A report published in late 2007 by the Foundation for Economic and Industrial Research (IOBE), the research institute at the Federation of Greek Industries, calls for reforms of the social insurance system. IOBE identifies the ageing population, a decline in the birth rate and organisational characteristics as the main problems associated with the system. The report presents IOBE’s reform proposals and includes an analysis of employment and unemployment trends.
The Foundation for Economic and Industrial Research (Ιδρυμα Οικονομικών και Βιομηχανικών Ερευνών, IOBE) is the body for scientific documentation at the Federation of Greek Industries (Σύνδεσμος Επιχειρήσεων, Σύγχρονη Ελλάδα, SEV), the main employer organisation in Greece. Every year, IOBE publishes four quarterly reports on the Greek economy. The final report for 2007 – The Greek Economy Issue 4/07 (in Greek, 2.57Mb PDF) – presents IOBE’s positions and proposals on social insurance reform, as well as an analysis of employment and unemployment levels.
IOBE’s positions on social insurance system
Current system
In Greece, the existing social insurance system is a ‘first-pillar’ mandatory public distributive system.
To date, the regular pensionable retirement age is 65 years for men and 60 years for women, or 65 years for both men and women who entered the labour market in 1993 or later. Public pension benefits are financed by three parties: the employer and employee, who both pay a proportion of social insurance contributions, and the state, which provides subsidies and allowances. Incentives encouraging workers to stay at work for up to two years after the age of 65 years are limited to raise the amount of employer’s and employee’s pension contributions by up to 1%.
Private pensions are not widely used in Greece and are voluntary in nature: a relatively small share of total pension provision results from schemes provided by employers on behalf of their employees, mainly through insurance companies. Second-pillar occupational pensions – private collective occupational pension schemes – are not particularly widespread, nor is there widespread use of the third pillar of occupational pensions, namely private retirement savings accounts.
IOBE proposals for reform
According to IOBE, the main problems associated with the Greek social insurance system relate, on the one hand, to an ageing population and the simultaneous decline in the birth rate. On the other hand, problems have also been identified in relation to the organisational characteristics of the system, such as the multiple exceptions from the normal retirement age, contribution evasion, fragmentation into a number of funds, and the system of taxation applied to pensions.
Therefore, IOBE calls for an urgent reform of the social insurance system providing for the following changes:
- strengthening the capitalisation basis of the system and gradually turning towards a pensions system where the second and third pillars play a greater role, thus allowing for a mixed social insurance system;
- improving active employment policies, which involves promoting regulations on social insurance provisions for maternity, as well as promoting part-time employment and active ageing;
- increasing incentives for older workers to remain in employment and restricting early retirement, thereby creating a flexible working environment that will allow older workers to continue to transfer their knowledge and know-how to younger colleagues under working conditions acceptable to them;
- combating contribution evasion both by increasing the ‘reciprocity’ of the insurance system, by creating a closer link between contributions and benefits, and also by strengthening monitoring mechanisms;
- revising the list of arduous and unhealthy occupations which entitle workers in the jobs concerned to retire early;
- combining the various social insurance funds, since their large number creates inequalities among employees with common occupational characteristics.
Study on employment and unemployment
In the second quarter of 2007, the unemployment rate fell to 8.1% – down from 8.8% in the same quarter of 2006.
By sector of economic activity, the number of people employed in agriculture, forestry and extractive industries (together sometimes referred to as the primary sector) decreased by 2.6% compared with the second quarter of 2006. At the same time, the manufacturing and construction sectors (the secondary sector) as well as the services sector (the tertiary sector) recorded increases in employment of 3.1% and 1.7%, respectively. In the secondary sector, the increase in employment resulted almost entirely from construction activities, showing a 10% increase in employment levels. In the tertiary sector, the largest increases in employment were recorded in the following subsectors: other service activities (8%), healthcare (5.8%), and hotels and restaurants (5.6%).
The proportion of total employment corresponding to paid employees in the second quarter of 2007 was estimated at 64.1%, which remains lower than the EU average (80%). This situation is due to the high rate of self-employment in Greece.
Part-time employees represented 5.8% of all employees in the second quarter of 2007. However, 43% of these workers were in part-time jobs not through choice but because they were unable to find suitable full-time employment, and 12% of these employees work part time because they are responsible for the care of young children or adults.
In terms of age, unemployment is highest among young people aged 15–29 years (17.8%). This figure is higher among young women, with 23.6% of their economically active population being unemployed.
Of all unemployed people, 88.5% are seeking full-time jobs. Some 12.9% of unemployed people had rejected a job offer because either the place of work offered was not convenient (24.3%), the pay was not adequate (20.4%) or the working hours were unsuitable (15.7%).
Commentary
At present, the social insurance system is a highly topical issue in Greece, with the government considering a number of controversial reforms (GR0801059I). IOBE also believes reform of the social insurance system to be necessary. The foundation’s proposals for change are mainly directed towards linking contributions to benefits and strengthening the second and third pillars of social insurance.
Sofia Lampousaki, Labour Institute of Greek General Confederation of Labour/Confederation of Public Servants (INE GSEE/ADEDY)