Responding to the Unemployment Crisis in Greece: An ‘Employer of Last Resort’ Proposal
Rania Antonopoulos
LEVY ECONOMICS INSTITUTE OF BARD COLLEGE AND FORD FOUNDATION
(joint work with Kim Kijong and Thomas Masterson)
The Eurozone Crisis, Greece, and the Experience of Austerity Athens, Greece, November 8−9, 2013
The Issues
• Economic Outcomes and Unemployment
• Responding to unemployment :the need to Re-orient Active Labor Market Policies and Dispelling Myths
• Τhe Employer of Last Resort and Why for Greece NOW: scaling up “Koinofeli Ergasia”
• The Proposal: Macroeconomic Outcomes of 4 scenaria
• Options for Financing
Economic Outcomes
and
Unemployment
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2
General Government Expenditure Household Disposable Income, Gross Household Final Consumption Expenditure
Government Spending Disposable Income, Consumption Expenditures
Source: Bank of Greece (BoG). 2013
Consumer Sentiment Indicator Major Purchases and Savings
Economic Sentiment Indicator
12%
27. 6%
EU - Unemployment rates 2008 and 2013 2008 2013.Q2 2008 2013.Q2
EU-27 7.1 10.9 Lithuania 5.9 11.9
Euro-17 7.6 12 Luxembourg 5.1 6.2
Belgium 7.0 8.1 Hungary 7.9 10.3
Bulgaria 5.7 13 Malta 6.1 6.8
Czech Rep. 4.4 6.8 Netherlands 2.7 6.7
Denmark 3.5 6.9 Austria 3.9 4.6
Germany 7.6 5.4 Poland 7.2 10.6
Estonia 5.6 8.4 Portugal 8.1 17.2
Ireland 6.1 14.1 Romania 6.1 7.8
Greece 7.8 27.3 Slovenia 4.5 10.5
Spain 11.4 26.4 Slovakia 9.5 14.1
France 7.4 9.8 Finland 6.4 9.3
Italy 6.8 12.2 Sweden 6.3 9.0
Cyprus 3.8 15.7 UΚ 5.7 7.8
Latvia 7.7 11.6
Responding to unemployment :
Re-orienting Active Labor Market Policies and Dispelling Myths
0
10
20
30
40
50
60
70
EU 2
7
EU 1
7
Bel
giu
m
Bu
lgar
ia
Cze
ch R
ep
Den
mar
k
Ger
man
y
Esto
nia
Irel
and
Gre
ece
Spai
n
Fran
ce
Ital
y
Cyp
rus
Latv
ia
Lith
uan
ia
Luxe
mb
ou
rg
Hu
nga
ry
Mal
ta
Net
her
lan
ds
Au
stri
a
Po
lan
d
Po
rtu
gal
Ro
man
ia
Slo
ven
ia
Slo
vaki
a
Fin
lan
d
Swed
en UK
Unemployment rates by age (2013Q2) 15-24
25-64
Source: Unemployment rates by age and nationality (%) [lfsq_urgan], Eurostat. (extracted Oct.14.2013)
0
10
20
30
40
50
60
70
80
90
100
EU 2
7
EU 1
7
Bel
giu
m
Bu
lgar
ia
Cze
ch R
ep.
