Wednesday 21 September 2011

Public Sector Employment in Greece – Myths and Realities

The debate over Greek public sector employment is characterised by a lack of real data and much stereotyping. In 2011, Greece’s public sector employment is 8% of the population and 18% of the active labour force. In the United States, public employment accounts for 7% of the total population and 15% of the labour force. Greece, however, has an extensive public provision of education and healthcare, whereas in the United States these functions are largely provide by the private sector. The OECD confirms this: "Greece has one of the lowest rates of public employment among OECD countries, with general government employing just 7.9% of the total labour force in 2008."
The latest Troika demands on Greece require—according to media reports last night--an immediate dismissal of up to 25,000 staff, hired since PASOK took power in 2009, as well as the placement into a labour reserve of a much larger number of staff, possibly up to 100,000 by 2015. It is impossible to confirm this as of Wednesday morning, since no official communiqué has been issued.

The issue of employment in the public sector is a difficult one to address, and not something which should normally be done as an immediate cost-cutting measure in a crisis of this magnitude. A primary factor for a rational debate on public sector employment is to understand and agree what Greece as a society expects from its public sector, and which tasks are consider it necessary.

This debate has largely been stifled by the growth in the public sector since PASOK first took power in 1981. This growth was characterised by introduction of left-wing unions into the civil service on a large scale, which had previously been banned by the military dictatorship which fell in 1974 and its precedents, dating back to the fears of a Communist take-over in 1944-1945. Together with this leftward shift in orientation came a large expansion in the role of the state, or at least in the financial expenditure the state was prepared to make. The history of Greece since then has been that of state expenditure expansion and contraction, of long periods of expansion followed by short periods of austerity.

Since Greece’s European Union entry, this process was heavily driven by EU funding and by the “convergence” philosophy. Greece was granted billions in structural and cohesion funds every year, intended to bring its infrastructure, institutions and private sector up to a competitive level so that it could achieve “convergence” with the existing EU member states. Part of this included the increase of wages in the public and private sectors. It is therefore ironic to hear today that Greek wages have increase more than German ones, and therefore must be cut. This increase in wages and in GDP/capita was precisely the point of convergence and the so-called “Objective 1“ regions.

This EU money was almost entirely channelled through ministries, which led in turn to the expansion of patronage and corruption in public contracts. No political party in Greece disputes this: most campaign on the premise that they will end corruption; then turn around and continue these practises once in power. Oddly enough, the EU never took real measures to prevent this, despite overwhelming evidence of common practise over time. I should add that neither occurrence is restricted to Greece.

The fact that EU funding was typically reimbursed after evidence of expenditure was made also contributed to Greece’s ballooning public debt: the government borrowed money to complete over-priced, inefficient projects, and ignored commercial reality. In many ways, EU funding played the same role as natural gas in Holland in the 1970s, or petroleum in Saudi Arabia today: a condition known as “Dutch disease.” This leads to the declining competitiveness of exports due to inflation, and in the case of Greece, a massive expansion of over-priced public sector projects financed through EU funds.

The end result of all this is a society and political system which finds itself in a struggle between what it views as public sector privilege and political spoils and the fact that the foreign money (loans or subsidies) to pay for this has run out. The focal point of this struggle is the public sector.

The debate as to what Greece wants from its public sector has never been held. There is no end of slogans, such as “free education for all”, or “permanent employment in the civil service” but these slogans do not reflect reality. We have not heard a debate or seen any analysis as to which sectors of the public sector deserve higher salaries and investments in productivity (and there are many such sectors), and which sectors require a down-sizing or restructuring. There is no global plan for liberalising state involvement in some sectors, such as education and healthcare, or for improving services to citizens through the use of egovernment.

And we are unlikely to hear this, as long as the public sector is associated with cost, and therefore costs which have to be cut as part of an austerity programme.

As with many things in Greece which emerge from the Troika or the government, there is a great deal of confusion and a lack of clear communication. But one of the “facts” being tossed about Greece lately is that there are more that 1 million people employed in the public sector, while others assert that Greece has one of the highest ratios of public sector employment in the world. One friend on Facebook made the assertion that Greece has more public employees than the United States.

I wanted to test these assertions to see if they were correct. As usual, data is fragmented, and several assumptions have been made. I will explain these in depth, comparing Greece to the United States. A comparison with France or Germany would be even more appropriate, finding data from these countries will take even more time. 

