Article

 

EMPLOYMENT AND SOCIO-ECONOMIC CHANGES IN GREECE: 1970-1993 AN EMPIRICAL INVESTIGATION

by

C. Kollias , Technological Education Institute of Larissa

G. Manolas, Ministry of National Economy

M. Chletsos, National Labour Institute

JEL classification : C29, E24

Abstract

A number of papers have analyzed the labour demand determinants and provided theoretical and empirical explanations between the employment or unemployment level and its determinants in various countries (Disney and Kiang 1990; Arestis and Biefang-Frisancho Mariscal 1994). Cross-national research shows that employment growth in European countries has been much lower than in United States. This has been explained by the obvious institutional differences between North America and Europe, with the suggestion that the “overegulated” European economies were unable to respond to shocks in the world economy (Appealbaum and Schettkat 1995). In the case of Greek economy we can remark that the change in the political regime affected most aspects of the economy. The change in the regime after 1974 also altered the labour market by the emergence of new labour unions, by the involvement of the state in the wage structure and in the level of employment. In this article empirical evidence is provided in order to assist in the investigation of the relation between employment level on the one part and growth rate, productivity and real wage on the other part in two time periods : 1974 – 1980 and 1981 – 1993. On the basis of the obtained results it appears that this relationship has not remained unchanged throughout the whole period. The structural changes of the Greek economy appear to have directly affected this relationship. In the first period, a period of economic expansion and absence of an economic crisis, the empirical findings indicate that employment levels are positively related to growth rate and to wage rates and negatively to labour productivity. In the second period, a period of economic crisis and restructuring of the Greek economy in which employment appears to be positively affected conclude only by growth. It would appear therefore that government employment policies must be targeted towards achieving structural changes in the labor market which along with active employment policies could in the medium term have beneficial effects on employment levels.

 

 

UNIVERSITY GRADUATES IN THE LABOUR MARKET: FROM THE EMPLOYERS’ SIDE

by

Dimitrios A. Giannias, University of Crete

Georgios A. Giannias, European Center for Economic and Technical Studies (EKOM)

JEL classification : I210, I280, I290

Abstract

This article presents the results of an analysis which is based on informaion that is collected through a questionnaire that was answered by firms in 1994. This provided information on the characteristics and qualities that are important for a successful career, the prospects of obtaining a job based on the subject of specialisation of the graduate, the effect of the type of the university of the graduate, the methods followed by organisations to attract, select, and eventually promote university graduates. The market researc performed in Greece in 1994 with the participation of a random sample of 113 enterprises (102 of which were located in Athens and 11 in Crete; the 75% of the enterprises of the sample employed over 25 people). 90% of the enterprises answered that they could employe university graduates majored in economics, 70% in computer science, and 40% in chemistry. The following factors were identified by at least 70% of the enterprises of the sample to be very important for an enterprise to offer a job to a graduate: the specialisation of the graduate (82%), previous working experience (77%), knowledge of a foreign language (72%), performance in interviews (88%). 90% of the enterprises answered that they identify their employees through people they know, the National Employment Agency (OAED), and CVs they keep in file. 45% of the decision to offer a job is based on the applicants CV and interview, while 80% of the enterprises declared that their decision depends on other factors. For a successful career, the most important factor were identified to be the communication skills, the performance, and the judgement of the employee. 75% of the enterprises offer some opportunities for further training to their employees (in house or not). Over 80% of the enterprises replied that their decision for the offer of a job does not depend on where the university degree is obtained. 65% declared that they hired at least one university graduate in the last year. Over 50% declared that they were not planning to hire new graduates in the next year. 45% of the enterprises were very satisfied from the graduates of the University of Crete. 90% of the enterprises believed that there are differences among university graduates and people who obtain their degrees from private educational organisations. Finally, factor analysis identifies 6 different groups of enterprises which are presented in the article.

 

 