Den
mar
k
Ger
man
y
Esto
nia
Irel
and
Gre
ece
Spai
n
Fran
ce
Ital
y
Cyp
rus
Latv
ia
Lith
uan
ia
Luxe
mb
ou
rg
Hu
nga
ry
Mal
ta
Net
her
lan
ds
Au
stri
a
Po
lan
d
Po
rtu
gal
Ro
man
ia
Slo
ven
ia
Slo
vaki
a
Fin
lan
d
Swed
en UK
Unemployment shares by age (2013Q2) 15-24
25-64
Source: Unemployment rates by age and nationality (1000) [lfsq_ugan], Eurostat. (extracted Oct.14.2013)
Shares of Unemployment by Age group, 2013 Q2
21%
79%
EU 27
15-24 25-64
13%
87%
Greece
15-24 25-64
18%
82%
EURO 17
15-24 25-64
Τhe Employer of Last Resort
and why for Greece NOW:
scaling up “Koinofeli Ergasia”
Typology of Direct Job Creation Government Programs
The Right to Work
Cyclical Unemployment during ‘Normal Times’
ILO Employment Intensive Investment Programs
Financial Crisis Emergency Programs
Structural Adjustment / Austerity –
Social Funds projects
Τhe state as the Employer of Last Resort (ELR) Το κράτος «εργοδότης ύστατης προσφυγής»
• Economic versus Social policy ? Coherent Objectives • να δημιουργήσει άμεση απασχόληση για τους άνεργους,
και ειδικά για τους μακροχρόνια άνεργους, με βασικό μισθό – βάζοντας φρένο στην διολίσθηση ημερομισθίων– και τηρώντας τα νόμιμα εργασιακά δικαιώματα
• να δημιουργήσει θέσεις εργασίας με κοινωνική χρησιμότητα (κοινωφελή έργα και κοινωφελείς υπηρεσίες) ενισχύοντας έτσι το βιοτικό, επιμορφωτικό και πολιτιστικό επίπεδο ζωής σε τοπικό η περιφερικό επίπεδο
• να επισπεύσει από μακρο-οικονομικής πλευράς, θετικά πολλαπλασιαστικά αποτελέσματα που κατά συνέπεια θα μειώσουν την ανεργία περεταίρω
The Proposal:
4 scenaria and their
Macroeconomic Outcomes
Costing and ex-ante program effects: 4 scenarios* Scenario 1 Target for PKE jobs: 550,000 per year Offered wage: 586 euros per month Total cost of the PKE: 7,1 billion
1
Total number of new jobs created 713,043
Direct PKE jobs2 557,974
Indirect jobs2 155,069
Increase in Output3 (GVA) 11,6 billion
Increase in Government Revenue4 3,99 billion
of which
1. PKE Direct Social contributions5 1,26 billion
of which
Employers' contributions 668 million
Employees' contributions 594 million
2. Indirect taxes (VAT)6 668 million
3. Direct taxes 2,06 billion
of which
Current taxes on income7 etc. 606 million
Employees' social contributions8 567 million
Employers' social contributions9 887 million
Scenario 2 Target for PKE jobs: 550,000 per year Offered wage: 751 euros per month Total cost of the PKE: 9,1billion
Total number of new jobs created 756,679
Direct PKE jobs2 557,974
Indirect jobs2 198,705
Increase in Output3 (GVA) 14,8 billion
Increase in Government Revenue4 5,1 billion
of which
1. PKE Direct Social contributions5 1,6 billion
of which
Employers' contributions 856 million
Employees' contributions 761 million
2. Indirect taxes (VAT)6 856 million
3. Direct taxes 2,6 billion
of which
Current taxes on income7 etc. 777 million
Employees' social contributions8 727 million
Employers' social contributions9 1,1 billion
Scenario 3 Target for PKE jobs: 250,000 per year Offered wage: 586 euros per month Total cost of the PKE: 3,2 billion
Total number of new jobs created 319,470
Direct PKE jobs2 250,000
Indirect jobs2 69,469
Increase in Output3 (GVA) 5,19 billion
Increase in Government Revenue4 1,79 billion
of which
1. PKE Direct Social contributions5 565 million
of which
Employers' contributions 299 million
Employees' contributions 266 million
2. Indirect taxes (VAT)6 299 million
3. Direct taxes 923 million
of which
Current taxes on income7 etc. 272 million
Employees' social contributions8 254 million
Employers' social contributions9 398 million
Scenario 4 Target for PKE jobs: 250,000 per year Offered wage: 751 euros per month Total cost of the PKE: 4,1 billion
Total number of new jobs created 339,030
Direct PKE jobs2 250,000
Indirect jobs2 89,030
Increase in Output3 (GVA) 6,6 billion
Increase in Government Revenue4 2,3 billion
of which
1. PKE Direct Social contributions5 724 million
of which
Employers' contributions 383 million
Employees' contributions 341 million
2. Indirect taxes (VAT)6 383 million
