Greece’s policies to improve the unemployment rates

1. Introduction

In the attached article in the references, it is shown that Greece has succumbed to a low employment rate since the financial crisis that has affected them in 2007. It is reported that Greece has reached an all-time high unemployment rate of 28% in November 2013 and has not been improving as of late till the point in which the article was written in February 2014. The article also states the contrast of Greece’s unemployment rate to the average rate of unemployment in the euro-zone, which is more than double in percentile. In this assignment, I will be discussing the unemployment issues that currently impact Greece.

2. Economic Concepts Identified

Factors affecting unemployment in Greece will be discussed. The precise economic definition of unemployment consists of unemployment falling into one or more of these factors, without work even after actively searching for a job for four weeks, waiting to be called back to a job in which he or she has been laid off, or waiting to start a new job within 30 days.

Firstly, we will look at the GDP rates of Greece. By identifying the historical and current GDP rates of Greece, we would be able to identify an inflationary (GDP increases) or a recessionary (GDP decreases over two quarters) economy. Using this information, it will explain certain levels of unemployment in Greece depending if it’s a recessionary or inflationary economy. Recessionary economy generally has a higher unemployment rate due to less resources being used, and inflationary would be vice-versa.

Secondly, a few different unemployment rates will be used to provide further statistical analysis of unemployment in Greece. There are three rates that will be used the unemployment rate in general (percentage of labour force that is unemployed) , the long-term unemployment rate (unemployed people who have been unemployed more than 27 weeks), and the youth unemployment rate (unemployed people who are between 16-25 years old).

Thirdly, the different types of unemployment will be explained and their subsequent effects on Greece. There are generally three types of unemployment, frictional, structural, and cyclical. Frictional unemployment stems upon the normal labour market turnover. Structural unemployment is unemployment due to changes in technology and the increase in foreign competitors which may affect the skills required and/or a change in location. Cyclical unemployment is unemployment that occurs during a recession.

Lastly, we will be looking at the policies implemented by the government of Greece to curb this problem of unemployment.

3. Application of Economic Concepts

1. What Does GDP Indicate in Greece Economy

Based on the graph attached above, Greece can be seen to have been going through a severe period of recession stemming from the global financial crisis in 2009. This also indicates that Greece is dipping towards the trough of their business cycle. In a recession, there is a slowdown in production output of the country. This is because the output per worker or productivity falls steadily causing an increase in production cost per product. This will in turn induce a dip in profits of firms which will inevitably reduce their labour force to compensate with their reduced output. This has caused a severe increase in unemployment rate from the crisis. Such unemployment caused by the recession is broadly labelled as cyclical unemployment. However, structural employment will also be affected as there will be businesses shifting out of Greece as it is not profitable to retain their business there, causing loss in job opportunity and employment.

2. What does unemployment rates indicate in the Greece Economy

We will zoom in directly to the three rates of unemployment, unemployment rate of Greece currently (26.4%), long term unemployment rate (19.9%), and youth unemployment rate (51.5%). These various unemployment rates can be perceived to being cyclical in nature due to the recession. These rates are abnormally high due to the long recession and the fact that Greece has incurred a vast amount of debts and even required bailouts by the euro-zone. This is also an indication that the Greek economy is uncompetitive. Rising wages have not been matched by rising productivity. The lack of competitiveness has led to a fall in demand for Greek goods and a very large current account deficit (imports greater than exports) which has in turned caused many firms to close, reducing job vacancies and further increasing unemployment rate of the country. Youth unemployment and long term unemployment rates have remained constant due to the fact that the Greek economy has no vacancy for fresh or previously laid-off workers due to the low tolerance of low productivity (hiring these people imposes a great amount of risk.

3. Policies the Greek government has undertaken to reduce unemployment

While the origins of the significant recent rise in long-term unemployment are predominantly cyclical in nature, targeted policies to assist the long-term unemployed are likely to be necessary even once jobs recovery is underway. In the first place however, labour market and social policies have a key role to play in preventing the risk that the sharp jump in unemployment becomes persistent by promoting a quick reintegration of jobseekers into employment and enhancing their skills to enable them to move into more productive jobs when the recovery gathers speed (OECD, 2009).

Unemployment benefits are available in Greece, but they are generally conditional upon insurance contributions. In terms of international comparison, benefits are low and take-up is limited (Karantinos, 2011). The main unemployment benefits provide income replacement at a flat rate of EUR 360 (slightly less than half of the current level of the minimum wage) for up to a maximum of 12 months of unemployment. Unemployment benefits are only available to those who have made unemployment insurance contributions and to those aged 45-65 under very strict conditions. Those who have never been in work (examples are unemployed young people without work experience) fall outside the system.

Greece has stepped up efforts to assist the unemployed since the start of the recession. According to the latest Greek National Reform Programme (2014), the focus of employment policy is on a more efficient use of resources and reallocation of resources, in order to both improve labour market outcomes, and in particular youth labour market outcomes, and to enhance the economic sectors with growth prospects. The main rationale behind the policies currently being implemented by the public employment service (PES) is the boosting of job creation and job retention mainly through the reduction of non-wage cost. For this purpose, the PES has launched a series of policies. These policies have the double benefit that they encourage the access of unemployed persons to the labour market and discourage undeclared work.

There is also a package of measures that is intended to facilitate the access of young people and newcomers to the labour market. These include: (a) a work experience programme in the private sector (b) a programme subsidising enterprises for the recruitment of young graduates up to the age of 35 years, (c) counselling and career orientation services, aiming at enhancing employment prospects, (d) programmes to enhance youth entrepreneurship, and (e) vocational and educational training programmes in priority areas of economic activity (construction, tourism, new technologies, etc.).

4. Conclusion

Basically in response to the newspaper article and current macroeconomic research, it shows that despite Greece’s policies to improve the unemployment rates, it has not improved much since the global financial crisis. In conclusion, the Greek economy faces two major challenges. The first is the need for strong economic recovery to increase job opportunities, and create constant job expansion mainly to facilitate the youth unemployment. The second is the need for policies to address labour market problems to increase the efficiency in matching of job seekers to new job openings and to assist in the labour market adjustment of the long-term unemployed, so as to prevent the high increase in unemployment from becoming structural.

5. References

BBC News,. (2014).Greece jobless rate hits new record. Retrieved 13 October 2014, from

Greek National Reforms Programme 2014. (2014). Retrieved 13 October 2014, from

Karantinos, D. (2011). Adapting unemployment benefit systems to the economic cycle, 2011.European Employment Observatory Review.

OECD employment outlook 2009: Tackling the jobs crisis. (2009). Paris, France: Organization for Economic Cooperation & Development.

Stevis, M. (2014).Greece’s Older Men May Never Work Again.WSJ. Retrieved 13 October 2014, from

Tradingeconomics.com,. (2014).Greece Unemployment Rate | 1998-2014 | Data | Chart | Calendar | Forecast. Retrieved 13 October 2014, from

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