NEW TECHNOLOGIES AND TRADE UNIONS: THE CASE OF NORTHERN GREECE

by

Dimitrios. M. Mihail, University of Macedonia

Stella Kufidu,, University of Macedonia

JEL classification : J51, J53, M12

Abstract

This study assesses the organized labor and management attitudes towards the technological change in Greek manufacturing. Specifically, it looks at what trade unions try to achieve and what activities undertake when faced with technological change at the Greek workplace. The main issue examined is trade unions as mechanism in raising employee participation in the workplace innovation. Since the mid-eighties the European Commission has tried to compromise conflicting interests and attitudes to the adoption of technological change. Management at a European level argues that company modernization is promoted within a flexible internal and external business environment, whereas unions place emphasis on technological unemployment. Commission’s insistence on social dialogue as a means of ameliorating innovation implications, led the social partners to an agreement, in 1987. European management accepts the process of information and consultation of unions about modernization plans, whereas the organized labor admits the management prerogative in the relevant decision making process. In 1994, Commission moved ahead institutionalizing labor participation in innovation through the Directive of European Works Councils (94/45/EC). European Union developments on this issue impacted Greek legislation almost spontaneously. Greek legislators echoed Commission directives and adopted Law 1767/88 that obliges management to inform company’s works council about modernization plans and to decide with employee representatives on corresponding training schemes. Provided this relatively favorable institutional framework, we try to assess in our study whether unions were able to promote employee participation based on four research hypotheses. The first hypothesis relates directly employee involvement to market competition. Companies which compete in new product markets where innovation, product quality and customer orientation are basic company strategies, tend to encourage employee participation. The second hypothesis contends that long- standing conflictual relations between labor and management would tend to undermine participation at company level. The third hypothesis accepts the argument that the level of employee participation is inversely related to the sophistication of technological innovation. The fourth hypothesis relates directly employee involvement to union density. However employee involvement is conditioned by the specific implications of innovation. There is no room for unions to maneuver facing, for instance, the issue of job loss concerning low – skilled workers. The sample was drawn from large manufacturing companies, employing more than 250 employees and operating in Northern Greece. Among the 37 organisations of our sample only 22 have recently introduced computer based technological change. All of them were unionized. Half of the companies agreed to participate in our survey so data were collected by means of a structured questionnaire that was completed by trade union representatives of 11 companies. The aim of our survey was to detect if there has been a marked shift towards employee participation schemes in facing the challenge of workplace technological change. The main finding is that, until 1997, one can hardly speak about employee participation since management simply announced its plans about plant modernization. All companies studied, except one, chose to simply inform their employees about innovation and only three of them scheduled a special meeting for this occasion. Management just complied with the existing regulations and did not adopt any form of participation. This result is not surprising if one contrasts each of the reviewed cases to the participation limitations imposed by our research hypotheses. Almost all of the examined companies belong to traditional industries such as food and beverage, chemicals and textile, which dominate the Greek manufacturing sector. Our survey did not find any organization that changed its production process by adopting flexible manufacturing systems in a full-scale fashion. Hence, both the competition strategy and the degree of technological change were not supportive of participation schemes from the management viewpoint. In addition, the conflictual industrial relationships in postwar Greece, undermining trust between the social partners, seem not to condition favorably employee participation initiatives. The high union density, averaged 70.3%, could not either promote participation or reduce technological unemployment, the latter being another major concern of the study. In fact, unemployment due to innovation reached a remarkable 6.8% in the surveyed firms. Here, the main finding is that unions proved ineffective due to the fact that lay-offs were mostly related to low-skill job positions. Furthermore, it is worth mentioning that company restructuring was taking place in macroeconomic conditions of high unemployment. Only three trade unions were reported to engage in dialogue with management, proposing certain measures for avoiding lay-offs. These were basically built around functional flexibility within companies. In only one case such union propositions found fertile soil, considering however that this development took place in a firm where all its employees are registered members of the company trade union. Another main finding is that management itself, without practically facing any union pressure, approached systematically and cautiously the issue of technological unemployment. There was an organized effort by management to limit lay-offs to low-skill jobs, to use extensively early retirement schemes and to transfer employees to other job positions within companies. The main policy implication of this study is the documented lack of initiatives from unions in intervening in crucial areas of labor-management relations. The remarkable union weakness to advance articulated propositions for employee participation in the technological innovation and unemployment tends to undermine worker voice at workplace. However, limitations to social partnership might slow down forthcoming massive company restructuring in Greece. This potential danger calls for systematic assistance to unions through institutionalizing suitable agents for information, training and human resource development within union ranks.

 

 

