Wage differentials in Greece

1. Wage differentials in Greece • Inter-industry wage differentials • Occupational wage differentials • Gender pay gap • Minimum vs average wage • Public sector / private sector wage differentials Elias Ioakimoglou Institute of Labour GSEE Athens, Greece January 2007 next

2. The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

3. The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

4. The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages

5. The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages Wages an industry is willing to pay Balance of bargaining power Extra Profits

6. The average industry wage depends on industry profitability… • The maximum average wage that an industry is willing to pay depends on industry profitability, itself depending on • labour productivity • capital productivity and • the ability of the industry to impose prices higher than competitive prices The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage where (wk) is the maximum nominal wage industry (k) is willing to pay (πk) is labour productivity (πk/κk)is capital productivity (pk) and (pcap) are value added and fixed capital prices (R) is average profitability across industries Public / private sector wages Wages an industry is willing to pay Balance of bargaining power Extra Profits

7. … and on the bargaining power of workers • The maximum average wage that industry (k) is willing to pay is not what is actually paid (wk) • When bargaining at the industry (k) level, workers target the maximum average wage that industry (k) is willing to pay, if there are extra-profits in this industry (); otherwise they target the “necessary wage”, which acts as a wage floor. • They obtain then a wage that depends on their target one hand and on their bargaining power on the other. The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage where (Wk) is nominal wage actually paid in industry (k) (wk) is the maximum nominal wage industry (k) is willing to pay (λk)is an index of the balance of power between workers and employers Public / private sector wages Wages an industry is willing to pay Balance of bargaining power Extra Profits

8. Industry rates of return deviate from average profitability The average wage • When demand persistently exceeds productive capacity • Progress in technology and work organization is continuous and • Competition is reducedfor long periods of time Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages Wages an industry is willing to pay Balance of bargaining power Extra Profits

9. Occupational wage differentials (2002) Hourly wages (plus overtime) The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

10. The quality of the workforce explains occupational wage differentials • Differences in occupational wages within industriesare independent of industry-specific characteristics. • Occupational wages vary around the average industry wage depending on the characteristics of occupation (j) in industry (k). • Characteristics of occupations: years of schooling, age (professional experience) and tenure in (j,k). • Job variables: shift work, overtime and other variables leading to compensating differentials in (j,k). The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

11. The accumulation of professional experience is faster for non manual workers Hourly earnings by occupation and age Euros per hour (overtime included) Senior officials and managers The average wage Inter-industry wage differentials Professionals Occupational wage differentials Technicians Gender pay gap Clercs Minimum vs average wage Service, shop & market sales workers Public / private sector wages Elementary occupations

12. Occupational wage differentials by gender (2002) Hourly wages (plus overtime) The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

13. Accumulated labour market experience Formal knowledge and skills, ability to performcomplicated tasks Accumulation of firm-specific skills, recent work experience Family allowances, wage premium for men, andwage discount for women relatedto familyresponsibilities Discrimination against migrants Increased average hourly wage rate for extra work Increased average hourly wage rate for shifts Lower bargaining power of part-timers but higher non-wage costs Compensating differentials Market power and productivityof the firm Higher bargaining power of employees in the firm(collective) Higher bargaining powerof employees (individual) Impact of occupational and industry segregation onwages Under-valuation of female work (effect of gendersegregation on averageoccupational wages) Factors affecting the gender pay gap next

14. Industry Services Share of the gap Share of the gap Segregation effect of which:Under-valuation effect Distribution effect 56.5% 17.8% 38.7% 50.4% 18.3% 32.2% Gender differences inobserved characteristics 16.9% 25.6% Wage discrimination byemployers 0,7% -3.0% Gender differences in unobserved characteristics + wage discrimination by employers unrelated to observed characteristics 25.9% 27.0% Gender Pay Gap(% of the average male pay) 100% 100% Decomposition of the Gender Pay Gap in Greece The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages

15. Minimum wages are lagging behind the average The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

16. Minimum wage is now 42% of the average wage The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages

17. Public / private sector wages Papapetrou E (2006) • In Greece, the average wage is higher in the public sector than in the private sector for both genders • The difference in wages between sectors is mainly attributed to the employee’s endowment. • However, in the lowest quantile a significant part of the wage difference between sectors (almost 50%) is due to the advantage of public sector and the disadvantage of the private sector. • In the highest quantile the wage difference is mainly attributed to the employee’s characteristics • The pattern of this finding is similar for male and female employees. • These findings may explain the behaviour of the less-skilled male and female employees who prefer to be employed in the public sector at the early stages of their career than accept the relatively low-paying jobs in the private sector. • On the other hand, the advantage of the private sector in the upper range of the wage distributions may explain the flight of senior managers from the public to the private sector The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages