The new one is priced at 780 eurosfrom the 713 euros that was from May 1, 2022. The new salary will be implemented from April 1, 2023.
The Ministry of Labor issued an information note in relation to the minimum wage.
1. On what grounds was it decided to increase the minimum wage by 9.4% to 780 euros?
The decision is the golden intersection between two things: the need to support workers, especially low-wage workers, who have been affected by imported inflation, and the need not to affect the resilience of businesses, which are also affected by the international economic crisis and the increase in production costs. It is also a golden ratio between the different proposals submitted by employees and employers. It would be easy for the government to go ahead with a bigger increase, especially in the run-up to an election and since the increase is a burden on businesses and not on the government budget. This would not be responsible, however, as it would undermine the foundations on which the growth of the economy is based and ultimately the reduction of unemployment and the improvement of workers’ wages.
To determine the minimum wage, the reduction of unemployment from 17.5% in the summer of 2019 to 10.8% in January 2023, the growth of the economy that is expected to continue this year, the rise in exports and high inflation were taken into account. . But on the other hand, factors such as productivity, competitiveness, but also the increase in business costs were taken into account so that the decision was indeed sustainable. Thus it was decided to increase the minimum wage to 780 euros per month, or 910 euros if it is taken into account that 14 wages are paid annually and, correspondingly, the minimum daily wage to 34.84 euros.
2. However, from some quarters it is pointed out that inflation has already compensated for this increase. Why didn’t you go for a bigger increase given the inflationary pressures on incomes?
Inflation is indeed high both in Greece and internationally. But it is not accurate that it is higher than the minimum wage increase. According to the relevant data, the general price index is expected to be increased by 15.1% in 2023 compared to 2019, while the cumulative increase in the minimum wage during the same period will amount to 20%. Specifically, from the 650 euros that was the minimum wage in 2019, it now increases to 780 euros. So the minimum wage in the four years 2019-2023 will have increased clearly more than inflation. And the increase in the net minimum wage is even higher (21.8% against 15.1% of inflation).
3. The government had however pledged that the increase in the minimum wage would be twice the growth rate, which in 2021 was 8.3% and in 2022 5.9%.
This commitment is not only kept in full, but also with the above. Taking into account the recession of 2020, but also the expected growth rate for 2023 (1.8%), it is concluded that the GDP in the four years 2019-2023 will have shown a growth rate of 6.5% (from 190.5 to 202.77 billion euros). The minimum wage increase over the same period is 20%. That is, more than three times the increase in GDP!
4. What is the final net amount that will be pocketed by the workers from April 1st?
The net amount, after deducting the insurance contributions and income tax from the 780 euros, is 667 euros (from 548 euros in 2019). However, this amount is multiplied by 14, as gifts and leave allowance are paid each year. Thus, with a reduction to a 12-month basis, the net minimum wage reaches 778 euros per month (from 639 euros in 2019). The annual net income of workers paid the minimum wage is 9,336 euros (from 7,667 euros in 2019). Therefore the increase from 2019 is 1,669 euros per year or, alternatively, three additional net salaries per year.
5. The new minimum wage exceeds the tax-free threshold. What will be the tax burden of those paid with it?
Even after accounting for the effect of taxation, minimum wage workers are, as already pointed out, significantly better off. Specifically, while the annual net income of 2022 was 8,597 euros, it now stands at 9,336 euros. In other words, their net income after paying any taxes will be 739 euros higher. Any contrary opinion is absolutely unfounded.
6. How many workers are paid the minimum wage and will their wages be directly affected from April 1st? And what are the estimated effects on the entire economy?
The number of minimum wage earners in 2022 decreased by 60,000 people (from 646,000 to 585,000). This happened because the growth of the economy and the reduction of unemployment led overall to an increase in wages, above the minimum, which is certified by both the ELSTAT surveys and the data of PS ERGANIS (ERGANI data show that the average monthly earnings in 2022 increased by 12.4% compared to 2019, a rate that exceeds the rise in inflation that took place). We expect the same to happen with the upcoming increase in the minimum wage, in order to further improve wages in our country.
7. Which benefits are affected by the increase in the minimum wage and how are they shaped from April 1?
The increase in the minimum wage implies an increase in the unemployment benefit, which from April 1st is 479 euros per month (from 438 euros previously and 399 euros in 2019). The cumulative increase in unemployment benefit from 2019 is 80 euros per month.