IMMIGRATION FLOWS AND LOCAL LABOR MARKETS: THE CASE OF THE REGION OF KAVALA

by

Anastasios Karasavvoglou, Technological Educational Institution of Kavala/Greece

JEL classification : J3, J6

Abstract

It is fact that during the last ten (l0) years Greece went from being a country that sent immigrants to countries in Central and Northern Europe to being a host country to immigrant labor force. The consequences of the presence and employment of foreign labor force, legal and or illegal, on both the Greek economy and society are strong and various. Particularly interesting are the effects that the employment of foreigners have on the labor market for reasons that have just as much to do with the size and extent of the black market as they do with the height and structural characteristics of unemployment. The present study investigates the effects of the employment of foreigners, mainly in the region of Kavala and secondly in rural eastern Macedonia and Thrace. At the empirical level of analysis the basic structural characteristics of the employment of foreigners in Kavala are registered and the effects on basic parameters such as the supply and demand of labor are determined. In particular, it is also examined whether the substitution of native labor force by foreigners is corroborated. Finally, efforts are made to determine the comparative advantage of the presence and employment of foreigners on the local economy in the region of Kavala, especially taking into account the changes that are taking place or are expected to be materialized in the near or remote future in the wider Balkan area and in Central and Eastern Europe. Since the beginning of the l990s Greece has been a host country to immigrants in contrast to the l950s and l960s, when a significant number of Greeks moved to Europe and America in search of a better life. Today there are 480,000 foreigners living in Greece, either legally or illegally. The main reasons for these mass population movements towards Greece was the socio-political changes that took places in the central and eastern european countries. Greece accepted strong currents of immigrants from neighboring countries, such as Bulgaria, Albania, Romania, Poland, but also from other democracies of the former Soviet Union. This article examines the effects of the massive entrance of immigrants on the economy, society and local labor and housing markets in the region of Kavala. Particular emphasis is given on the matter of the relation between native and foreign labor force (a complementarity or a substitution relation). The issue of the determining factors in immigration and its effects on the economy and society of the host countries began to systematically and strongly occupy scientists-researchers during the l980s and l990s. It concerns the time periods which coincide with the appearance and even more with the strengthening of crises conditions and the worsening of the problem of unemployment in the market economy. It is generally accepted that the larger part of the immigration movement is explained by the presence of different income levels between countries. The relative “immigration elasticity” index concerning the income of the host country is positive and is estimated to be bigger than unit l and smaller than 3 (Bhagwati l985). In addition, empirical research shows that a change in the number of labor force members in a country, as well as an increase in unemployment, are positively related to immigration (Blanchard and Katz l992, Stark and Taylor l99l ). Finally, the cost and potentiality of population movements, the political context as well as the availability of information about the host country (Siebert l993) to the potential immigrants all comprise additional factors that may affect the intensity and extent of immigration. It is a fact that the effects of immigration on the economy and the society of the host country are significant. The relevant bibliography examines this matter mainly in relation to productivity, wages and employment. The studies that examine the effects of immigration on the American economy show that there are more positive sides to immigration (Borjas 1990, Simon 1989), and this is evidenced by the quick adjustment of foreigners on both the economy and social life of the area (Chiswick 1978). At the wage level and the employment of the natives it is emphasized that generally there were never any substantial negative effects. (Lalonde and Topel l99l, Altonji and Card l99l, Winegarden and Khor l993, Friedberg and Hunt l995). This, however, does not exclude the existence of particular categories of native workers (concerning those who did not finish university) who showed that their wage level was negatively influenced by the entrance of immigrants into the United States (Borjas, Freeman and Katz l99l). With regard to the question concerning the relation between native and foreign labor force the actual research on the American economy supports the view of complementarity (Borjas 1986) as much as the view of substitution of natives by immigrants (Akbari and Devoretz l992, Matta and Popp l985, Defreitas and Marshall l983). Analogous research has been conducted in European economies and particularly in the case of Germany. The results show the positive aspects of the effects of immigration on the domestic production and employment (Straubhaar and Zimmerman l992, Barabas, Gieseck, Heilemann and Von Loeffelholz l992) but mainly the negative aspects (Wehrmann l989). Concerning the wage levels of natives and foreigners, the relevant studies support the view regarding long-term adjustment of foreigners’ income to the levels of natives’ income. In particular, research from Pischke (l992) and Schmidt (l992) lead to the realization that the wages of foreigners after the passing of seventeen years adapt to the equivalent levels of income of the natives. Finally, the question concerning the possibility of the substitution of natives by foreigners, or the existence of a complementarity relation between the two the prevailing view is that in the field of wage employment in the private sector foreigners replace domestic labor supply,whereas there is evidence that a complementarity relation exists between unskilled workers and foreigners (De New and Zimmermann l993). As far as the Greek bibliography is concerned, the relevant research concerning the subject is limited, given the fact that it is a relatively new phenomenon for Greece. Thus the available statistical elements are limited and concern only a small part of the total number of immigrants. In spite of this, efforts were made to evaluate the effects of the illegal immigrant labor force on the Greek economy, despite the reservations about the validity of the data and thus the validity of the results. In this context the issues that are examined are: first, if the employment of foreigners in Greece is complementary with regard to the native character or if the former replace the latter for the limited work places, leading to worse unemployment. Second, if the wages of foreigners push the wage level down, leading to a worsening of employment conditions and of the survival of wage earners in the country. With regard to the first issue recent empirical research conducted in the area of Northern Greece has shown that illegal immigrants replace native workers in unskilled labor, whereas in the field of agriculture they cover additional real needs (Lianos, Sarris Katseli l995, Chletsos and Karasavvoglou l997). Relevant research at the Institute of Labor (IN.L) led to the same conclusion. It emphasized, among other things, the fact that foreigners work in areas for which there in no analogous supply of labor on the part of native workers (Linardos-Rilmon l993, Katsoridas l994). It should be emphasized that the complementarity character of the employment of immigrants prevails in the first phase of their entrance into the country, whereas in the later phases foreigners replace equivalent skilled domestic workers (Kontis l996). The wage level of immigrants is lower than the corresponding level of Greek workers (Linardos-Rilmon l993). It is estimated that the average wages of immigrants are 45% lower than the average wages of Greek workers (Lianos-Sarris-Katseli l995). This finding together with the fact that employers do not make the mandatory insurance payments establish illegal foreign workers as a particularly cheap and thus attractive labor force. The incorporation of this labor force in the production process constitutes for many domestic businesses a condition of survival and continuity. Otherwise, they would be condemned to economic stagnation and eventually to a discontinuity of their activities (Chletsos and Karasavvoglou l997, Karasavvoglou and Katrakilidis 1997). The results of this empirical research show that foreigners in the area of Southern Kavala are mainly men, relatively young who came illegally in the country. They are employed in agriculture (37.0%), in livestock (30.3%), in construction industries (22.3%) and in the quarrying of marble (l0.4%). They offer services as unskilled workers. Their employment is of a seasonal temporary nature and their work program is particularly flexible. Their wages fluctuate at lower levels than those of their native colleagues. This is why 50% of the business persons prefer foreigners to Greek workers. Foreigners are also preferred because there are no Greek workers (30%) found for a particular type of employment and finally the behavior of foreigners is for the Greek business person a particularly attractive factor (20%). The local society is split concerning acceptance of foreigners, even though it is obvious that foreigners contribute to the discontinuity of the process of population exodus from the rural areas and to the revival of economic life of the area. In addition, the educational structure is not substantially worsened by the presence of foreign students in primary and secondary education. Finally, the housing market is positively influenced by the presence of immigrants. Regarding the question concerning the type of relation between native and foreign workers, research leads to the conclusion that the work profile of foreigners (employment sector, additional wages, conditions of employment) favor the acceptance of the complementarity view of employment of foreigners and natives, without this excluding the likelihood of the substitution of native workers by foreigners. It has been realized that agricultural cultivations in the area would have been quantitatively fewer without foreigners. In the area of quarrying foreigners cover rather additional needs of the businesses and in manufacturing they offer services that native workers do not want to provide, given the particular conditions.

