Damian Mac Con Uladh

Slashing salaries

In Greek crisis, Labour rights on 2 May 2010 at 6:35 pm

It certainly counts as the most controversial issue in the debate over the Greek government’s austerity measures – the axing of the so-called δώρα or gifts or holiday bonus from the pay packets of public and private sector employees.

Today, Economy Minister Yiorgos Papakonstantinou announced the abolition of Christmas, Easter and summer holiday bonuses in the public sector, also known as 13th and 14th salaries, for those earning above 3,000 euros a month and will be capped at 1,000 euros for those earning less.

For some civil servants, the loss to income per annum runs into the thousands. Pensioners have also been hit: their 13th and 14th pension payments have now been replaced by a flat-rate payment of 700 euros (gross). In addition, out of their remaining pensions will be deducted a “solidarity levy for the the poor” (known in Greek as the ΛΑΦΚΑ) of 7-9 percent.

As all public sector salaries have been frozen until 2014, there’s going to be a lot less money in civil servant pockets for the time being.

In Greece, all employees are effectively paid their annual income in 14 instalments: twelve payments every month; one payment at Christmas (equivalent to a month’s salary or 25 days’ pay), and a half payment at Easter and summer (each equivilant to a half-month’s salary or 15 days’ pay).

In recent weeks, the 13th and 14th salaries have come in for special attention in the world’s press, who invariably have presented them as yet another example of the wastefulness of the bankrupt Greek state, a throwback to an archaic socialist past, specifically to Andreas Papandreou’s first period in office in the 1980s.

For example, my colleague and friend John Psaropoulos wrote in the Irish Times on April 30:

“Local media have reported a series of draconian measures said to be included in the package. Among them is the complete severance of Easter, summer and Christmas bonuses in the public sector, amounting to two extra monthly salaries a year. The government had already trimmed these by 30 per cent in the last austerity package, announced in early March. Their removal would be a historic irony, as they, along with much of the welfare state, were introduced in the early 1980s by then prime minister Andreas Papandreou, father of current prime minister George Papandreou.”

However, the reality is somewhat different and less dramatic. These payments are much older, in part dating back in law to the immediate post-war period.

It’s generally neglected too that that these payments come on top of what count among the lowest wages and salaries in the European Union, and all this in a country where retail prices are generally higher than in the rest of the EU.

Nor is the situation unique to Greece. Employees are also paid in 14 tranches in Spain and Portugal.

Origins

Before the Second World War, holiday bonuses, particular for Easter, formed part of the customary law in certain localities and was contained in the collective agreements in certain industries. According to Labour historian Giannis Kordatos, in the early days of the Greek revolution, in April 1822, officials in the interim administration in liberated Corinth requested an Easter payment (Kordatos, History of the Greek Workers Movement, Athens, 1956, p. 29).

Their gradual legalisation of these payments dates back to an extremely difficult period in Greek history. In 1941, during the wartime occupation of the country, the collaborationist government passed a decee (310/1941) ordering that the Easter gift was to be paid wherever it had been customary.

Some months after the ending of the occupation, and as the country was descending into a bloody civil war, the government passed a law (539/1945, article 2, paragraph 1), stipulating that employees were entitled to a paid annual leave.

In the early 1950s, legislation was passed (Law 1901/1951, Compulsory Law 1777/1951 and Law 2053/1952) allowing the ministers of finance and labour could “jointly decide to give extraordinary financial support at Christmas and Easter, either in cash or in kind”. This practice soon became widespread in the public and the private sector.

The Easter and Christmas “gifts” were renamed allowances or bonuses in 1980, under a law (1082/1980, article 1) enacted by the New Democracy (conservative) government.

A year later, the new Pasok government passed a law (19040/1981) specifying how the holiday allowances were to be calculated and allocated.

Part of the salary

In place legally and paid out for almost 60 years and in custom for much longer, Greek employees and pensioners understandably and justifiably see the 13th and 14th salaries as an integral part of their income. They compensate for Greece’s comparatively low incomes and the absence of a proper welfare system.

In one article in conservative Kathimerini on the history of the payments, it was argued that they were “a belated application [in Greece] of the Keynesian spirit adopted since the Great Depression of 1929 in the US and Europe”.

That’s the real irony: seeing a measure introduced to help the economy in a time of crisis abolished during another crisis.

According to labour law professor Alexis Mitropoulos, since their introduction, in 1945 and 1951/52, no Greek government or private company has questioned the existence of the bonuses.

“The 14th salary (the Easter bonus and holiday pay) and the 13th salary (Christmas bonus) were designed to strengthen the purchasing power of employees. It contributed to the increase in commercial trade and the alternative consumer behaviour on the part of employees, pensioners and the unemployed.”

He expected that their abolition “would lead to the dramatic proletarianisation of wide strata of employees and pensioners”.

The effects of reduced spending power on what’s left of Greeece’s small time retailers will be immense.

Consequences

When the additional salary payments were legalised, in 1945 and 1951/52, communism held out a better future to impoverished Greeks. Perhaps by legalising them, rightwing governments hoped to kill off worker demands through kindness, much in the same way that Bismarck tried to defeat the social democrats by setting up the social welfare state.

Although the local media had claimed that the 13th and 14th salaries in the private sector were also in danger, they seem safe … for the time being. But how many times have we heard the government tell us that they were done with announcing austerity measures? I’ve a strong suspicion that in a few months the troika and employers will argue that the labour market requires standardisation. They’ll see if they can wrestle the bonus salaries from the public sector first; then we’re next.

Now that the neoliberals feel safe that there is no alternative to the wonderful, free-market world that they have created for themselves, they feel safe in destroying what they see as undeserved privilages. At the same time, they’ll continue to demand dizzying bonuses for themselves and their friends, despite the financial havoc that their system has created worldwide.

Sources:

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  1. Very good piece Damian. The so-called bonuses have for as very long time been simply seen as a component of total compensation, as are many of the “extra” payments eg., for using a computer. Most of these idiotic devices were simply subterfuges to get around arbitrary salary limits, but finally, they became so visible and risible, that it’s time they go. It’s too bad all of this wasn’t done in better times, but then what union would have agreed to anything so rational?

  2. They better not slash our ‘bonuses.’ I am a teacher and do not get paid in July and August, therefore only receive 10 month salaries (and 10 months IKA payments). Therefore I rely on these extra to get me through the other months. Plus, my salary is pitiful anyway.

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