Diagnostic Report on Undeclared Work in Greece Athens, July 06, 2016

Diagnostic Report on Undeclared Work in Greece Athens, July 06, 2016 Yannis Panagopoulos President of the Greek General Confederation of Labor We welcome the important technical contribution by the ILO in identifying the characteristics and various forms of undeclared work in Greece aimed at formulating proposals to the country s political leadership. GSEE relationship with ILO: ILO s important contribution to the country s developments (starting with the GSEE complaints filed with ILO s supervisory mechanism, through continuous updates and the GSEE s insistence and determination until now). The role of ILO today as regards the new Memorandum best practices : The ILO Director-General, Guy Ryder, has clarified his position on these ambiguities, the risks they entail, etc. - We consider that ILO (unlike the Government) will be keeping us informed about the developments involving the Office itself since social dialogue in Greece was and still is severely muzzled. This is proven by the fact that today is the first time that three parties sit at the negotiation table and this is precisely attributed to ILO s involvement in the whole process. To be precise, this was preceded by a meeting with the Minister in October 2015, which was held on our own initiative, namely, the GSEE and the employers' organizations with a view to presenting the conclusions of our joint actions to reinstate social dialogue; In addition, a high-level meeting was held in September 2014 in Geneva, under the auspices of ILO, whereby important conclusions were agreed upon. However, such agreements seem to have been disregarded. We know that the European Commission is also engaged in this process, however, we must not overlook the fact that its representatives have participated in the socalled "Institutions" (and before that, in Troika) and have stubbornly persisted in deregulatory interventions in the protection framework of labor legislation, both collective and individual, that have proven completely ineffective and failed to produce the expected results. A new wave of deregulatory interventions is already underway in view of the next review of the country's adjustment program in September 2016 in crucial issues like 1

collective dismissals and the framework of the Collective Labor Agreements. Moreover, the government has delivered a final blow to the core, the "heart" of free trade union action through changes in the trade union law and the right to strike. Of course, these new interventions are deregulatory reforms since the government is committed within the framework of the 3 rd economic adjustment programme (Memorandum) to implementing them without reverting back to the institutional framework prior to memoranda. In a context marked by the commitments undertaken with the signing of the Memorandum and the implementing measures, tackling undeclared work is an issue provided for under all 3 Memoranda. All the same, if you would allow me before commenting on the Report - I would like to ask a crucial question deserving a clear institutional and political answer: On which principles and, if you wish, on which political choices is this initiative based upon and what is the scope of its implementation? Namely, is it based upon accepting the full-time and stable employment model as the dominant one to tackle undeclared work in a proper environment of respect for collective autonomy and representation, free collective bargaining and collective Labor agreements? And if, yes, do these commitments leave room for carrying out this action in parallel at all levels that require an intervention, e.g, protection of work, social security, taxation? Against this background, I would like to make some general remarks on the Diagnostic Report so as to explain GSEE position on the current validation process, as you call it. The Diagnostic Report seeks to reflect in a concise and coherent way the academic debate and the theoretical considerations on how to combat undeclared work. However, several key issues have not been fully adjusted to reflect Greek reality. In the effort to identify and fully understand the size, magnitude and qualitative characteristics of undeclared work phenomenon, it is useful to take into consideration certain peculiarities in the national economy and Labor market; such peculiarities, even if they have already been identified, are not clearly depicted in this Report. Firstly, it is worth noting that since 2010 to this day a drastic deregulation of Labor relations has occurred, both at individual and collective level, resulting in a reduced level of workers' overall protection vis-à-vis the breach of Labor and social security legislation. These developments coupled with insufficient controls by the cocompetent ministries result in increasing unlawful behaviour in the Labor market and limiting the objective possibility of taking protective measures on the initiative of workers themselves against a background of liberalization of redundancies and unprecedented levels of unemployment. In this context, there has been an upsurge in the phenomenon of partly/falsely declared work as compared to that of undeclared work, a dimension not reflected in the Report to its true extent. Attempting to answer myself the question I raised earlier, it should be 2