General government employees in Greece are numbered at 705,645 in the Mid-Term Fiscal Consolidation Plan approved by Greece in July 2011. The general government category includes national, regional and local (municipal) employees. The main problem is to understand how many employees are in the wider public sector, i.e. semi-governmental organisations (DEKO) and other state organisations with have the status of private sector legal registration. This number is impossible to access with any reliability: although the government has completed a census on this, I have not been able to find the final number.

I’ve taken the number of 175,000 as representing employment in this sector. Although this may seem low to most people, we have to remember that the government ownership share in many DEKO is actually quite low. It would be a mistake, in my opinion, to count OTE, the National Bank of Greece, and equivalent organisations in the wider public sector. However, it is also true that the government’s role as a shareholder in these DEKO affects labour law, pension spending and general productivity in these companies. The result seen, in any case, is my best estimate. If anyone can provide a better one, I would be pleased to re-run the numbers.

The total labour force in Greece is 4,967,200. This is defined as the segment of population over 15 years old which is not in education or training, and which is looking for work. (It therefore includes the unemployed). We should remember that one of the main problems with Greek economic competitiveness is the size of the active labour force: Greek women have one of the lowest employment rates in the European Union. Any future plan for improving the economy must focus on improving female employment and labour force participation.

The total population, according to the National Statistics Organisation (ELSTAT) was estimated at 11,257,290 in the first quarter of 2011. Thus, Greece’s public sector employment is 8% of the population, and 18% of the active labour force of the country. There was one public employee for every 13 citizens.

General Government
Wider Public Sector
Total Public Sector Employment
Total Labour Force
Total Population
Public Sector Employment as:

% Total Population
% Total Labour Force
Population per Public Employee

We can compare this with the United States, which has excellent labour statistics available on and the Bureau of Labour Statistics. US general government employment in December 2010 is calculated at 22,249,000 people. This includes:

·       2,852,000 Federal Employees
·       5,142,000 State Employees (full and part time)
·       14,255,000 Local Employees (full and part time)

Not included in this are certain government agencies, such as the US Postal Service. I’ve included this as a separate line under “Wider Public Sector” employment, but have not been able to find a complete count.

The Bureau of Labour Statistics records 153,560,000 people in the active labour force in the first quarter of 2011. The site records 312,257,855 total population on September 20th, 2011 (these dates do not match, but are presumably close enough and flatter the US results).

This yields a result of 7% public employment to the total population, and 15% of public employment in the total labour force. There are 14 people per public employ in the United States.

We should also remember that there is a big difference between the US and Greece in terms of public sector service provision. In Greece, for instance, healthcare and education are provided by the state; in the United States they are predominantly provided by the private sector. If “like-for-like” agencies were compared, it is highly likely that Greek and American public sector employment would be much more similar than we think.

My calculations are confirmed by the OECD, in its “Government at a Glance 2011 – Greece” publication, which quotes:

Greece has one of the lowest rates of public employment among OECD countries, with general government employing just 7.9% of the total labour force in 2008. This is a slight increase from 2000, when the rate was 6.8%. Across the OECD area, the share of government employment ranges from 6.7% to 29.3%, with an average of 15%. The Greek government has plans to further decrease this share, by replacing only 20% of staff leaving on retirement. Public employment is also highly centralised in Greece, with over 80% of staff working at the central government level.

So the question must be asked: will cutting the public sector, which has already suffered a massive decline in wages and headcount (there were a net 82,000 departures in 2010), yield results?

I have no doubt it will yield immediate financial results in the form of lower expenditure on salaries. However, I doubt it will render any further benefits beyond this, and the negative impacts will be far higher:

a.     Already, public sector workers are not working as effectively as possible in light of public sector cutbacks. This is particularly the case in the Revenue services, who are the tip to the spear in the current struggle to balance the budget.

b.     These public sector workers are all consumers. Once they are fired or “idled”, GDP and tax income fall through the elimination of this income.

c.     The loss of productivity for the remainder of the system will increase. Only if these workers are replaced with productivity enhancing processes, i.e. egovernment or elimination of authority-seeking processes, will there be a real impact on citizens and businesses.

d.     The unemployment rate will rise, creating further financial expenses (via unemployment payments) as well as a downward, long-term drag on GDP.

