London School of Economics and Political Science Hellenic Observatory Research Seminar

1. London School of Economics and Political ScienceHellenic Observatory Research Seminar Poverty and Social Policy in Greece: Economic Modernization, Social Fissures and the Contradictions of Corporatism 6 December 2005 Elias KikiliasEconomist,M.Sc, Ph.D.Researcher at the Institute of Social PolicyNational Center for Social Research

2. Issues Part I • Work and Poverty in Greece, from a household perspective. • Social policy efficiency in alleviating poverty. Part II • Social policy as a ‘bridge’. The architecture of the ‘bridge’ in the ‘conservative-corporatist’ welfare regime. • Familialism, corporatism and social reproduction in Modern Greece. • Aspects of modernization: The ‘hidden’ labour market mobility. • The origins of mobility: from ‘bureaucratic clientelism’ to the contemporary agrarian exodus. • Social expenditure has been rising but a welfare state is lacking.

3. 1. Poverty and Work in Greece: A Household Approach The Choice of Poverty Measure Although a large academic literature on the measurement of poverty discusses why the poverty rate is a poor summary index of poverty, all the same, it remains the most popular statistic. The problem gets serious when the poverty rate is used to draw policy conclusions or recommendations. Example When reductions in the poverty rate are used as the criterion for social policy efficiency, administrators who want to demonstrate “success” will always be tempted by the option of “creaming” the poverty population. By redistributing benefits or services away from the very poorest (who are so far below the poverty line they are likely to stay poor anyhow) to those just below the poverty line (who have the greatest chance of being moved over the line) administrators can improve the poverty rate, even while deepening the deprivation of the worst off - which is surely not a socially desirable outcome.

4. Employing the poverty rate as a measure of social policy efficiency, we get a clear answer to the question: How many individuals are assisted by social expenditure in getting over the poverty threshold? But it is not sure at all that this is the right question. The SST Poverty Intensity Index This presentation - following the work of A.K.Sen, A.F.Shorrocks and mainly L.Osberg - introduces a measure of poverty intensity which is technically preferable to the poverty rate as a measure of poverty. The approach is (hopefully) one of simplicity, based on the hypothesis that one reason why bad measures of poverty continue to be used is because excess technique has been a barrier to widespread communication.

5. The Poverty Intensity index, hereafter SST, can be decomposed as • SST = (Rate) (Gap) (1+G(x)), and transforming (1) into • lnP(y;z) = ln(Rate)+ ln(Gap) + ln(1+G(x)), we get (3) ΔlnP(y;z) = Δln(Rate)+Δln(Gap) +Δln(1+G(x)) That is, the percentage change of poverty intensity can be expressed as the sum of the percentage change in the Poverty Rate, the average poverty gap ratio (among the poor) and the Gini index of inequality in the poverty gap ratios (among the total population)

6. Data and Methods Data are based on the results of the survey on “European Union Statistics on Income and Living Conditions” (EU- SILC), carried out in 2003 by the National Statistical Service of Greece (ESYE) in collaboration with the Institute of Social Policy, National Centre for Social Research. Household's total disposable income: total net monetary income received by the household, including all income from work (wages and salaries and self- employment earnings), private income from investment and property, plus all social cash transfers received including old-age pensions, net of any taxes and social contributions paid. The definition of the poverty riskused is the definition of Eurostat: “the percentage of persons, over the total population, with an equivalised disposable income below the “at risk of poverty threshold”. The “at risk poverty threshold” is set at 60% of the median of the national equivalised disposable income.

7. Poverty and Work: Individual and Household approach ‘In-work poverty’ implies that holding a job, though necessary, is not always sufficient to escape poverty. Work and poverty may be approached either by focusing on individuals or on households. An individual-based approach of “in-work poverty” focuses on issues such as job quality, low wages, precarious employment, inability to find full-time work etc. The household perspective is important because the household structure and the household work intensity affect the risk of the individual in being in poverty, beyond its personal and occupational characteristics.