 

 

FISCAL CONVERGENCE AND ITS IMPACT ON GREEK LABOR MARKET

by

Karagiannis Yannis , University of Crete

Sachinidis Fillipos , IOBE

JEL classification : J230, J640, H890

Abstract

The objective of this paper is to analyze the impact of achieving EMU’s fiscal convergence criteria on Greek labor market. For this purpose we combine the simulation results of a partial equilibrium macroeconomic model for Greek economy with a decomposition analysis based on the econometric estimation of a translog dual cost function. The EMU fiscal convergence criteria are used, through the macroeconomic model, to simulate changes in national income, inflation, interest rate and fiscal deficit via two alternative scenarios, i.e. a 6- and a 10-year convergence plan. Then, these results are used to simulate changes in the derived demand for labor and consequently, on the unemployment rate. According to our results it is preferable for Greece to adopt a stepwise (10-year convergence plan) instead of a instantaneous (6-year convergence plan) process. In either case there are only limited differences in terms of changes in fiscal variables, but there are tremendous differences in terms of job losses. Thus, given the inflexibility of labor market in Greece, it seems more reasonable for Greece to be in the second group of countries entering into EMU.

 

 

ACTIVE LABOR FORCE, UNEMPLOYMENT RATE AND FERTILITY IN GREECE

by

Kostas Velentzas, University of Macedonia

Michalis Xatziprokopiou, University of Macedonia

Yannis Karagiannis, University of Crete

JEL classification : J230, J640

Abstract

The objective of this paper is to analyze the relationship between the unemployment rate in Greece and the increased female employment. Since the early 1980s it has been an increase in female employment opportunities which progressively resulted in a decrease of fertility rate. In addition, the economic conditions in Greece during the same period were not sufficient to open up new job position with the same rate of increase as in previous decades. As a result, an increase in unemployment rate had have occurred. In the long-run, however, the declining fertility rate is expected to contribute negatively to the magnitude of active labor force, as well as its age composition, and thus, the unemployment rate will tend to decrease.