Perhaps most seriously, this step risks mobilising all public sector workers against the Troika and against the PASOK government. And if the government falls, there is no realistic political alternative for the Troika’s plan.

As I have written before: the financial shortfall so far in 2011 is minor and is attributed to rational policy choices. The negative economic impacts of the austerity programme as well as structural economic factors are going to increase as we go into the winter, creating a greater fall in GDP and a greater rise in unemployment.

By implementing these reported measures, the Troika risks fundamentally de-railing the Greek reform programme. They are unnecessary, and a high price to pay for a very small and short-term economic return. There are other alternatives available, and these should be explored first.

© Philip Ammerman, 2011


  1. Mr. Ammermann,Thank you for all the interesting information which I was not aware of. Could you also address the issue of the pensions burden? When I settled in Greece 25 years ago, women could retire from the civil service after 15 years; now its 25 years for “mothers of underage children” (which are probably in their teens!). Over the decades many thousands of young pensioners whose lifetime benefits outstrip their contributions have accrued, in addition to the fake disabled, in addition to the single daughters of deceased army officers etc, etc.
    I imagine the numbers, and the burden on the rest of society, are staggering. Do you have some statistics?

  2. The deficit in pensions, and the state spending on pensions, is one of the main reasons for Greece's deficit and public debt. The newest tax measures include specific measures to reduce pensions; previous reforms of the Karamanlis government and the Papandreou government (in 2010) made some important reforms, but the situation remains grave, and a further reform will have to be made in the next 3-4 years. At present, one of the main sources of the central government deficit is the IKA and OAEE pension deficit, which had to be funded by the central government.

    You can find precise assumptions on public sector pensions in the Explanatory Essay of the Mid-Term Fiscal Adjustment Programme (in Greek) here: (Έκθεση της Επιστημονικής Υπηρεσίας της Βουλής)

    The OECD has a brief but clear segment on pension reforms made here:

  3. Not counting the tertiary sector, there are 3.2 million teachers in the USA, of whom around 19% work in the private (or Catholic) sector. Thus, around 12% of public sector employees are teachers, as against around 0.5% of private sector employees. By contrast, around 19% of public sector employees in Greece are teachers (I am assuming that the number of private sector school teachers is insignificant): this seems to reflect the smaller active workforce. Congratulations on a very interesting article.

  4. Where does the figure of "82,000 net departures in 2010" come from?

  5. The Ministry of Finance website, in the annual report on structural adjustment implemented in 2010.

  6. Well done Philip!
    In your Nov. 8 answer, do you imply this: ?

  7. TNS, thanks for referencing the Hay/ICAP study: it's a good resource.

  8. A very interesting and thought provoking piece which seems objective, sensible and fair in its approach. Thank you.

  9. I am just an amateur who is here to read for my own education, so I cannot comment professionally on your figures, but what is of great interest to me, and I think of great importance, is something that you indicate early on in your article in respect of your comparison between the public services of the US and Greece. It is one thing to assess other peoples and other countries on their fiscal performance, but what one must take into account (and is often forgotten) is other people's cultural approach and historical background. Hence any comparison between the US and a modern European nation must take into account the dreadful healthcare and welfare benefits for the poor in the US. This is something which Americans seem to find culturally acceptable, but precisely what modern European nations have been trying to avoid. A budget surplus of billions of dollars is worth nothing if it leaves large sections of your population with little access to food or healthcare.
    As you so rightly indicate, any fiscal comparison must at least mention this conflict of cultural priorities.
    Thank you for a most interesting article. M

    1. BS ... "...the dreadful healthcare and welfare benefits for the poor." Where in the Constitution did it ever suggest we pay for people who won't work? And sure, it may be sad to see an individual struggle but it's worse when whole segments of society believe that everything they have is "free." That's partly what's wrong with California ... everyone is willing to vote for a nice new benefit, and they all seem "free." Any smart person sets a budget ... if you have $100 to spend, and you spend $500, you get into trouble. Governments don't have that discipline, in part because people have become addicted to credit and the idea that if they want something they should have.

      I'm robbed by taxes in the US. If I have to pay more taxes, I'd like this as part of the deal -- people who don't pay taxes, don't get to vote. It's way to easy for someone who loses nothing to say "Yes, let's steal more money from that person so I can buy some new Nikes" or "Let's take money from that person who has a business so I can walk away from my mortgage" or "Let's take money from that business so I can pay for my 5th illegitimate child." Sorry ... no taxes, no vote. If you want to vote but have a low income, you can sign up to pay 10% minimum in taxes, and you get a vote.