underscored that many of the recommended improved interventions in taxation and employment, in the context of a national plan to combat undeclared work (being depicted to some extent in the Report) cannot be adopted, since contrary provisions or special commitments are laid down in the text of memoranda and implementing laws that bind the Greek government. The question arising therefore is what is the framework of labor relations and collective agreements to underpin a national framework for combating undeclared work, considering that the effort to regulate unlawful behavior in the labor market does not seem to be aligned with the continuing deregulation of labor, in view of the impeding deregulatory interventions in the context of the 2 nd review next September. It should be stressed that the discussion on extending the labor stamp (ergosimo) is part of labor law deregulation environment, promoting flexible and precarious work, not protecting employees' remuneration and social security contributions and overall it relates to the reduction of employees' protection. GSEE intends to take a clear stance on the issue: We are declining any additional, direct or indirect strengthening of flexible forms of work and insurance; we insist on the clear determination of sectors or professions and we seek for rigorous safeguards in the use of labor stamp because the paradigm for dealing with undeclared work needs to be explicitly founded on full and stable employment. I would like to particularly underline the following three points: Firstly, the applicable labor stamp in Greece is structured as a means of payment of occasionally employed workers and not as a means of insurance or of combating undeclared work. Therefore, secondly, it is required to invent a different type of voucher or cheque, adapted to the special efforts of tracking down and averting unlawful behavior, possibly with reasonable adjustments and versions of a labor stamp in order to be reliably and effectively applied in every sector or profession separately. Thirdly, it is important to pay attention to extension, let alone to the general matching of insurance-payment through labor stamp with the occasional or at least non permanent/non stable employment. The Greek labor market is characterized by some structural features that have reached their peak since 2008 and afterwards in the challenging environment of unemployment and financial crisis; one of these features is multiple employment and occasional labor relations. It is rightly stressed in the diagnostic report that sustainable development and the creation of a smoothly functioning labor market is a fundamental prerequisite to substantially combat undeclared work; therefore, care should be taken to avoid the labor stamp be converted to undeclared work consolidation and extension factor instead of being a means for its mitigation; moreover, it should be avoided to convert the labor stamp into a means of further deregulation of labor relations and breakdown of a typical-regular labor relationship. Still, at this point the impact from the Social Security System reform implementation is not visible, particularly with regard to its connection with the taxation system, since it is quite probable and not unfounded, that phenomena of generalized tax evasion and social security contribution evasion will be observed by groups of insured individuals-tax payers whose income has been severely hit in this environment of austerity policies. In other words, it would be useful to take into 3

