The recent global economic crisis has apparent effects on poverty and on the deterioration of the levels of living for the most vulnerable population groups. However, instead of disputing the dominant paradigm for organizing and administrating the economy, it has lead to further strengthening the neoliberal arguments for fiscal discipline, reduce of public spending, and labour market deregulation. One of the main consequences is the strong pressure for further decrease of social expenditures and for transforms of the social protection systems towards a more liberal one. This is more evident in the case of Greece where the consequences of economic crisis are more severe. However in order to implement the austerity policies, certain myths are cultivated and reproduced at a national and European level and have dominated the public and political debate.

Among the most popular myths that the media like to reproduce is that Greeks are not working that much (compare to other Europeans) and that they enjoy a high standard of living. However Eurostat’s evidence dispute this, showing that on average Greeks works more hours per week than the Europeans. Concerning the standard of living, Greece has also the highest poverty rate (20%) among EU-15 and one of the highest among EU-27. We should also note that these estimates, although based on most recent available data from Eurostat, are those collected at 2009 and refer to 2008 incomes. That is before the economic crisis. Since the mid 1990s, when we have comparable data for EU countries, poverty in Greece was constantly much higher than the average figure for total EU. These estimates are based on the poverty lines defined at a national level (adopting the broadly used definition of the 60% of the median equivalent income). However, when the comparison is based on a common to all EU countries poverty line, we can uncover the true dimensions of the differences in the standard of livings between the Greeks and the rest Europeans. Comparable estimates of poverty rates in EU, based on Greek poverty line and taking into account the differences in purchasing power between countries, shows that in most EU-15 countries (with the exception of Portugal, Italy and Spain) less than the 6% of the population have similar low level of livings to those of the 20% of the poorest Greek.

One of the myths that also dominate the current debate at national and EU levels associates poverty mainly with unemployment. This helps promote the neoliberal remedy for deregulation of the labour market and for the increase of flexible and part-time or temporary employment contracts. Definitely unemployment is associated with high poverty risk. However, our estimates, based on Eurostat’s micro-data, showed that in Greece various occupational groups such as farmers and employees with part-time or temporary contracts face similar high risk of poverty. Employment cannot secure someone from poverty.

Focusing on the contribution to overall poverty, the evidence also shows that in Greece (as well as in most EU countries) a significantly larger proportion of the poor live in households with a head who is employed rather than unemployed. In Greece 3 out of 5 poor live in households with a head employed. Overall 4 out of 5 poor live in households with a head employed or pensioner. Only 4,5% of the poor population live in a households headed by unemployed. The statistical evidence suggests that part-time and temporary labour contracts increase the poverty risk of the working population. Higher flexibility in the labour market has an unfavorable impact on in-work poverty. It may reduce unemployment but, at the same time, it may increase in-work poverty by splitting in two (or often in more parts) jobs that provided an income slightly higher than the poverty line.

Dominant rhetoric also victimizes social protection and the relevant spending as being the main contributors to the current crisis. This cultivates hostility against social policy which is considered part of the problem and not part of the solution as the experience of the 1929’s crisis showed. Social expenditures in Greece, as % GDP, are lower than the average corresponding figures for total EU. The country’s social protection system is particular weak in alleviating poverty and inequality. Social transfers (except pensions) have by far the weakest distributional impact in reducing poverty among EU countries. The austerity program has been undermining welfare rights and further weakening the already weak Greek social protection system. Among other, pension incomes (current and future) and social assistance benefits have significantly been reduced and large cuts in social services have taken place. The new basic pension of €360 per month (funded by general taxation) is well below the country’s poverty line for a single person household. However this €360 could be further reduced if economic conditions worsen. Unemployment benefits are also well below the country’s poverty line. Austerity and stabilization measures will increase poverty and dispersion and will reduce further the incomes in those part of the population that have the highest rate of consumption (low and middle income strata) with profound implications to total demand and to growth.

Dr Christos Papatheodorou