3. Direct taxes 1,2 billion
of which
Current taxes on income7 etc. 348 million
Employees' social contributions8 326 million
Employers' social contributions9 509 million
*Please do not quote: Preliminary results based on a study undertaken in collaboration with INE/GSEE. Final study results TBA shortly
550,000 jobs at 586 euro/month Scenario 1 Target for PKE jobs: 550,000 per year Offered wage: 586 euros per month Total cost of the PKE: 7,1 billion
1
Total number of new jobs created 713,043
Direct PKE jobs2 557,974
Indirect jobs2 155,069
Increase in Output3 (GVA) 11,6 billion
Increase in Government Revenue4 3,99 billion
of which
1. PKE Direct Social contributions5 1,26 billion
of which
Employers' contributions 668 million
Employees' contributions 594 million
2. Indirect taxes (VAT)6 668 million
3. Direct taxes 2,06 billion
of which
Current taxes on income7 etc. 606 million
Employees' social contributions8 567 million
Employers' social contributions9 887 million
Item
Sum (million euro)
Monthly rate
(euro)* Workers Months
Total costs of ELR program 7,107
Wage componet
ELR Total Wage Cost 4,264 695
of which
Employers' social contributions 668 18.56%
Gross Wages 3,597 586 557,974 11
of which
Employees' social contributions 593 16.50%
Net wages 3,003 489
Non-wage component
Intermediate consumption 2,701
of which
Domestically produced 2,129
Imported 572
Administrative costs 142
550,000 jobs at 751 euro/month Scenario 2 Target for PKE jobs: 550,000 per year Offered wage: 781 euros per month Total cost of the PKE: 9,5 billion
1
Total number of new jobs created 756,679
Direct PKE jobs2 557,974
Indirect jobs2 198,705
Increase in Output3 (GVA) 14,8 billion
Increase in Government Revenue4 5,1 billion
of which
1. PKE Direct Social contributions5 1,6 billion
of which
Employers' contributions 856 million
Employees' contributions 761 million
2. Indirect taxes (VAT)6 856 million
3. Direct taxes 2,6 billion
of which
Current taxes on income7 etc. 777 million
Employees' social contributions8 727 million
Employers' social contributions9 1,14 billion
Item
Sum (million euro)
Monthly rate
(euro)* Workers Months
Total costs of ELR program 9,108
Wage componet
ELR Total wage 5,465 890
of which
Employers' social contributions 856 18.56%
Gross Wages 4,609 751 557,974 11
of which
Employees' social contributions 761 16.50%
Net wages 3,849 627
Non-wage component
Intermediate 3,461
of which
Domestic 2,728
Imported 733
Administrative costs 182
250,000 jobs at 586 euro/month Scenario 3 Target for EPK jobs: 250,000 per year Offered wage: 586 euros per month Total cost of the PKE: 3,2 billion
Total number of new jobs created 319,470
Direct PKE jobs2 250,000
Indirect jobs2 69,469
Increase in Output3 (GVA) 5,19 billion
Increase in Government Revenue4 1,79 billion
of which
1. PKE Direct Social contributions5 565 million
of which
Employers' contributions 299 million
Employees' contributions 266 million
2. Indirect taxes (VAT)6 299 million
3. Direct taxes 923 million
of which
Current taxes on income7 etc. 272 million
Employees' social contributions8 254 million
Employers' social contributions9 398 million
Item
Sum (million euro)
Monthly rate
(euro)* Workers Months
Total costs of ELR program 3,184
Wage componet
ELR Total wage 1,911 695
of which
Employers' social contributions 299 18.56%
Gross Wages 1,612 586 250,000 11
of which
Employees' social contributions 266 16.50%
Net wages 1,346 489
Non-wage component
Intermediate 1,210
of which
Domestic 954
Imported 256
Administrative costs 64
250,000 jobs at 751 euro/month Scenario 4 Target for PKE jobs: 250,000 per year Offered wage: 781 euros per month Total cost of the PKE: 4,2 billion
1
Total number of new jobs created 339,030
Direct PKE jobs2 250,000
Indirect jobs2 89,030
Increase in Output3 (GVA) 6,6 billion
Increase in Government Revenue4 2,3 billion
of which
1. PKE Direct Social contributions5 724 million
of which
Employers' contributions 383 million
Employees' contributions 341 million
2. Indirect taxes (VAT)6 383 million