8. Examples It is rather possible a female spouse holding a precarious job (part-time, low remunerated, etc.) not to be in poverty risk, if her husband holds a full-time average-paid job. Similarly, a young newcomer in the labour market, holding a low paid temporary job, may enjoy relatively high living standards if he lives with his parents. On the other hand, the members of a single-earner household may be in poverty risk, even if his job is of high quality and well-paid. The household approach allows focusing on the determinants of the families’ labour supply decisions. Estimation of poverty indicators is based on the notion of “equivalised income”, which means that the sum of household resources are allocated, through a certain equivalence scale, to all the members of the family. In other words, poverty estimations are implicitly founded on a household approach.

9. Table 1: “At-risk-of-poverty Rates – Household and Individual Approach, Greece, 2003

10. Figure 1: “At-risk-of-poverty Rates – Household and Individual Approach, Greece, 2003

11. Table 2: Poverty Intensity – Seniors and Non-Seniors, Greece, 2003

12. Figure 2a: Poverty Intensity – Seniors and Non-Seniors, Greece, 2003

13. Figure 2b: Poverty Intensity – Seniors and Non-Seniors, Greece, 2003

14. Table 3: Poverty Intensity and Employment Intensity in Households, Greece, 2003

15. Figure 3: Poverty Intensity and Employment Intensity in Households, Greece, 2003

16. 2. The Effectiveness of Social Policy Expenditure The central theme of this chapter is: to what extent does welfare expenditure reduce income differences? A customary method to assess social policy efficiency is to compare poverty rates before and after redistribution, the so-called Beckermann ratios. To produce the Beckermann ratios we estimate three (3) income distributions: • Market Income, that is income before any transfers, • Income including pensions, because pensions play a major role in social expenditure, and • Disposable Income, that is the “real” income, including both pensions and other social transfers. The corresponding poverty rates are estimated using a single common poverty line based on the disposable income distribution, that is the real poverty threshold. It is important to note that this method, although practical, is no more than a simple exercise that should not be considered in interpretive terms.

17. It is also important to underline another implicit assumption: comparing pre- and post- social expenditure poverty rates (or gaps) to measure policy efficiency, could imply - and is more than often interpreted in these terms even in academic or official documents - that the sole objective of social policy is income poverty reduction or alleviation. In this sense, it is related to the key policy issues of concerning the targeting and the allocation of resources. For policy makers, there is much appeal in the idea that the existing total of transfers can be reallocated to increase their effectiveness in combating poverty.

18. However, as A. Atkinson has put it, although politically fashionable, calls for better targeting need to be treated with extreme caution, because such recommendations tacitly assume that the sole objective of policy is the reduction of poverty, whereas a typical social protection programme has a multiplicity of objectives. In this sense, the constraints on policy choice are more complex than a “fixed total budget”, including the availability and reliability of information and the competence and adequacy of the administration, aspects all too often ignored by economists.

20. Figure 5a: The Effectiveness of Social Expenditure, Total Population, Greece, 2003

21. Table 5: The Effectiveness of Social Expenditure, Seniors and Non-Seniors, Greece, 2003

22. Figure 5b: The Effectiveness of Social Expenditure, Seniors and Non-Seniors, Greece, 2003

23. Table 6: Participation of Pensioners in the Population of Households, Greece, 2003

24. Table 7: The Effectiveness of Social Expenditure, Greece, 2003 Employment Intensity in Working-age Households

25. Figure 7: The Effectiveness of Social Expenditure, Greece, 2003 Employment Intensity in Working-age Households

26. Table 9: Requisite Financial Resources for the Alleviation of the Poverty Gap, Greece, 2003

27. Conclusions, so far • Poverty risk is greater in non-working age households, but ¾ of the poor live in households with head<65 years old, accounting for almost 80% of the total poverty gap. • Among working-age households - and the population as a whole - the larger part of the poverty volume stems from mixed employment families, that is multi-adult but single-earner households. • Full employment (multi-adult and multi-earner) and workless households (no adult with market income), have an equivalent contribution to the poverty volume, but an important distinction should be highlighted: poverty in full employment families stems mainly from the number of poor persons and to a lesser extent from the poverty gap, while the reverse is true for workless families.