account that the social security awareness of citizens, employees and small business employers has been irreversibly afflicted by consecutive radical and adverse changes in the social security system, by excessive taxation in just a few years time and by the inability of many people to respond to their increased obligations. It would certainly be an omission not to mention that the new social security ''anti-reform'' creates many incentives for cutting down on salaries or concealing income and contribution evasion (e.g replacement rate reduction in average and above pensionable earnings) as well as counterincentives for adhering to social security. Therefore, self-employment should not be dealt with as a single and totally distinct category of employees for two reasons: firstly, due to the large share of pseudo-employment and secondly, due to the increased tendency to ''select'' a form or entrepreneurship or self-employment for reasons of subsistence, as a way-out of the inability to work on decent terms in the context of salaried work. In both cases, very often it is an option out of necessity vis-à-vis the extended unlawful practices in labor relations (unpaid work, partly/falsely under-declared and undeclared work) and not a conscious option to conceal tax or insurance liabilities. Moreover, the Report's conclusion stating that in the Greek case state morality and citizen morality diverge decisively and this is the cause of undeclared work is not at all certain. For decades in a row, the measures adopted for combating the phenomenon, including the more recent ones, have fallen short of real political will, boldness and effectiveness; this is confirmed by the serious weakness of sanctions to be enforced in order to become a reliable counterincentive for infringers. It would be probably advisable to attempt in the diagnostic report an approach to ''business ethics'' or business culture in Greece related to unlawful behavior, with particular emphasis on undeclared work, focusing on the phenomenon's characteristics, its various types and the kinds of enterprises involved. In a nutshell, both the institutional framework governing undeclared work, as well as its implementation conceal to a large extent the social and political tolerance to such phenomena regarding any kind of breach of law across the scope of citizens' economic life. Based on what we know so far, and I hope it will not be confirmed in practice, an official instruction is given to Labor Inspectors not to impose the fine of 10.550 EUR, because such a sanction would supposedly drive enterprises to shutting down. In addition to this being a ''current philosophy'' of (SEPE) Labor Inspectorate in the Diagnostic Report, if indeed such a phenomenon means that audits are driven under guidance, then undeclared work is much more widespread in Greece than registered in the official data; moreover, the risk of corruption incidents is added on top of the already cumbersome daily practice of labor inspectors due to understaffing and insufficient infrastructure in the Labor Inspectorate. With regard to the particularly important issue of citizens confidence in the political system and governmental initiatives in fighting against the unlawful behavior in economy and labor market, it should be underscored that under the memoranda, the frequently anti-parliamentary and unconstitutional way of legislating and governing has afflicted a blow to the reliability of the country's institutions and has downgraded the democratic functioning of state bodies. Therefore, at this level greater efforts are required to reverse a generalized climate 4

of mistrust pervading not only the issue of best and fair taxation or the democratization of labor relations, but in general spreads through the qualitative civil features and the democratic deepening of the Greek political system. Finally, allow me to conclude the introductory part of my presentation making a critical point. As I mentioned already, a holistic theoretical and methodological approach is rightly adopted on the issue of undeclared work in Greece, taking into consideration all aspects of taxation, fiscal and social life in Greece. However, this holistic approach is attenuated due to limited reference to the migration phenomenon and in particular to immigrants' work, running in parallel to the unlawful behavior phenomenon in the labor market. Based on estimates by international organizations, foreign population in Greece cannot be lower than 1,1-1,2 million people. Moreover, since the residence permits in force do not exceed 450.000, it is inferred that approximately half a million migrants, in their vast majority salaried persons or 15-20% of salaried people in the country, are institutionally trapped in ''black'' and fully undeclared labor market. Consequently, the holistic approach of undeclared work in Greece should include reference (detailed if possible) to the need to harmonize migration policy, access formalities, legal residence and work status preservation of immigrants with the overall action plan to combat undeclared work in the country. For example, unless we stave off the ''delegitimization'' trend of salaried immigrant residence regime, which became more intense by virtue of the financial recession and crisis, the ''pool'' fully undeclared work offer will keep on growing, since labor relations without a valid residence permit are by definition unlawful. This observation regards almost all sectors of economic activity in the country, particularly in the rural sector, manufacturing, tourism, construction and work at home. An incontestable evidence is the failure of the recent provision, introduced in the legislation with an emergency amendment by the Ministry of Rural Development (article 58, l. 4384/2016) on the possibility of exceptional employment of illegally residing immigrants in some primary sector professions, as a measure to combat undeclared work in rural economy. The statutory special work permit does not provide any incentive whatsoever neither to employers (tax incentives from the labor stamp), nor to workers, since it entails the identification and the deportation of an illegal migrant. The ''benefits'' from the totally undeclared work of legal and illegal migrants are very powerful inasmuch as the desire of farmers to fall under the new provision will be limited. In any case, it is obvious that the big continuing needs in workers in the rural sector cannot be covered by the obsolete, rigid and non-applicable institutional framework that governs both the invitation process ('metaklisi') of foreign workers and employment in the context of seasonal work (L. 4251/2014), nor with the halfmeasure of ''legitimate'' work by illegally residing foreign rural workers until they are deported, as laid down in the recent provision of Law 4384/2016. 5