3. Direct taxes 1,2 billion
of which
Current taxes on income7 etc. 348 million
Employees' social contributions8 326 million
Employers' social contributions9 509 million
Item
Sum (million euro)
Monthly rate
(euro)* Workers Months
Total costs of ELR program 4,081
Wage componet
ELR Total wage 2,449 890
of which
Employers' social contributions 383 18.56%
Gross Wages 2,065 751 250,000 11
of which
Employees' social contributions 341 16.50%
Net wages 1,724 627
Non-wage component
Intermediate 1,551
of which
Domestic 1,222
Imported 329
Administrative costs 82
Monthly Wage
PKE target : 550,000 Jobs PKE target: 250,000 jobs
586 euros
Total Jobs : 713,043 Total Cost: 7.1 billion Tax Revenue: 3.99 billion Net Cost: 3.1 billion Annual effective cost per job created: 4,347 euros
Total Jobs : 319,470 Cost: 3.2 billion Tax Revenue:1.8 billion Net Cost: 1.4 billion Annual effective cost per job created: 4,382
751 euros
Total Jobs : 756,679 Cost: 9.1 billion Tax Revenue: 5.1 billion Net Cost: 4.0 billion Annual net cost per job created: 5,286 euros
Total Jobs : 339,030 Cost: 4.1 billion Tax Revenue: 2.3 billion Net Cost: 1.8 billion Annual net cost per job created: 5,309 euros
Options for Financing
Sources of Financing IMMEDIATE CREATION OF A NATIONAL EMPLOYMENT FUND TO WHICH FUNDS CAN FLOW FROM: A newly established "European Fund Against Unemployment " which will devotes a percentage of a corresponding institution in Greece , the Greek Employment Fund (Commissioner Ardor's proposal): (i.e., 500 million) The restructuring of existing ΕΣΠΑ funds (Εθνικό Στρατηγικό Πλαίσιο Αναφοράς or NSRF (National Strategic Reference Framework) 600 million Funds from the European Investment Bank through the institutionalization of a lending facility for reconstruction and development 1 billion A dedicated percentage of the proceeds from gains made against tax evasion 1billion Debt re-negotiation linked to a specific proposal is support of the National Employment Fund …..
Χρηματοδότηση ΑΜΕΣΗ ΔΗΜΙΟΥΡΓΙΑ ΕΝΟΣ ΕΘΝΙΚΟΥ ΤΑΜΕΙΟΥ ΑΠΑΣΧΟΛΗΣΗΣ ΣΤΟ ΟΠΟΙΟ ΜΠΟΡΟΥΝ ΝΑ ΕΙΣΡΕΟΥΝ ΠΟΡΟΙ ΑΠΟ Την εγκαθίδρυση «Ευρωπαϊκού Ταμείου Κατά της Ανεργίας» το οποίο να αφιερώνει κάποιο ποσοστό σε ένα αντίστοιχο φορέα στην Ελλάδα, στο Ελληνικό Ταμείο Απασχόλησης 500 εκ. Την αναδιάρθρωση των κονδυλίων του ΕΣΠΑ 600 εκ. Δανειακή Χρηματοδότηση από την Ευρωπαϊκή Τράπεζα Επενδύσεων 1 δισ. Την αντιμετώπιση της φοροδιαφυγής. Ένα ποσοστό έσοδων από την μείωση της φοροδιαφυγής θα μπορούσαν να στηρίξουν το Εθνικό Ταμείο Απασχόλησης 1 δισ. Διαπραγμάτευση για μείωση των δανειακών υποχρεώσεων της Ελλάδας με συγκεκριμένη πρόταση για ισόποση χρηματοδότηση κοινωνικής/κοινωφελούς εργασίας ….
www.levyinstitute.org
Compilation of industries
• PKE projects 5 Industries (NACE Rev.2)
• Absence of actual budget allocation on projects, nor project spending on inputs; program- specific wage rates hypothetical integration method (Kim, 2011).
• Compilation of existing input compositions of the industries, with wage : non-wage of 60:40 percent.
• Share of inputs are within lower and upper bounds.
Kim K. (2011) “Ex-ante evaluation of a targeted job program:
Hypothetical integration in a social accounting matrix of South Africa.” Economic modelling 28: 2683-2690.
13 13 9 2 15 8
29
55
38
4
29 30
30
15 38
72
57 60
28 17 15 23
0 2
Import Domestic Compensation GOS
Leontief I-O model with household
• 2010 symmetric, domestic input output table: domestic employment from domestic production.
• Public sectors-public administration, education, health and social works- are fixed as constant to replicate austerity measures: mixed model approach.
• 5 household groups by income quintiles to represent income as selection criteria.
(sources: 2010 household budget survey, El.Stat. for consumption; 2010 EU-SILC for wages and salaries by industry)
• Disposable income method: to deflate household expenditure coefficients by ratio of disposable to total income (69%) to avoid over-estimation of induced effects of household consumption.