 

 

EXCHANGE RATE AND NOMINAL WAGE DYNAMICS AND THE EFFECTIVENESS OF STABILIZATION POLICIES

by

Christos Papazoglou, University of Crete and Bank of Greece

Dimitrios Kyrkilis, University of Macedonia

JEL classification : F41

Abstract

The experience of the collective bargaining process between the representatives of employers and employees during the recent stabilization programs of the 1990’s in Greece showed that the basic objective of the latter has been to at least secure stability in real wage. In particular, a common outcome of almost all negotiations referred to agreements that call for increases in nominal wages over the period of the labor contract, which normally has a duration of two years, equal to expected inflation. There are, however, two main features common in all agreements that are the main cause for the slow adjustment of the nominal wage to actual inflation and thus responsible for the fall in real wage during the two year period of the contract. The first stems from the fact that, the adopted expected inflation upon which the increases in nominal wages are conditioned, normally referred to the one forecasted by the stabilization program of the government, which most of the time was over-optimistic predicting a rather quick disinflation. In case, however, that the actual inflation exceeded the expected one at the end of the contract period, which was normally the case, workers was agreed to receive a “corrective” increase that would equalize the increase in nominal wage with that of actual inflation. The second reason was due to the fact that the agreed increases in nominal wages would be given in four doses over the period of the contract. That is, one at the beginning and another at the middle of each of the two years of the contract period. Thus, the adjustment of nominal wage towards the current inflation was quite slow and was completed only at the end of the contract period and after the “corrective” increase in nominal wages had taken place. As a result, according to the above described Greek experience, we could say that the nominal wage appears quite rigid in the short run and only in the longer run, when all adjustments are completed, the rigidity is transferred to real wage. The above described Greek experience is introduced into a dynamic macroeconomic model of a small open economy operating under a flexible exchange rate regime with the objective of examining the effectiveness of fiscal and monetary policy. In particular, the model attempts to re-asses the conclusions of the Mundell-Fleming (M-F) classical model by explicitly introducing the supply-side of the economy as well as the specific pattern of wage adjustment. The model constitutes an extension of the Dornbusch (1976) model as it considers the supply-side and introduces slow adjustment in the nominal wage. That is, it assumes nominal wage rigidity in the short run and real wage rigidity in the long-run. Moreover, it also introduces the distinction between the price of domestic output and the overall domestic cost of living (CPI). In the long run, a nominal monetary expansion has no real effects due to complete nominal wage and price flexibility. This, of course, reverses the conclusions of the M-F model since the nominal wage flexibility keeps the real wage constant and thus prevents any output increase. The situation in the short-run, however, is quite different. In particular, the nominal wage rigidity leads to a partial only increase in CPI leading to a fall in domestic interest rates and to an overshooting in the exchange rate. The depreciation of the exchange rate as well as the fall in real wage lead to an expansion of aggregate supply and as a result output increases in the short run. During the adjustment period, as the nominal wage increases and the nominal exchange rate appreciates the real wage gradually increases which, in turn, reduces supply bringing output back to its initial level. Turning to fiscal policy, an expansion in nominal government spending in the long-run leads to an increase in output, an appreciation in the exchange rate and a fall in nominal wages and CPI. Again, this result is in conflict with the conclusions of the Mundell-Fleming model. The fall in the nominal wage in the long run prevents the deterioration of competitiveness and thus it cancels out the mechanism through which the initial positive impact of fiscal policy on output is offset in the M-F model. Again, the situation in the short-run is different. More specifically, the slow adjustment in nominal wage causes an over-appreciation of the exchange rate and thus an increase in real wage which, in turn, leads to a fall in the supply of output. This fall in aggregate supply reduces the initially positive impact of fiscal expansion on output. As a matter of fact, output may even fall in the short run if the deterioration in competitiveness more than offsets the favorable impact of the increase in government spending. Overall, we could say that the degree of flexibility in nominal wages is of critical importance in determining the effectiveness of alternative policy measures. In the present analysis, the basic assumption of real wage rigidity in the long-run reverses the conclusions of the M-F model. In particular, it undermines the effectiveness of monetary policy whose effect turns out to be temporary while, on the other hand, it re-enforces the impact of fiscal policy, whose influence becomes permanent.