Finally, on behalf of GSEE we explicitly declare the following in order to be specific with regard to the Diagnostic Report ratification: The Report's conclusions-proposals constitute mostly a depiction of the subject's academic/theoretical approach and require analysis and specification in further actions. Such actions should be based on the principles I mentioned above, i.e on the full and stable employment and on the respect of collective autonomy and its results. In this context, we outright oppose any deviations in issues related to extending precarious work (such as generalization of the labor stamp) and tolerating unlawful behavior, combined with non respect of workers institutional collective representation. As far as trade unions are concerned, we were clear and specific in our proposals. We practically supported this effort through a broad and high level representation (sectoral/occupational Federations and Labor Centers) at a special work meeting, where we stated workers positions and proposals on undeclared and falsely declared work. This report by GSEE was scientifically documented by GSEE Labor Institute and was officially released to the group of experts and ILO since April 2016. A related Report with detailed proposals by workers had been submitted to the Labor Inspectorate and the Ministry since July 2015 in the framework of the 'continuous' tripartite procedure on undeclared work introduced by the Labor Inspectorate; the respective committee has not made its presence felt since then. Note also that the statistical data and other date included in this committee's meetings minutes are particularly interesting. The vast majority of our proposals, to be published by GSEE today are not included in the Diagnostic Report's proposals. Our proposals span across a wide range of specific measures such as: - staffing and strengthening of SEPE (Labor Inspectorate) - depiction of the fragmentation in social dialogue's tripartite structures - depiction of audit mechanisms and their duties particularly in case of Ministries joint competence, - assessment of audits-fines system and establishment of sanction measures for work recovery (e.g obligation to employ the undeclared employee for a specific period), - review of the labor card practice focusing on personal data issues, - reinforcement of the institutional framework of occupational specializations - passing more rigorous legislation on awarding contracting agreements in both public and private sector, - Workers health and safety aspect for undeclared workers and many other proposals not included in the Report. It would be an omission not to mention that the Report does not deal with the issue of the agricultural sector being 'untouchable' by SEPE audits, a sector where 6

undeclared work is the rule along with incidents of exploitation and racist attacks involving mainly foreigners. Particularly in the context of managing the acute refugee/migrant crisis the country is faced with, a strong message of lawful employment in the agricultural sector should be conveyed in order to smoothly integrate all those population groups. The non reference in the Report of the need to ratify the International Labor Convention 129 on Labor Inspection in the Agricultural sector is significant and I would not like to think that it is related to the political decision of non carrying out audits in the agricultural sector (on this occasion allow me to say that a tripartite body of the Health and Safety Council on discussing the ratification of International Labor Conventions has NOT been convened in the last 3 years now). Allow me to dwell on this point further. The primary sector in Greece registers uninsured work rates exceeding 60% in some areas. The method of ensuring salaried work in the rural economy through the labor stamp, if not accompanied by strong incentives and mainly counterincentives to employers, has resulted in a dramatic shrinking by 50% in the last five years even of the exceptionally small number of insured land workers in OGA (Farmers Insurance Fund). The weakness and reluctance by the co-competent Ministries of Labor and Rural Development to perform audits and the practically unenforced penalties imposed on breaching employers, particularly as regards work by undocumented migrants do create an environment of lawlessness and barbarity at work, with repeated incidents of racist violence. The inhuman employment conditions and the systematic violation of minimum wages, working time and health and safety conditions (under adverse weather conditions, such as heat wave in the summer) for land workers, foreigners and indigenous population, do signal an environment of arbitrary practices and unlawful behavior in general which has diachronically reinforced phenomena of forced labor and employment on conditions of modern slavery. It would be an omission not to highlight that in the context of GSEE request for a minimum personnel synthesis, we would welcome with particular interest the linking of farmers aids to the necessary number of employed workers on the basis of objective and non contested criteria (cultivable area, type of cultivation etc) Despite the overall conclusion that the most critical proposals by workers were not depicted, I should acknowledge however that some (few) of the issues we raised were taken into account, such as - the setting up of a central coordination body to specifiy the decision making strategy with a tripartite structure, - the comprehensive dealing with the fragmentation of audit duties, - the necessity of interoperability of so many information systems for the purpose of searching and cross-checking data, - making more rigorous the context of public procurement and contracting agreements. On the minimum personnel synthesis issue, constituting a standing request of trade unions, we are awaiting to be invited by the Government to discuss the specification of the relevant provision included in the recent insurance law. 7