28. It must be emphasized that (a) poverty reduction or alleviation is not the sole objective of social policy, and (b) measuring policy efficiency with the single criterion of poverty rates change, aside from an inadequate could turn to be a misleading exercise. • This said, pensions, absorbing the lion’s share of social cash expenditure, are the main contributor to the reduction of both pre-fiscal poverty rates and poverty depth in Greece. Social (cash) benefits are of greater advantage to the households closer to the poverty threshold, indicating a possible “creaming effect”. • Although the distribution of pensions is by far the major determinant of poverty reduction for the non-working age families, the inequality of poverty gap is enhanced, indicating the particular distortions of the pension system, especially for low-income households.

29. Pensions are also the major determinant of poverty reduction for the working age families. Pensioners comprise 1/3 of members of full- and mixed-employment working-age families and 2/3 of members of workless households, which surpass the poverty threshold after the distribution of pensions. • “Creaming effects” of cash benefits are particularly noticeable in full- and mixed-employment households. • Eliminating the current poverty gap would require financial resources equivalent to 4,2% of national disposable income, of which non-working age families would absorb 0.9%, full-employment households 0.8%, mixed-employment families 2.0% and workless households 0.6%. This amount, 4,2% of national income, corresponds to 8.8% of the disposable income of the wealthier quartile (25%) of the population or 50,3% of the total social expenditure that benefits this group.

30. It would be only a slight exaggeration to conclude that anti-poverty policy in Greece is • virtually lacking and social policy objectives are way off reducing or alleviating poverty, • at the same time as modernization processes transform rapidly the patterns of social needs, the founding principles, standards and practices of social policy have remained at a standstill, upholding the corporatist-clientelistic character of the welfare system. This is the main argument of the next section. To clarify this argument, however, we have to leave the magnificent world of economics and enter the wonderful world of political economy and sociology.

31. 3. Modernization Processes and the Contradictions of Social Policy in Contemporary Greece Considering Social Policy • Social Policy should not be equated to the welfare state, that is something other than whatever ‘menu’ of social benefits a state happens to offer. (The Romans or the medieval guilds and nobility). T.H. Marshall (1950):The post-war welfare state implied the recognition of citizen’s social rights and a promise to bridge the divisions of class, a rewritten social contract. • Underlying the distinction of the state and the individual, there is a fundamental relation of mutual creation. • Consider social policy as a ‘bridge’the functions of which are twofold: to allow both for the articulation and the resolution of conflict, thereby providing a continuous link between the individual and the state. The famous Lockwood’s (1964) distinction between social integration (= the bridge) and system integration.

32. The structural design and the architecture of this bridge, namely the particular ways in which welfare is produced and allocated between state, market and family, varies significantly between different countries. Welfare Regimes (Esping-Andersen):Modern welfare states can be classified in different clusters, according to the historical establishment and development of their social policies and the consequent implications to the broader social structure. • the liberal welfare regime (Anglo-Saxon world) • the social-democraticregime-cluster (Nordic) • the conservative-corporatist regime (Continental and Southern Europe) Features of the Conservative-Corporatist Welfare Regime • Sustain traditional society and integrate the individual into an organic entity, protected from the individualization and competitiveness of the market and removed from the logic of class opposition. • Soon became a dogma of the Catholic Church. Corporatism inserted itself easily into Catholicism’s ‘subsidiarity’ principle: the idea that the state should only intervene when the family’s capacity for mutual protection was rendered impossible.

33. Whether it is strict hierarchy, corporatism or ‘familialism’, traditional status relations must be retained for the sake of social integration. • The unifying principles of corporatism are a fraternity based on status identity, obligatory and exclusive membership, mutualism and monopoly of representation. • Carried over into modern capitalism, corporatism was typically built around occupational groupings(e.g civil servants) seeking to uphold traditionally recognised status distinctions and used these as the organizational nexus for society and economy. • The tradition of constructing a myriad of status-differentiated social insurance schemes, each with its peculiar rules, finances, and benefit structure, each tailored to exhibit its clientele’s relative status position. • International corporative leaders: Greece with almost 250 (around 370 in early 1990s) and Italy with more than 120 distinct pension funds

34. Familialism and Corporatism in Modern Greece • An essential feature in setting up the state in modern Greece (early 19th century) was the rapid development of an extended institutional system with typological ‘modern’ civic properties. • Economy and society, however, was typified by a rather atrophic array of modern economic relations. • State policies are associated to the creation, promotion and expansion of a compilation of “out-of-the-market” incomes and rents, allocated to a number of specific social groups. • This selective economic insurance policy, could be conceived as a function of a broader political strategy aiming at the selective and systematic formation of a wide ‘supporting-class’, typical in the conservative-corporatist welfare regime.