A series of benefits and allowances based on the minimum wage or daily wage are also being adjusted. These include, among others, the unemployment benefit for the self-employed, the new job programs, the special end of unemployment benefit, the benefit due to suspension of work, special seasonal benefits for employees in the tourism and food industry, builders, forest workers, etc., the special maternity allowance, the parental leave allowance, the unpaid wages due to the insolvency of the employer, the availability allowance, the compensation of the students in the Vocational Apprenticeship Schools of DYPA, the compensation for the work experience programs, etc.
8. What about three years?
The regime governing the three years does not change. For eleven years now, with three different governments, the same legislation has been applied. This status, based on the legislation, will change when unemployment is reduced to below 10%. Therefore, the increase announced for the minimum wage and the minimum daily wage benefits even more the workers who had completed at least one three years in their work on February 14, 2012. These workers will have additional earnings which can reach up to 30% depending on years of service. This means that the gross minimum wage for these workers can reach up to 1,183 euros on a twelve-month basis, and the annual benefit in relation to 2019 ranges from 2,002 euros to 2,366 euros.
9. What positions did the scientific and social bodies express in the context of the consultation?
All were in favor of the increase but with significant differences in terms of its amount. Specifically:
• The Bank of Greece, IOBE and the majority of employers’ representatives (SEB, ESEE, SETE, SBE) proposed a “reasonable increase” of the minimum wage within the limits of expected inflation, focusing on the need to maintain the competitiveness of the Greek economy.
• The KEPE, although it recognizes that “an increase of more than 3-4% will increase unit labor costs”, nevertheless concludes that a larger increase could be given, corresponding to the one recently given to pensioners, “because the rest of the countries with which we are competing are expected to significantly increase their minimum wages.”
• GSBEE proposes an increase of 8% “as a measure to combat the poverty of low-wage workers whose income is spent on groups of goods that show the largest price increases”.
• GSEE proposes an increase of 15.8% so that the new minimum wage rises to 826 euros.
10. Is there a risk that the increase in the minimum wage will lead to a loss of competitiveness, layoffs and an increase in unemployment?
As pointed out, when making the decision, the economic data, the strengths of the companies, the needs of the employees and the positions formulated in the context of the consultation were carefully weighed. The new minimum wage is balanced between the proposals made by the bodies that participated in the consultation. In any case similar reservations expressed in 2022 were not confirmed in practice. On the contrary, despite the increase not only in minimum but also in total wages, unemployment remained on a downward trajectory while exports and tourism moved to record levels. Which means that the international competitive position of the country was not affected.
11. Where does Greece rank among EU countries in terms of the amount of the minimum wage after the increase that was decided?
The new minimum wage is the tenth highest of all 22 EU member states that have a statutory minimum wage. Greece was previously ranked 13th. A similar development is observed in the ranking of the Greek minimum wage in relation to purchasing power: while until yesterday Greece was in 18th place out of a total of 22 EU member states that have a legislated minimum wage, with the new increase in the minimum wage it rises to 13th position.
12. Do you think that the minimum wage as of April 1 is a sufficient income for an employee?
Do not forget that the minimum wage is the minimum salary limit, i.e. the security threshold set by the State as a minimum wage for work. In addition to this, one must take into account the allowances and benefits that already applied to the most vulnerable population groups (e.g. housing benefit, child benefit) and were strengthened by the current government, but also the new subsidies/income support for households, which were established during the crisis period (prepaid cards for purchases of fuel and supermarket items, increased heating allowance, subsidy on the consumption of electricity and natural gas, etc.). Indicative:
• A minimum wage worker with two children receives €3,780 a year in housing benefit and child benefit on top of their salary.
• The market pass is configured for a one-person household at 132 euros and for a couple with two children at 312 euros.
• In the energy sector, the heating allowance, from 184 euros on average, has risen to 242 euros, while due to the increase in income criteria, 290,000 more beneficiaries received it.
• In addition, with the subsidies paid every month to electricity consumers, up to 90% of the increase in tariffs is absorbed with an amount exceeding 8.2 billion euros since the beginning of the crisis.
In any case, however, the challenge remains for a further significant increase in wages in Greece, which can primarily be supported by the dynamic growth of the Greek economy.