    2. I am 67 and live in Arizona. I have Medicare through the Arizona Health Care System and pay nothing, NOTHING, for my medical care and the service is the same as every other citizen paying for health insurance. You are grossly uniformed about U.S. Healthcare. You must be listening to the Obama propaganda.

    3. I agree with you completely.

    4. "Hoarding record amounts of capital" is none of your damn business and companies have a perfect right to do what they want with their surplus capital. If you want to be a Socialist why don't you get the heck out and move to Greece!

  10. The elephant in the room here is productivity. American workers are productive enough to support these levels of gov't parasitism, Greek workers are not.

    1. Well, we're not ... but we're much more productive than Greek workers. Sadly the regulations that seem "free" to Obama are reducing profits and profitability. I'm thrilled my company is finding ways to reduce employment through smarter processes and automation. And if Obamacare isn't overturned, at some point we'll walk away from our employer-paid (100%) health care plan. What's the point of being hit with all sorts of extra taxes just because we offer employees a great plan?

    2. You don't seem to realize that many of our top companies are making record profits and are hoarding record amounts of capital. Regulation has very little to do with unemployment right now. Product demand has a huge impact. Job security and unemployment has a huge impact on product demand.

      As to your employee health insurance, i wasn't aware of any major taxes being pushed on companies that offer their employees full insurance. There's a penalty on those companies that don't offer insurance. I could be wrong though. Mind clarifying?

  11. What's missing is the number of employees in state-owned companies in Greece, e.g. in railroad, ports, airports. Their number is legion and productivity very likely rock bottom, as these companies are monopolists.

    Unfortunately their number is unknown, I kid you not, at least the OECD doesn't know it - for every other country, yes, but NOT for Greece. Oh, and the OECD doesn't even know what these companies are DOING.

  12. Dirk, if you look at the numbers in my table comparing Greece and the US, I've added 175,000 employees in the wider public sector. This is to cover railroads, ports and airports. The number here is in fact relatively small: the larger number is in various organisations associated with municipalities. The main municipal employment is in the main public sector employment figure (705,645), but they have set up a large network of associated organisations.

    Their productivity is definitely rock-bottom, and I believe it would be better to eliminate these functions from the public organisation. Government should be a regulator and legislator, but only in very few cases should it be an operator.

  13. Ammerman - I didnt read the full article, the first stat you stated stopped me in my tracks. You say 8% of the population works for the government and you also say that 18% of the workforce works for the government. Given that only 66% percent of the Greek population is of working age I wonder why you think the 8% and 19% figures add up.
    8% of 11 million is 880,000 public sector employees
    18% of 7.26 million is 1.3 million public sector employees
    Check any good source of demographic information so check the population of working figure.
    In short I believe the 8 OR the 18 must be correct not both, unless I am missing something?

    1. Richard, the numbers are in the table provided. Thanks.

  14. Mr Ammerman, I do not know about statistics, I just trust my eyes. I am an entrepreneur, a civil engineer. Almost every day I have interactions with public services. There are public emploees (PE) who work and others you just DO NOTHING! During 2007 I was a symvasiouhos (PE for a limited time). I was put there because my family voted a specific party. I went to "work" at 08.00 and left at 11.00! Like me MANY others. Be very careful with the Greek statistics.

  15. You said: "We should also remember that there is a big difference between the US and Greece in terms of public sector service provision. In Greece, for instance, healthcare and education are provided by the state;"
    Ha! Have you ever being hospitalized to a public hospital? God forbid. Only extreme poor people (immigrants, gypsies) go there! There are not even gauzes or alcohol there! The doctor will say "come to my private clinic and I'll tell you the cure".
    Has your kids ever been "educated" to a public school? Squats and strikes lasting for months! Nearly every parent send his kids from early age to "frontistirio" a private school that works in the afternoon.
    So every Greek has to pay excesive taxes and social security for "healthcare and education provided by the state" plus to pay for gauzes, alcohol, medicines, X-rays, private clinics, "frontistiria", day nurseries, private police and the list goes on to have a quality of life equivalent to that of a middle class American or W. European.