I should recognize that the Report included the proposals to reinstate the procedure of extending the binding force of Collective Labor Agreements, as an important tool to protect employees and enterprises; on this point we agree with employers' associations. I should also underscore that the conclusions do not highlight anywhere that coping with undeclared work and partly/falsely undeclared work is connected with abolishing measures of promoting flexibility and precarious work in individual work contracts and in jobs. In conclusion: - Fighting against undeclared work has always been and still is an issue of clear and targeted political will; its key parameter is the continuous dialogue in a stable institutional form with GSEE in order to take actions and monitor their effectiveness aimed at combating unlawful behavior in the labor market. - Insofar as this political will is absent, the true dimension of undeclared work is definitely not depicted with accuracy in the statistical data, similarly as the partly/falsely declared work tends to become the rule under state tolerance, driving to extended social security contribution evasion and tax evasion, while protecting some sectors from audit, e.g. the rural sector being 'untouchable'. - Unfortunately, this arbitrary situation tends to be 'regularized', combined with the inability of audit mechanisms, despite the strenuous efforts by their staff to respond to an arduous audit work provided under conditions of understaffing and technical infrastructure shortage. - The extended deregulatory interventions in the protective framework of labor law, under the memoranda, both at collective and individual level, have driven evidently to a rise of employers' unlawful behavior with dramatic impact on employees' remuneration and working conditions. - The final stroke to employees' protection is expected to be given by the new wave of interventions in a series of critical issues, such as collective dismissals and the framework of collective bargaining agreements, along with the well-timed blows to the heart of free trade union action and workers collective representation, such as changes in the trade union law and the right to strike, being commitments the Government shall be bound to implement under the 3 rd Memorandum, without reverting back to the institutional framework prior to Memoranda. - We are declining any additional, direct or indirect strengthening of flexible forms of work and social security; we oppose the unclear determination of sectors or professions and we seek for rigorous safeguards in the extension of labor stamp because the paradigm for dealing with undeclared work needs to be explicitly founded on full-time and stable employment. - To combat undeclared work and unlawful behavior in the labor market, it is critical to immediately restore the collective bargaining framework, the National General Collective Agreement and the extension of sectoral/occupational collective bargaining agreements; it is also critical to 8

immediately abolish the memorandum provisions of promoting flexibility and precarious work in individual employment agreements and in jobs. Taking all the above into consideration, GSEE's position is that the text should explicitly mention the full-time and stable employment paradigm as the way to deal with undeclared work in Greece; the Report should also refrain from making generalized comments on major issues, such as the generalized use of labor stamp. We also believe it is very important to continue the tripartite consultation on the specification of measures included in the table, being mainly preventive without suggesting substantial interventions to cope with unlawful behavior in the labor market. In this context, GSEE: - states its will to participate in the fight against undeclared, partly/falsely declared work (this results also from the fixed commitments in National General Collective Agreements); - requests the addition of an Annex in the Diagnostic Report with all its Positions on Undeclared work, as they had been sent to ILO in April and - ratifies the Diagnostic Report as part of a process that should continue in order to specify, following ongoing tripartite dialogue, the Road Map that will help to substantially and effectively deal with undeclared work and partly/falsely declared work by taking specific measures and fixing quantified objectives. 9