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LSE - Policy Seminar (22/04/2005)

A fresh impetus to the dialogue on labour market reform in Greece was given with the policy seminar, which was organised last Friday by the Hellenic Observatory of the London School of Economics and was chaired by Professor Kevin Featherstone, Director of the Hellenic Observatory.
A fresh impetus to the dialogue on labour market reform in Greece was given with the policy seminar, which was organised last Friday by the Hellenic Observatory of the London School of Economics and was chaired by Professor Kevin Featherstone, Director of the Hellenic Observatory. The theme of the seminar was labour market flexibility and its key focus was to examine what lessons, if any, could be drawn for Greece from the European experience. The seminar was sponsored by EFG Eurobank.
One of the most prominent economists in the area, Professor Stephen Nickell, who is currently serving as president of the Royal Economic Society and member of the Monetary Policy Committee of the Bank of England, laid out the problem that has been shared across Europe of rigid labour markets and long-term unemployment. He drew from his analysis a number of key reforms that policy-makers everywhere should prioritise: the reform of the social security system towards reducing the replacement ratio of the unemployment benefits and offering incentives for effective job search; the reduction of barriers that place a large number of the working age population out of the labour market; and the restriction of early retirement measures with the effect of maintaining working age population in the labour force.
The seminar hosted presentations by policy experts on the topic from Greece who interpreted and elaborated on Professor Nickells’s key points in relation to current Greek realities. Dr Vassilis Monastiriotis, Lecturer of Political Economy at LSE, focused on the peculiarities of the Greek economy, especially in relation with the size of the informal sector, the structure of the majority of Greek businesses (SMEs and family businesses), and the technological deficit (low level of innovation and technological absorption), which, he claimed, change the parameters of the issue in the context of the Greek labour market. Additionally, he listed a number of observations in relation to the connection between labour market flexibility and labour market intervention and the effectiveness of combinations of various forms of flexibility.
The issue of the specific forms that flexible labour arrangements can take was addressed in more detail by Dr Stavros Gavroglou, Head of the Labour Market Research Department of OAED and Dr Dafni Nicolitsas, of the Athens University of Business and Economics. Both researchers emphasised that the Greek labour market has very low levels of functional flexibility and high levels of only a few types of numerical flexibility, which however are often related with lower wages, worse working conditions and more insecurity. Dr Gavroglou stressed that specific forms of numerical flexibility have a non-linear relation with firms’ performance, concluding that flexibility is good to the extent that is used in moderation. Dr Nicolitsas focused her policy recommendations on the provision of vocational training and life-long learning, implying that the low levels of the latter is related to low levels of functional flexibility and thus of the weak performance of the Greek economy in terms of international competitiveness and long-term unemployment.
Connecting research with policy, the seminar also provided the opportunity to three of the key players in the Greek debate to reflect on how they see the emerging agenda of reform. The Minister of Economics and Finance, Professor George Alogoskoufis, in his opening speech, focused on the segmentation of the Greek labour market, emphasising the different conditions that characterise employment conditions and labour relations in the unregistered (insecurity), private (partial flexibility) and public sectors (protectionism). He stressed that the reform of the labour market is directly connected to the reform of the calculation of the working hours and the design of a migration policy that will be consistent with the conditions prevailing in the labour market. He finally confirmed the intensions of the Greek government to open a constructive dialogue with the social partners involved in the labour market.
Mr Ulysses Kyriacopoulos, president of the Federation of Greek Industries, focused on the relation between flexibility and competitiveness, emphasised that flexibility should not be translated into job insecurity, and stressed the need for a constructive dialogue that will aim at achieving long-run solutions to the problems of the labour market. He further highlighted a number of areas where a consensual climate exists between the employers and employee associations and expressed the hope this climate to expand to cover all areas of dialogue.
In turn, the vice-president of the Greek Confederation of Labour, Mr Alexandros Kalivis, questioned the picture about the Greek public sector as sketched by the Minister of Economics and Finance and asked or macroeconomic and monetary policies that will not necessitate unpopular reforms in the labour market. He argued that the debate on labour market flexibility should not be about distributing a given volume of employment and incomes to a larger pool of employees (e.g., through part-timing) but rather that the objective should be the expansion of employment with real increases in labour incomes and restrain on the share of profits.
Overall, the seminar provided a valuable opportunity to open-up the Greek debate by directly referring to policy innovations made elsewhere in Europe. In inviting the key actors to respond, it also signalled the basis on which a new dialogue might develop.