????Today, unemployment in Greece stands at 21%. Wages are still so high that many employers pay workers cash, off the books, to avoid social security taxes. Incredibly, a raise of 2.5% was scheduled for July at the national level. But this month, in its most decisive move to date, the government dismantled the pay elevator. It passed a 22% decrease in the minimum wage for most workers, and a 32% drop from employees under the age of 24.
????The change should produce a reverse ripple effect lowering salaries at all levels. "Greece is finally breaking the spiral," says Michael Massourakis, an economist at Alpha Bank in Athens. "This could make labor markets far more efficient." In effect, the new law allows employers to negotiate strictly at the company level, instead of starting with a big, mandated wage increase before they even start talking to their own workers. The rub: The new system applies for three years. The possibility that Greece will return to the old system in 2015 dampens the significance of this historic reform.
????In conclusion, it's clear that Greece is only embracing these widely reviled reforms under intense pressure. It may indeed choose the route of exiting the euro over the pain of staying the course. But after two years of fiddling, it's finally making the right moves. The Greek tragedy is that it may be too late.
