Labor / In the poverty zone and with the new minimum wage

The government’s argument for a significant increase in the minimum wage, the fourth in a row in five years, which will set the minimum wage at €830 gross from today, April 1, does little to correct the losses suffered by the incomes of the lowest paid workers in last two years, while keeping around 570,000 workers in the poverty zone.

At a percentage level, the increase of the minimum wage by 6.5% raises the minimum wage from 780 euros gross to 830 euros and the net is 707 euros from 667.

The monthly income support of the 570,000 minimum wage workers will increase by 50 euros. However, even this money will not remain in its entirety, as net earnings (minus deductions) will be 39 euros, while the tax for an employee without family obligations will increase from 69 euros a year to 80 euros. In other words, the tax office will keep the 2-month increases from 468 euros (net increase for 12 months), with the result that the increases on an annual basis will cumulatively reach 388 euros. Thus the increase of 50 euros per month, announced yesterday by the prime minister, drops to 32 euros.

In the poverty zone

The new minimum wage increase will increase workers’ real earnings by €1 per day, leaving around 1/6 of the minimum wage workforce stuck at the poverty line.

This is also confirmed by the most recent data from Eurostat, according to which Greece, with the exception of only the neighboring Balkan countries and Hungary, belongs to the cheapest zone in terms of daily wages, with hourly labor costs reaching only 15.7 euros, when in the developed countries of the Eurozone it is more than triple, while it is almost ten points away from the European average. In other words, our country, instead of converging in salary terms with the central European countries, is constantly moving away, now competing with countries such as Bulgaria and Romania.

Collapse of purchasing power

Moreover, the new increase in the minimum wage cannot compensate for the significant losses suffered by workers from 2021 onwards, when the inflationary wave that began in 2021 fueled an unprecedented wave of precision and profiteering, which remains almost intact to this day by removing in some cases up to 40% of the income of the low paid

The new minimum wage hike covers inflation and a very small part of productivity, but does not make up for the losses workers have suffered over the past two years – despite the three-year rollback, which so far affects only 50,000 private sector workers who entered the labor market after 2012.

It is characteristic that cumulative inflation has increased by 15% since 2019, the purchasing power of workers has fallen by 33% in the last three years, while even today inflation in food and basic necessities remains at 6%.

According to Eurostat data, in Greece, nominal wages saw a decrease in 2021 (-1.53%) and a very small increase in 2022 (0.87%). However, the decline in purchasing power was felt in 2021 and 2022, with real wages declining by 3.93% and 6.87% respectively! This suggests that the increase in prices (inflation) has been much higher than the increase in wages, resulting in a decrease in purchasing power. From 2023 onwards, it appears that both nominal and real wages are rising, indicating an improvement in purchasing power.

According to the same data, Greece ranks last in the Eurozone and second to last among the 27, after Bulgaria, in GDP per capita, expressed in Purchasing Power Units (PPUs). According to Eurostat’s preliminary data for 2023, the relative index for Greece is only 67, when 100 represents the average of the EU member states.