Sunday, 26 June 2011

A look at recent wage dynamics in Greece

If there is one datapoint that is extremely difficult to come by for Greece this is data for wages. I found some of that concerning industry and construction from Eurostat. Of course these two sectors account for a very small part of total economic activity in Greece presently but nonetheless the comparison with Ireland allows for some conclusions to be drawn.

Here is the chart for industry.

source: Eurostat

During 2008 when Greece was not in recession, Ireland was already there and during 2009 when Ireland was deep into it Greece was just testing the waters. Last year when economic activity in Greece plummeted, recession in Ireland was more contained. The reason for that? Well, one reason could be that its tradables sector is larger and export-oriented at that.

The result of this fact is the chart above; despite things being tight in the domestic market, wages of Irish industrial workers performed much better that the ones for Greece.

source: Eurostat

Even wages in the construction sector behaved better in Ireland and Ireland had a monumental-size bubble there. 

The fact that any fiscal adjustment that took place in Ireland was enacted not through the raising of indirect taxes (VAT) surely plays a significant role in the picture painted by the charts above. I think that VAT was even slightly reduced in Ireland in an effort to make things more manageable for people and businesses.

You can reach your own conclusions over what's happening in Greece right now and if it is done properly. The truth is that the present situation faced by Greece is not a result of the current policies, decades of non-existent policies and extremely bad choices brought us here. All illusions end at some point though and Greece is definitely beyond that point...


  1. Looks like internal devaluation for Greece. If it is, the question is the competitiveness gains -if any- so far

  2. Well, it should take a little time for them to show up, since there usually is a lag on them being reflected on trade data, we have to watch external trade data in the coming months...I hope that any difficulties greek firms face regarding trade financing won't erase any gains materializing.....

  3. Here's the latest press release concerning Greek external merchandise trade...the headline figures are inflated by oil products exports....