Wage differentials in Greece Interindustry wage differentials Occupational

Wage differentials in Greece • Inter-industry wage differentials • Occupational wage differentials • Gender pay gap • Minimum vs average wage • Public sector / private sector wage differentials Elias Ioakimoglou Institute of Labour GSEE Athens, Greece January 2007 next

The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages

The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages Wages an industry is willing to pay Balance of bargaining power Extra Profits

The average industry wage depends on industry profitability… The maximum average wage that an industry is willing to pay depends on industry profitability, itself depending on The average wage • labour productivity Inter-industry wage differentials • capital productivity and Occupational wage differentials • the ability of the industry to impose prices higher than competitive prices Gender pay gap Minimum vs average wage Public / private sector wages Wages an industry is willing to pay where (wk) is the maximum nominal wage industry (k) is willing to pay (πk) is labour productivity (πk/κk) is capital productivity (pk) and (pcap) are value added and fixed capital prices (R) is average profitability across industries Balance of bargaining power Extra Profits

… and on the bargaining power of workers The maximum average wage that industry (k) is willing to pay is not what is actually paid (wk) The average wage Inter-industry wage differentials Occupational wage differentials When bargaining at the industry (k) level, workers target the maximum average wage that industry (k) is willing to pay, if there are extra-profits in this industry (); otherwise they target the “necessary wage”, which acts as a wage floor. They obtain then a wage that depends on their target one hand on their bargaining power on the other. Gender pay gap Minimum vs average wage Public / private sector wages Wages an industry is willing to pay where (Wk) is nominal wage actually paid in industry (k) (wk) is the maximum nominal wage industry (k) is willing to pay (λk) is an index of the balance of power between workers and employers Balance of bargaining power Extra Profits

Industry rates of return deviate from average profitability The average wage • When demand persistently exceeds productive capacity Inter-industry wage differentials • Progress in technology and work organization is continuous and Occupational wage differentials • Competition is reduced for long periods of time Gender pay gap Minimum vs average wage Public / private sector wages Wages an industry is willing to pay Balance of bargaining power Extra Profits

Occupational wage differentials (2002) Hourly wages (plus overtime) The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

The quality of the workforce explains occupational wage differentials The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage • Differences in occupational wages within industries are independent of industry-specific characteristics. • Occupational wages vary around the average industry wage depending on the characteristics of occupation (j) in industry (k). • Characteristics of occupations: years of schooling, age (professional experience) and tenure in (j, k). • Job variables: shift work, overtime and other variables leading to compensating differentials in (j, k). Public / private sector wages next

The accumulation of professional experience is faster for non manual workers Hourly earnings by occupation and age Euros per hour (overtime included) Senior officials and managers The average wage Inter-industry wage differentials Professionals Occupational wage differentials Gender pay gap Technicians Clercs Minimum vs average wage Service, shop & market sales workers Public / private sector wages Elementary occupations

Occupational wage differentials by gender (2002) Hourly wages (plus overtime) The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

Factors affecting the gender pay gap • Accumulated labour market experience • Compensating differentials • Formal knowledge and skills, ability to perform complicated tasks • Market power and productivity of the firm • Higher bargaining power of employees in the firm (collective) • Higher bargaining power of employees (individual) • Impact of occupational and industry segregation on wages • Under-valuation of female work (effect of gender segregation on average occupational wages) • • Accumulation of firm-specific skills, recent work experience Family allowances, wage premium for men, and wage discount for women related to family responsibilities • Discrimination against migrants • Increased average hourly wage rate for extra work • Increased average hourly wage rate for shifts • Lower bargaining power of part-timers but higher non-wage costs next

Decomposition of the Gender Pay Gap in Greece Industry Services Share of the gap 56. 5% 50. 4% Occupational wage differentials Segregation effect of which: Under-valuation effect Distribution effect 17. 8% 38. 7% 18. 3% 32. 2% Gender pay gap Gender differences in observed characteristics 16. 9% 25. 6% Wage discrimination by employers 0, 7% -3. 0% Gender differences in unobserved characteristics + wage discrimination by employers unrelated to observed characteristics 25. 9% 27. 0% Gender Pay Gap (% of the average male pay) 100% The average wage Inter-industry wage differentials Minimum vs average wage Public / private sector wages

Minimum wages are lagging behind the average The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages next

Minimum wage is now 42% of the average wage The average wage Inter-industry wage differentials Occupational wage differentials Gender pay gap Minimum vs average wage Public / private sector wages

Public / private sector wages Papapetrou E (2006) • In Greece, the average wage is higher in the public sector than in the private sector for both genders The average wage • The difference in wages between sectors is mainly attributed to the employee’s endowment. Inter-industry wage differentials Occupational wage differentials • However, in the lowest quantile a significant part of the wage difference between sectors (almost 50%) is due to the advantage of public sector and the disadvantage of the private sector. Gender pay gap • In the highest quantile the wage difference is mainly attributed to the employee’s characteristics Minimum vs average wage • The pattern of this finding is similar for male and female employees. Public / private sector wages • These findings may explain the behaviour of the less-skilled male and female employees who prefer to be employed in the public sector at the early stages of their career than accept the relatively low-paying jobs in the private sector. • On the other hand, the advantage of the private sector in the upper range of the wage distributions may explain the flight of senior managers from the public to the private sector