35. Dominant pattern of Social Reproduction • Particular modes of condensation between ‘enterprise’ and household in the context of the broader family network. • Main components: • a wide-ranging network of small-scale property • the domination of the micro-enterprise • the self-employment of the head of the family (male breadwinner), and • the unpaid labour of family members Stylized Facts (2003): 96.1% of enterprises in Greece employ less than 4 persons (owner included) and 2% employ 5-9 persons. Micro-enterprises account for 63% of total employment, while enterprises with more than 50 persons employed account for around 11% of total employment.Dependent employment (employees) in micro-enterprises accounts for only 38.7% of total employment. • The stability of this type of social formation has been founded on the potential of the family units to internalise social risks.

36. The unprecedented stability of small-scale family ownership in Greece, closely related to its demographic stability that is powerless to confront, was stemming from the capability of the over-manned household to channel a considerable part of the redundant human force out of the family venture. • The main responses to market pressures and hence the material basis to deal with social shocks (‘crisis absorption capability’) has always been (a) migration and (b) public employment, but with a distinctive feature: the prospect for social advancement. • This ‘absorption capability’ of social shocks is related to the multi-functional attributes of the Greek family: • unit of consumption, reproduction of labour power and domestic regulation (typical) • promotion of the individual’s social mobility through an unparalleled family investment to education (key) • seeking of economic insurance through the acquisition of a privately owned dwelling.

37. Aspects of modernization: The ‘hidden’ labour market mobility. But this ‘jobless growth’ picture may be misleading since:

39. Dividing the labour market in a primary and a secondary segment, according to the educational level of the different occupations: • immigrants join exclusively the secondary labour market, • almost all Greek men employees flow into the primary segment, but • half of Greek women employees enter the secondary section of the labour market However, the primary labour market, as defined above, does not necessarily indicates high quality in work(e.g. public sector temporary employees). Wages and Poverty • Real labour cost proliferated in branches of economic activity closely related to the primary labour market (public sector enterprises and high level services of the private sector), while • Labour cost in the secondary sector of the economy has been characterized by stagnant or declining trends.

40. The average annual labour cost of typical primary sector industries (energy, financial institutions, etc.) is 70% higher than the average labour cost for total economy, while the same indicator for the typical secondary sector activities (construction, trade, hotels, restaurants, etc.) is 25% to 35% lower. • 52% of poor employees are also low-wagers (37% in the EU-15). • During the 1990s the poverty risk increased considerably for the employed in the secondary economic sectors (+78% for manufacturing, +33% for construction, +47% in hotels and restaurants), while • it declined or remained unchanged in the main divisions of the primary sector such as the public service, the monopolistic sectors of public enterprises, education, health and the high level services of the private sector.

41. Early 1980s to Late 1990s: From ‘Bureaucratic Patronage’ to the Current Agrarian Exodus. A major feature of the aforementioned labour market flows, is that urbanization and the rush to cities and mostly Athens, is the other side of the rapid ‘salarization’ of employment, especially for women. Rural Politics - 1980’s • Gross product was stagnating, competitiveness was rapidly deteriorating, exports were gradually shrinking, but incomes were on the rise. • Between early 1980’s and early 1990s the relative poverty risk of households with a farmer as a head, decreased from 1.71 to 1.32 (-23%) in relation to the national average, while the contribution of these families to total poverty declined from 37.4% to 16.4% (-56%). • Common Agricultural Policy subsidies and especially its implementationgenerated in effect “a powerful network of political and economic interests including farmers, manufacturers, state executives and employees and the governing party officers”.

42. Agricultural cooperatives, were assigned with the task to put into operation the so-called ‘social policy’ in support of the small-scale agrarian family holding, that is in simple words the payment of prices way off their financial capabilities, financed through the Agricultural Bank backed up by the state warranty. • Unsurprisingly, the liabilities of cooperatives had been skyrocketed by mid-1980s, as were the political gains, since cooperatives were transformed in ‘clientelistic centers’. • This social in-its-essence policy effectively minimized the potential social disturbances that would otherwise take place in a period with stagnant or negative growth rates of the real GDP. • Transformation of traditional corporatism and clientelism to a “bureaucratic patronage” or a “bureaucratic clientelism” system: the party acts a ‘collective patron’ of its adherents who are systematically converted to a state clientelethrough a labyrinthine combination of the party and the state apparatuses.