(ex. RIMS II model by Bureau of Economic Analysis, U.S. Dept. of Commerce; IMPLAN group)
Quantity vs. Price changes
96
98
100
102
104
106
108
110
112
114
1 2 3 4 5 6 7 8 9 10 11 12
2013
2012
2011
2010
110
115
120
125
130
135
140
145
20
10
_01
20
10
_05
20
10
_09
20
11
_01
20
11
_05
20
11
_09
20
12
_01
20
12
_05
20
12
_09
20
13
_01
20
13
_05
Fig. Consumer price index on the left; Producer price index on the right from 2010-2013. Source: consumer price index (CPI) and producer price index in industry (PPI), Hellenic Statistical Authority.
2013 with 2010 tables?
• Inevitable time delay in compiling the tables. For symmetric, domestic table, 2010 is the latest one.
• Rapid decline of the Greek economy: is economic structure in 2010 similar to the one in 2013?
• Industry growth; 2009-2010 is a turn-around period for many industries, and following years show one directional pattern of change.
• A look-back approach: if the structure in 2009 at the turn-around period shows stability, it is reasonable to extrapolate that 2010 table can represent the later years.
Industry 2009 2010 2011 2012
Agriculture, forestry and fishing -0.3 -1.1 -2.0 -6.9
Mining and quarrying; manufacturing; electricity, gas, steam and air conditioning supply; water supply; sewerage, waste management and
remediation activities (environmental service) -1.1 5.0 -7.5 0.0
Construction -24.0 -35.8 -32.7 -20.7
Wholesale and retail trade; repair of motor vehicles and motorcycles; transportation and storage; accommodation and food service activities
-7.2 -2.4 -8.5 -13.0
Information and communication 9.3 -7.3 -6.0 -6.6
Financial and insurance activities -1.8 0.3 -3.1 -7.1
Real estate activities 7.1 -5.0 5.7 -1.6
Professional, scientific and technical activities; administrative and support service activities
11.5 -13.2 -20.1 -6.9
Public administration and defense; compulsory social security; education; human health and social work activities
9.3 -7.1 -5.4 -5.2
Arts, entertainment and recreation, repair of household goods and other services
11.6 0.4 1.7 -11.8
Gross Value Added (at basic prices) 0.4 -5.2 -6.2 -6.9
Taxes less Subsidies on Products -10.6 6.9 -5.7 -8.5
Gross Domestic Product (at market prices) -0.9 -3.9 -6.1 -7.1
Annual growth rate of output by industry (percent)
Source: gross value added by industry (A10) 2000-2012 and gross domestic product, annual national accounts by Hellenic Statistical Authority. Note: values are in current prices to be comparable to the current price valuation in the input output table.
Stability (1): Output by industry (2009-10)
• Comparison of 2010 observed industry output to estimated output using 2009 multiplier matrix from 2009 table.
• Y2010≈ M2009* F2010
0
5000
10000
15000
20000
25000
30000
35000
0 5000 10000 15000 20000 25000 30000 35000
20
10
, est
imat
ed
2010, observed (million euro)
Stability (2): Inputs of 5 industries and the new sector (2009-10)
0
0.02
0.04
0.06
0.08
0 0.02 0.04 0.06 0.08
Enviromental services
0
0.03
0.06
0.09
0.12
0 0.03 0.06 0.09 0.12
Construction
0
0.01
0.02
0.03
0.04
0.05
0 0.01 0.02 0.03 0.04 0.05
Security; services to buildings and landscape
0
0.004
0.008
0.012
0.016
0 0.004 0.008 0.012 0.016
Education
0
0.01
0.02
0.03
0.04
0 0.01 0.02 0.03 0.04
Social work
0
0.007
0.014
0.021
0.028
0.035
0 0.007 0.014 0.021 0.028 0.035
New sector
Stability (3): Output Multipliers of the new sector (2009-10)
2009 2010
Total 2.88 2.77
Direct 1.00 1.00
Indirect 1.88 1.77
Employment multipliers (number of jobs per million euro spending)
8.6 14.8 18.8 26.9
45.6
78.5
15.7 14.1
17.8 15.6
26.4
21.8
24.3 28.8
36.6 42.5
72.0
100.3
0
20
40
60
80
100
120
EnvironmentalServices
Construction Security; Servicesto buildings and
landscape; Officeadministration and
support
Education Social work Synthetic sector
Direct Indirect