 

 

EMPLOYEE RELATIONS SYSTEMS IN THE EUROPEAN UNION

by

Dimitrios M. Mihail, University of Macedonia

JEL classification : J51, J53

Abstract

The aim of this paper is to discuss potential modes of restructuring the employment relationship in the European Union countries. In the current global economy, intensified market competition forced firms to adjust to the new economic environment introducing new technologies and reorganizing production. Intensifying market differentiation has been closely related to profound changes in the organization of production. Growing need for flexibility and differentiation in global markets seriously undermined institutions of centralized collective bargaining as a central characteristic of post-war industrial relations arrangements in most European Union countries. Labor flexibility for the enterprise is at the heart of post-Fordism. It is up to individual firms to improve internal flexibility by means of staff versatility and flexible working time. To this aim corporations have to promote internal at the expense of external labor market institutions, a trend that encourages the decentralization of industrial relations. Indeed, in the last decade, there has been a remarkable devolution of European labor relations decision-making from the national and industry level to company and even to workplace one. Provided the emphasis on enterprise level labor-management relations, recent literature has drawn particular attention to two competing models: the Human Resource Management (HRM) approach and that of the "participatory company". Parallel to the distinctive tendency to decentralize collective activities towards the company level in most industrialized countries deregulationist argument is built around the HRM model as an alternative paradigm to the post-war "European social model" of employee relations. The emphasis shifts from "collectivism" to "individualism", undermining the post-war “European social model” of employee relations. There is a marked decline in trade unions presence. Union derecognition is getting momentum and management's antipathy towards collective activity, is pronounced.. Merit pay systems have largely been introduced, and communication and employee participation schemes have been implementing at an increasing pace. Attempts of power devolution towards line managers and a noticeable disengagement of companies from employers’ associations have been revealing elements of individual firm inclination to internalize labor relations within corporate structures. Basic elements of the employment relationship such as compensation and working time arrangements are regarded as the prerogative of management. Human resource practices are elevated to new levels of importance constituting a source of competitive advantage for a company. The vision is of a systematic utilization of employee participation schemes to enhance workplace innovation and efficiency. This approach seems to have found fertile soil in US and UK firms. Nevertheless, prominent HRM scholars acknowledge that eventhough UK organizations have begun to implement an array of HRM practices, they have not rigorously pursued a HRM coherent model. As far as the diffusion of HRM practices in the US firms is concerned, they point out that rhetoric outstrips the reality and the difficulties mainly lie on the failure of management, union leaders and national policymakers to truly understand the strategic significance of human resource policies for corporate competitiveness. The HRM proponents, regarding the prospects of the “empowerment organisation” in the European union, admit their scepticism. Impediments to non-union HRM practices have been contributed both to organised labour and management sides. Unions in many European countries tend to perceive these practices as delegitimizing process of collective representation. Senior management, on the other side, is sceptic due to high commitments to labor. Scepticism seems to dominate middle-managers’ attitudes too, since they tend to perceive the empowerment of their subordinates as a threat to their future employment status. Studies on continental Europe point out that companies in Europe are highly reluctant in adopting non-union HRM practices. There is a diversity of adjustments of European industrial relations systems to the challenge of bargaining decentralization. The documented diversity is attributed to the combined effects of workers' relative shop-floor power and the European governments varying stance towards national bodies of industrial relations concertation. In the European Union the management strategy at corporate level is conditioned by labor market institutions. The proponents of the “participatory company” argue that the intensification of international competition, with regard not only prices but also product quality, has implied for many European firms a search for some co-operation by their workforce. Hence, the reshaping of industrial relations has been mostly carried out, so far, not by attacking unions, but by securing their support. This signals the new role for European unions in allowing them a degree of centralized control over the process of decentralization. Joint re-regulation marked in many companies seems to be built on mutual understanding and a minimum level of trust between the social patterns. Government role is pivotal in flourishing the participatory firm. In contrast to HRM approach, the proponents of this approach stress that a conciliatory strategy of unions accepting flexibility in company employment arrangements must be encouraged and supported by a government-led institutionalization of unions expressing voice. Which approach is going to prevail in the European union labor markets remains to be seen. However, it must be noticed that the prospects of the “participatory company” approach are supported actively by the European Commission. Over the last decade, Commission has constantly promoted the dialogue between social partners, has institutionalized European Works Councils, and encouraged company flexibility and mutual trust through its White and Green papers.

 

 

THE OPTIMAL RESPONSE OF WAGES TO CAPITAL - INVESTMENT DECISIONS : THEORY AND EVIDENCE FROM GREECE 1954 - 1990

by

Kaskarelis Yannes , University of Macedonia

Miaouli Natasha , Athens University of Economics

Philippopoulos Apostolis , University of Essex and Athens University of Economics

