Friday, 17 March 2006

Employers' New Social Role

A year after sparking exploratory labour reforms in this country, the conservative government has shown unmistakably that it is committed to overhauling established labour practice. In an advancing series of steps, it has begun to unravel the constrictive labour regime that has been partly responsible for low investment, both domestic and from abroad. 

The reforms began tentatively in May last year with a pilot voluntary redundancy scheme at OTE for up to 6,000 employees. Another pilot scheme in June consolidated banks' social insurance funds, and reduced the generosity of benefits.

Both those pilot projects have now been advanced. The banking sector, part-publicly owned, has cast off its pentagenarian obligation to negotiate industry-wide wage deals. OTE is preparing to renegotiate its general work rules with its union. The biggest issues at stake include removing restrictions on hiring and firing, and understandably so. OTE CEO Panagis Vourloumis told this newspaper that he is hamstrung by an inability to hire managers and executives from the market place. Only entry-level hiring is possible, and all promotion must be from within. It is highly doubtful whether the most visionary talent scout can possibly predict who will make a good manager or executive thirty years down the road.

Salary policy is also circumscribed at the telco, with raises fixed to seniority rather than merit. That removes one of the most basic levers at management's disposal to promote productivity or punish uselessness.
The reforms are politically brave, and they increasingly seem to be part of a concerted development policy that has included an entrepreneurship incentive law, a tax cut for corporations (now to be followed by a tax cut for individuals) and a law ending lifelong tenure at all listed public companies.

A Competitiveness Report presented by the development and finance ministries last May now sounds prescient: "There is room for substantial increase in versatility" in labour conditions., it said on page 53.
In rolling out these reforms, New Democracy has shown stealth, patience and a reasonable balance of determination and open-mindedness. Their clear message is that the publicly-minded 'social role' touted by state-controlled companies is at an end, and the logic of the private sector is winning ground. Even a government can no longer afford to preserve unproductive employees.

Over the long term, the success of the reforms will be judged primarily by whether they have reduced unemployment; but also by whether they have made the growing ranks of the employed happy.

Employee happiness is now the question at stake as the chairman of the Federation of Greek Industries, Odysseas Kyriakopoulos, has upped the ante in refusing to negotiate a national wage agreement this year, and, more recently, in declaring that below-inflation salary increases are adequate.  

Again, the government's Competitiveness Report seems to have warned that reformist policy would move in this direction. On page 6 it said, "Salary policy, which the public sector often sets the tone for, has often been expansive. All the indications are that public sector productivity has shown no improvement. Salary increases under these circumstances may be obligatory for social reasons, strengthen demand and help raise GDP, but they adversely effect competitiveness. In general, Greek salaries are rising faster than in the EU25..."

Kyriakopoulos, too, favourably compares the rate of salary increase in Greece with EU countries of similar inflation.

In the new labour arena, unions and their stiff rule books are being forced back and employees, unionised and non, are being brought closer to the humanity and judgement of their employers. In a sense this is fairer to both sides, because employers should have the flexibility to deliver the benefits they can afford, but also to obligation to share information with their staff when they cannot. As we set sail for the open seas of flexible labour, employers should remember that their new freedom can also damn them. Company reputations will now be built partly on the basis of good labour practices, including salaries and benefits. In terms of social responsibility, Greek firms are seriously behind. Few have facilities that help their staff be more productive such as day-care centres and gyms. Few offer auxiliary retirement schemes with matching company funds. For the majority of employers, acquiring freedom is going to prove much easier than disposing of it well.
The open seas also make it more important that there be some benchmark rules, such as a national minimum wage and an absolute ceiling of weekly work hours. If industry is going to rely on governments to provide physical infrastructure, defence, social stability and social security, it can concede on an absolute foundation that helps governments do their job.