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Rebekka Christopoulou & Vassilis Monastiriotis: The public-private duality in wage reforms and adjustment during the Greek crisis

There is a general perception that the crisis in Greece impacted mostly public sector wages, whereas in fact its impact on private sector wages has been equally large, if not larger. In this paper we examine sector-specific wage reforms and dynamics for the duration of the crisis, using micro-data from the Greek Labour Force Survey over 2009-2013 and applying a wage-decomposition analysis on the basis of an endogenous switching regression model, which controls for sector-selection. We find large sectoral differences in wage adjustment not only in terms of magnitude but also in terms of timing and direction. While the private sector has recorded a substantial response to the heavy demand pressure, changing noticeably its valuation of worker and job characteristics, adjustment in the public sector, despite the significant wage-cuts, has been slower and less sizeable. Consequently, public premia for monthly regular wages never fell during the crisis; rather, they initially increased and subsequently returned back to their original level.

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