elr for greece - levy economics institute · -20.0-15.0-10.0-5.0 0.0 5.0 10.0 2010q1 2010q2 2010q3...

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

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Bu

lgar

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Cze

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mar

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Ger

man

y

Esto

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Irel

and

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ece

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Cyp

rus

Latv

ia

Lith

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Luxe

mb

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rtu

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Slo

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Slo

vaki

a

Fin

lan

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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

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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






of which


of which





of which



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






of which

1. PKE Direct Social contributions5 565 million

of which




3. Direct taxes 923 million

of which




Scenario 4 Target for PKE jobs: 250,000 per year Offered wage: 751 euros per month Total cost of the PKE: 4,1 billion






of which


of which





of which




*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






of which


of which





of which




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


1






of which


of which





of which



Employers' social contributions9 1,14 billion

Item

Sum (million euro)

Monthly rate



Wage componet

ELR Total wage 5,465 890

of which


Gross Wages 4,609 751 557,974 11

of which


Net wages 3,849 627

Non-wage component

Intermediate 3,461

of which

Domestic 2,728

Imported 733


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






of which


of which




3. Direct taxes 923 million

of which




Item

Sum (million euro)

Monthly rate



Wage componet


of which


Gross Wages 1,612 586 250,000 11

of which


Net wages 1,346 489

Non-wage component

Intermediate 1,210

of which

Domestic 954

Imported 256



1






of which


of which





of which




Item

Sum (million euro)

Monthly rate



Wage componet


of which


Gross Wages 2,065 751 250,000 11

of which


Net wages 1,724 627

Non-wage component

Intermediate 1,551

of which

Domestic 1,222

Imported 329


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

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_05

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_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

elr for greece - levy economics institute · -20.0-15.0-10.0-5.0 0.0 5.0 10.0 2010q1 2010q2 2010q3...

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