43. This policy was ideologically legitimized through a type of agrarian populism: a blend of anti-capitalism, anti-imperialism and anti-European notions and the demand for a permanent protection of the small-scale family property. • The strategy was not limited either within the boundaries of farming sector or to residents of the agrarian areas: • In Greece, residents of urban areas own almost 55% of the rented agricultural land. • High rate of establishment of new ‘micro’-firms, promoted by subsidies and an incomes and tax policy that left intact revenues and ‘windfall’ profits. • Employment in the public sector expanded rapidly, more than doubling its share between 1970s and 1980s. It could well been argued that the major strategic objective of state policies during the 1980s was to build and establish the clusters of a new supporting class, the so-called new middle classes.

44. Rural Politics - 1990’s • External and internal pressures imposed the abandonment of the agrarian-friendly policy. • Generation of large-scale fissures within the respective corporatist networks (e.g. cotton farmers). • From mid-1980s to mid-1990s employment in agriculture declined by 24% and the number of holdings dropped by 16%. • Agrarian exodus was mainly deriving from wives and family members ceasing to participate in the family farm, their employment in the farm declining by 29% and 35% respectively. • From mid 1990’s to date the share of employment in agriculture declined by another 35%. • In overall terms the share of employment in agriculture was over 30% in early 1980’s, 23% in 1990 and 14% in 2004, while the share of the female employment from over 45% in early 1980s fell to 29% in 1990 and 18% in 2004. • The relative poverty risk of households with a farmer as a head, increased from 1.32 in 1994 to 2.15 in 1999 (+63%), while the contribution of these families to total poverty increased from 16.4% to 20.9% (+27%).

45. Social expenditure is rising but a welfare state is lacking. The renowned fragmentation of social policy is nothing but an aspect of the particular form corporatism and clientelism, which stigmatize the entire structure of welfare sectors, both pensions and other benefits (unemployment, family and children, etc,) generating “islands of privilege in a sea of insufficient provision”. Aspects of the mounting social fissures generated by modernization processes and the inability of social policy to fill the emerging gaps: • Demographic ageing. • Further delay of family formation and rapid decline of fertility • Decrease of three and two generations’ households indicating a possible reduction of family solidarity especially among the low-income clusters. • Access to higher education and educational inequalities have been aggravating for low-income families. • The capability of low-income young persons to acquire a dwelling has been rapidly deteriorating.

46. Vertical and Horizontal Efficiency of Benefits (other than pensions) Greece, 2003

47. The fragmentation of the Greek pension system • Asectoral dimension: a large number of pension funds by sector of employment or occupation. Even within funds, there are sharp differences on a sectoral basis regarding contributions or pension entitlements. • A differentiation according to tier of protection, that translates to a system with three tiers of benefits consisting of a primary pension, a supplementary pension, and a separation payment. The three tiers are almost always in different accounts, in most cases even in different institutions. • A cohort dimension, where fragmentation occurs even within occupational groups and pension funds: Frequently, grand fathering rules, take-overs of providers and other legal changes have created a multitude of subdivisions among the insured population according to age or length of service.

48. General Conclusion The processes of economic modernization in Greece during the previous 15-20 years resulted in a considerable decline of both the ‘marginal and the average capability’ of the Greek family to absorb the consequent social shocks. European conventions and broader macroeconomic conditions necessitate restrictive fiscal policies and low-level public deficits and debts, resulting in the declining capability of the state to absorb labour. On the other side, migration trends have been reversed. In effect, both of the traditional social pressure-releasing mechanisms have ceased to play their key-role in sustaining a major part of the social integration processes. While system restructuring is well under way, welfare state should be a key-actor for system integration. Nonetheless, although social expenditure has been, till recently, on the rise and matches or even outruns the European average, the founding principles, standards and practices of social policy lingers at the rear, upholding the corporatist-clientelistic character of the welfare system.