus, by a recession of 9% in 2020! Despite the contraction of GDP in 2020, the government decided in the summer of 2021 a small increase in the minimum wage by 2%, effective from 1 January 2022. Therefore the government is consistent with the above in its election commitments, without setting at-risk businesses and the course of the economy. It is noted that even the GSEE does not suggest at this stage such a large (16%) increase in the minimum wage.
7. Is the increase in the minimum wage enough to deal with the wave of accuracy?
The increase of the minimum wage for 2022 (2% from January 1 + 7.5% from May 1) is a cumulative 9.7%. This percentage exceeds the increase in inflation, which in March was 8.9%. In addition, raising the minimum wage is just one of the weapons used to support workers. The government is implementing a wide range of measures that largely offset the rising cost of living, especially for the most vulnerable groups. These include the reduction of insurance contributions and income tax, the reduction of ENFIA, the subsidies on the electricity and gas bills, which are bigger for the beneficiaries of the Social Housing Invoice, the fuel subsidy, the extraordinary aid of 200 euros to low-income uninsured elderly and people with disabilities, the payment of a double installment of the Minimum Guaranteed Income, etc. Above all, the overall economic, licensing, tax policy that led to the significant growth of the economy in 2021, which is expected to continue this year. A policy that had direct positive consequences on unemployment to fall from 17.2% in the summer of 2019 to 12.8% in February 2022.
8. Businesses are currently facing a large increase in operating costs due to the international crisis. Do you think that small and medium-sized enterprises, in particular, will be able to cover the additional salary costs?;
The decision to increase the minimum wage took into account, on the one hand, the need to protect workers and, on the other, the competitiveness of the economy. Obviously, the difficult conditions that have been created internationally, also affect companies. That is why no demands were made for a much larger increase in the minimum wage, as a reckless decision could have an impact on both the companies - by destabilizing them - and consequently on the employees who work for them. On the other hand, we remind you that in the last 33 months a series of measures have been adopted for the benefit of companies and their competitiveness such as tax cuts, reduction of insurance contributions, and a series of measures to deal with the consequences of the crown (repayable advance, special support programs, etc.) It is also noted that all the bodies that participated in the consultation (representatives of small and large enterprises, scientific bodies, and of course the GSEE) suggested the increase of the minimum wage, at a different level each. There is no one today to suggest the "freezing" of the minimum wage.
9. How is the minimum wage formed in Greece in relation to the EU?;
With the increase that will take effect from May 1, Greece is ranked 9th among 21 EU countries that have a statutory minimum wage, from the 11th it was until now. Specifically, with the increase of 7.5% to 831.8 euros on a 12-month basis, the minimum wages in our country rise in the ranking by 2 places, surpassing Portugal (822.5 euros) and Malta (792.26 euros).
10. This significant increase will not lead to a rise in unemployment;
The labor market since the summer of 2019 has entered a stable virtuous cycle in which we have at the same time a reduction in unemployment, an increase in labor market participation, and an increase in wages. It will therefore be able to absorb the increase. This is due to the general pro-investment policy of the government.
According to ELSTAT, since the summer of 2019 unemployment has decreased by 4.4 percentage points: from 17.2% to 12.8% in February 2022, a percentage that is the lowest since July 2010. In the fourth quarter of 2021, the employment rate rose to 65% (the highest since the third quarter of 2009) while the number of employees exceeded in June 2021 the psychological barrier of 4 million for the first time since August 2011. In addition, the balance of wage flows in the private sector is positive as in 2021 133,082 new jobs were created, more than in 2020 (93 thousand) but also in 2019 (127.6 thousand). And all this despite the crisis of the pandemic and despite the fact that the average monthly salary has increased by 4.3% (from 1,072 to 1,118 euros) compared to 2018.
However, the government, studying all the parameters (GDP growth, productivity, inflation, etc.) considered it appropriate to reach the announced increase, which it considers a golden section between competitiveness and social protection...
11. There is a risk that raising the minimum wage will further exacerbate inflationary pressures, dampening any benefits;
Avoiding an inflationary spiral is a key concern of the government. It is also the main reason that maximalist proposals were not adopted which, while it seems to be in favor of the employees, would eventually bring the opposite result. The increase decided is balanced and is not expected to be a trigger for inflation.
12. Why do not you let the social partners decide the amount of the minimum wage, as requested by GSEE, ESEE, GSEVEE;
The social partners retain the ability to agree on higher wages through collective bargaining. There is no prohibition on this. The system of administrative determination of the minimum wage by the government after consultation with the social partners is applied by most EU member states and in addition, is the system proposed by the European Commission in the draft Directive on the European minimum wage. This process on the one hand ensures transparency as the views of all stakeholders involved in the consultation are officially made public by the Ministry of Labor and Social Affairs and on the other hand takes into account the interests of both employees and the unemployed.
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