JEL classification : J5, E62

Abstract

The state of the economy undoubtedly affects wage claims by trade unions. In particular, there are feedback effects from recent investment-capital decisions to wage setting. In the absence of binding contracts, one expects that a higher capital stock will lead the union to make a higher wage claim. Intuitively, since an increase in the capital stock increases the demand for labor, wage claims are expected to increase with the capital stock. In turn, this leads to under-investment. However, the optimal response of wages to investment-capital decisions is also affected by changes in the socio-economic environment. For instance, changes in social security, employment protection legislation or macroeconomic policy are expected to systematically affect the behavior of wages. The objective of this paper is twofold. First, it formulates the dynamic interaction between firms and trade unions. The model yields simple testable predictions about the optimal reaction of wages to the predetermined capital stock. It shows that this optimal reaction is nonmonotonic. It depends on the markup of market wages over reservation wages and the elasticity of wage income to wages. The second objective of the paper is to test the theoretical predictions of the model for the greek manufacturing during 1954-1990. In Greece, there are (at least) two distinct labor market regimes during this period. An early period until 1974, during which unions were weak (1954-66) or state-controlled (1967-74). And a second period 1975-90, during which unions have been strong operating within an environment of relaxed fiscal policy and regulated labor market. These characteristics make Greece an ideal candidate for testing the applicability of our model. The theoretical model is simple. We use a dynamic monopoly union model with capital accumulation in the spirit of Ploeg (1987). The interaction between firms and unions is modeled as a leader-follower game with the union acting as a leader. Then, applying standard dynamic programming techniques, we solve for Markov perfect equilibria. The solution specifies how wages react to the state of the economy. The main theoretical results is as follows. If (i) reservation wages are close to market wages and (ii) wage income is insensitive to wages, then wages increase with the predetermined capital stock. Intuitively, if these conditions hold, the union can afford to take advantage of favorable states in the capital stock and go for higher wage claims. On the contrary, if these conditions do not hold, it is risky for the union to go for higher wages and in that case wages can decrease with the capital stock. This places the socio-economic environment as a key factor for wage behavior. In the empirical study for the greek manufacturing 1954-1990, we estimate real wage equations as functions of the predetermined capital stock. Our methodology is as follows. First, we detect possible regime changes. According to our theory, regime changes can be associated with changes in the markup of market wages over reservation wages and/or changes in the sensitivity of wage income to wages. Second, we test whether the response of wages to the predetermined capital stock systematically changes as regimes change. Our main empirical results are as follows. It is reasonably accurate to say that the postwar history of the greek labor market is divided into three regime periods. An early period 1954-66, the period of the dictatorship 1967-74, and a late period 1975-90. The distinguishing feature of these regimes, as we move from one regime to the next, is the diminishing markup of market wages over reservation wages. This diminishing markup is due to a constantly rising government consumption, which has allowed Greek government since 1975 to follow a very lax employment policy in the public sector (including public enterprises) where a de facto job is guaranteed. Then, by estimating real wage equations, we test whether regime changes affect the feedback coefficients on the predetermined capital stock. Using alternative estimating techniques (multiplicative dummies, window regressions and Kalman filters), we show that wage claims increase (decrease) with the capital stock when the markup of market wages over reservation wages is low (high). Thus, the response of wages to the predetermined capital stock is significantly negative during 1954-66 (when the markup was high as a result of tight fiscal policy), but is significantly positive during the late period 1975-90 (when the markup was low as a result of loose fiscal policy). During the dictatorship 1967-74, when market forces played a minor role, the response is negative but insignificant. Finally, we report that there is no evidence of regime changes associated with conservative and socialist administrations (1975-81 and 1982-90 respectively).

 

 

UNEMPLOYMENT AND STOCK PRICE DIVERSITY: THE CASE OF GREECE

by

Nicholas Apergis, University of Ioannina

JEL classification : E24, E32, G14

Abstract

In the international literature, theoretical as well as empirical studies have attempted to investigate how labour mobility among different manufacturing sectors is capable of explaining the course of unemployment. According to the sectoral shifts hypothesis, demand changes lead to changes in production patterns among different manufacturing sectors. These changes in production, in turn, lead to shifts in the labour force from one manufacturing sector to another. However, it is known that labour mobility is characterised as a time-consuming process. It is this time-consuming process that, in the interim, contributes to higher unemployment. Moreover, in the literature of business cycles two are the most strong theoretical schools of thought that have attempted to explain the swings of certain real economic variables, such as production, unemployment, consumption and investment. The first follows the Keynesian school and it holds that the main determinants of unemployment are changes emerging from the demand side of the economy. According to the aggregate demand hypothesis, it is changes in demand that cause the presence of business cycle phenomena, even though that labour mobility is absent. By contrast, the rivalry theory of real business cycles holds that real factors (disturbances), i.e. changes in productivity, technological advances, changes in consumer's tastes, are responsible for the economic phases that an economy has to go through. The objective of this paper is to test empirically the two alternative theories -demand versus real factors- regarding the determinants of unemployment in Greece under the hypothesis that certain degrees of labour mobility do exist in the economy. Unemployment in Greece has been characterised by a continuous rising course over the last 20 years. The empirical attempt of this study is based on the construction of an index, as a proxy of real disturbances that measures the diversity of stock prices. The empirical results will provide an explanation about the strength of the rivalry theories of business cycles in general and the determinants of unemployment in particular. The results are crucial for the future of the Greek economy within the European Monetary Union (EMU) system. In cases where real factors seem to be responsible for the course of unemployment, this implies that the Greek economy has to undertake serious structural changes to successfully cope with the EMU challenge. The usual monetary and exchange rate policy 'weapons' will be proved to be totally invalid. The methodology of unit roots as well as the methodology of OLS reach the following results: First, the index of stock-price diversity and unemployment are positively associated. Second, it is the contribution of the diversity index (a proxy for real factors) that it is responsible for explaining unemployment issues in Greece. Therefore, economic policy makers in Greece have to advance certain structural changes, i.e. higher competition in commodity markets and more flexible labour markets, that will alleviate the unemployment problem.

