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How credible are PASYDY’s wage claims?

By Fiona Mullen

The public-sector union, PASYDY, has said it is going to sue the government for losses incurred by public-sector unions for the cuts imposed as a result of the financial crisis.

The first range of measures for public-sector workers were imposed in late 2012. Assuming that it will take some time for the case to be heard, PASYDY could be claiming four years’ worth of losses.

The head of the union, Glafcos Hadjipetrou, was quoted as saying that workers had lost €140m per month as a result of the cuts. This would imply he is looking to claim losses of €6.7bn.

These figures, if true, would be enough to frighten off anyone thinking of investing in the country or buying government bonds. Fortunately, it is quite straightforward to prove that the reported claims are false.

At its peak in 2011, the government spent €2.9bn on compensation of employees. This translates into €240m per month if one divides by 12 months (or €221m if one divides by 13 salaries). If the government had cut €140m per month from public-sector workers, then one should expect compensation of employees to have dropped to just €100m per month, or just €1.2bn per year.

Instead, compensation had fallen to €2.2bn by 2015. Moreover, this is before counting the decline of almost 7,000 in the public sector workforce, which shrank from 71,552 in 2011 to 63,581 in the first three quarters of 2015.

Ironically, average compensation of employees actually rose on a per-capita basis from €24,831 per year in 2011 to €28,059 in 2015. It is not clear why this is the case, especially as ‘casual workers’ have actually risen in the same period.

But one can assume that the 7,000 who left must have been generally on a lower pay-scale than those who stayed.
PASYDY will no doubt claim that workers have seen other cuts in net pay because of temporary additio-nal taxes. But this is also true of everyone else.

That fact is important, because the main basis of PASYDY’s claim is that it violates Article 24(1) of the Constitution: “Every person is bound to contribute according to his means towards the public burdens”. It believes that the cuts have fallen disproportionately on public-sector workers.

According to my calculations based on earnings per sector, public-sector workers have on average seen steeper cuts, with earnings dropping by 7.9% in 2011-2014 compared with 2.9% for the private sector. However, they are also paid considerably more in the first place.

In 2011 they were paid 25% more than the private sector; in 2015 they were paid 19% more (or 26% if one excludes the well-paid financial sector). It will be interesting to see if the Supreme Court takes the differences in pay levels into account when deciding how to interpret “according to his means”.

Fiona Mullen is Director of Sapienta Economics www.sapientaeconomics.com

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