Small companies hard hit by employment crisis

The latest survey in a series conducted by the Institute of Small Enterprises of the Hellenic Confederation of Professionals, Craftsmen and Merchants (IME/GSEVEE) found that the majority of micro and small enterprises considered the biggest challenge to their business to be their non-wage costs such as social security contributions and utility bills, rather than wages. More than eight out of 10 enterprises felt a reduction in social security contributions would help them most.

About the survey

Since May 2009, the Institute of Small Enterprises of the Hellenic Confederation of Professionals, Craftsmen and Merchants (IME/GSEVEE) has carried out a survey every six months (in cooperation with the market research company, MARC S.A), on the economic situation of the very small (micro) and small enterprises in the processing, trade and service sectors, which together constitute 99.6% of enterprises in Greece. The interim report [in Greek] of the results of the fifth survey in the series was published in late February 2012.

The survey involved a nationwide sample of 1,200 very small and small enterprises with 0–49 employees conducted 10–18 January 2012. The findings reveal that the indicators of the economic climate in these enterprises are at their worst point since the surveys began, that is, before the outbreak of the economic and financial crisis.

Key findings

Overall economic situation

Almost nine out of 10 enterprises (87.3%) reported experiencing a deterioration in their overall economic situation.

The percentage of small enterprises that considered they ‘will’, are ‘very likely’ or ‘quite likely’ to face serious operating problems in the near future, to the extent of risking closure, remained high, reaching the level seen in January 2011 (51.2% compared with 44.5% in the previous six months).

Predictions by the enterprises about the first six months of 2012 were the worst recorded since the beginning of the surveys: 77% of the enterprises expected their position to deteriorate, 14% did not expect any change and only 4.3% hoped their situation would improve.

Working conditions and pay

The survey findings on the employment issues of working conditions and pay can be summarised as follows.

For every person hired as a paid employee in the private sector, almost seven people were laid off. One out of five enterprises (20%) stated it had downsized during the last six months and only 3.3% reported an increase in the number of employees. In absolute terms, the net loss of paid employee jobs during the second half of 2011 was estimated at 65,000.

A total of 106,00 paid employee job losses was predicted for the first half of 2012**. For the whole of 2012, a loss of 240,000 employment positions (employers, self-employed persons, paid employees) was anticipated.**

Just over half the enterprises (53%) had faced difficulties in paying salaries promptly, a percentage significantly higher than that recorded in the previous survey (42.1% in July 2011) and 37% had reduced the hours or days of work of some employees. The percentage of enterprises that had reduced wages (29%) had increased by 50% compared with that of the previous survey (19%).

More than four out of 10 enterprises (43%) believed they would almost certainly be forced to reduce the wages or the working hours of their employees during the next six months, while another 28% did not rule out the possibility.

Just under half (46.5%) considered their operating expenses (such as power, water, telephone) to be the main barrier in terms of carrying out their economic activity. Inflexible costs in recent years due to increases in VAT rates were particularly blamed. Excise and pricing policies have also increased and energy costs in Greece are among the highest in the EU

Non-wage labour costs (social security contributions) ranked second (36.5%) while only 5% of the enterprises deemed wage costs to be a barrier.

This feeling was made even clearer when business owners were asked to prioritise the measures that would make it easier for them to carry out their business activity. More specifically, 80% considered the reduction of social security contributions to be an important measure and only 1.5% thought a reduction in the minimum wage would make life easier for them. For those enterprises with employees, almost nine out of 10 (86.5%) would prefer a reduction in social security contributions and only 2.5% favoured a reduction in the minimum wage.

Commentary

The survey reveals the pessimism among very small and small enterprises in Greece and the impact of the economic and financial crisis on employment. GSEVEE concludes that the reluctance of small entrepreneurs to support policies that reduce wage costs is explained by their belief that their survival depends on domestic demand and consumption, and that a decline in consumption within Greece cannot be replaced by exports. At the same time, there is a need for structural reform to reduce the tax burden, bureaucracy and operating costs, such as power, telephone and heating bills.

Sofia Lampousaki, Labour Institute of Greek General Confederation of Labour (INE/GSEE)