 

 

EFFECTS OF STRUCTURAL AND TECHNOLOGICAL CHANGE ON THE LABOR MARKET AND LABOR DEMAND FOR GRADUATE DIPLOMA ENGINEERS

by

I. Tsolas, National Labor Institute

K. Athanassouli, National Labor Institute

JEL classification : I200, J400

Abstract

As the role of technology in society increases, engineers possessing a strong understanding of technology, are crossing into other fields except for the traditional engineering sectors of manufacturing and construction. Compared to the past, the industrial employment characteristics of engineers have been changed due to the increased competition. The notable technological change in telecommunications, information and production technology and the globalization of the economy have contributed to the emergence of new markets and the increase of international competition and the competition at national level as well. The reaction of enterprises focused on the development of new products and services with emphasis on quality and the better utilization of production factors (especially of human potential in which the engineers are also included). In Greece, according to official data published by the Technical Chamber of Greece, during the last two decades the number of graduate diploma engineers increased rapidly. That increase of supply was not associated with the growth of economy and the creation of new jobs and had as effect the cause of a surplus of diploma engineers. Specifically, the number of graduate diploma engineers was about 22900 in 1981, about 52600 in late ‘80’s and reached about 70000 in 1997. Empirical findings of the most recent survey conducted in 1996 by the Technical Chamber of Greece, Civil engineers and Architects showed that one half of the total (49%), though Mechanical and Electrical engineers about 30% of the total. As far as the economic activity is concerned, the diploma engineers are employed mainly in construction and public works (49%) and in the tertiary sector (41%). The rest of them (11%) are employed in manufacturing (10%) and mines and quarries (1%). According to the official data of National Statistical Service of Greece, the portion of diploma engineers to total employment was 1,3%, in 1997. Concerning the unemployment of Greek diploma engineers we remark that the new graduates, women and repatriates from universities of the countries of Eastern Europe and the former Soviet Union are touched more than the other groups. It is worth noting that among the unemployed there are also diploma engineers of older groups who were fired by closed or privatized firms. In the case of graduate diploma engineers, new skills are required by the enterprises and the organizations. These skills are adaptability to the firm culture and policy, communication and interpersonal skills, willingness for team working, continuous learning, mobility inside and outside Greece etc. For the improvement of qualifications of older graduates who have not managed yet to adapt to the new requirements of the labor market, further training is needed. In the case of new graduates who face various problems for coming into the labor market, it is essential to investigate the structure of curriculums of the Greek technical universities and how these curriculums can be adapted to new demands of the labor market. In order to facilitate the integration of new graduate diploma engineers into the labor market, further training can help in the short-middle run, though in the long run the optimum solution is that of establishing links between universities and industrial enterprises and the adaptation of curriculums of higher educational institutions to the new market demands as well.

 

 

THE IDENTITY OF UNIVERSITY GRADUATES AND STUDENTS IN GREECE: THE CASE OF THE UNIVERSITY OF CRETE

by

Dimitrios A. Giannias, University of Crete

Georgios A. Giannias, European Center for Economic and Technical Studies (EKOM)

JEL classification : I210, I280, I290

Abstract

The article presents the results of a market research performed in University of Crete through a questionnaire that were answered by 274 students and graduates. The 32% of them were majored in economics, 7% in sociology, 7% in psycology, 16% in chemistry, and 30% in physics. The 70% of those who answered the questionnaire would like to work in Crete and the 50% in Athens. 60% of them would prefer to work for the public. The 30 % graduates who are majored in economics and sociology are unemployed four yeas after their graduation. 65% of the employed work in Crete and 10% in Athens. The 80% of them search for a job through public announcements and the 60% through persons they know. The 35% of them believe that there are differences differences between regional and non-regional universities. Based on the experience of those who work, a ranking is developed for an evaluation of the different educational organisations in Greece. This ranking puts on the top the universities and these are followed by private foreign colleges, the technological educational institutes, the private centers of liberal studies, and the institutes of professional training.