THE GREAT UNPAID

Acknowledgement 5/1/2016: This post, and the mixed income post that triggered it, owe much to the thinking of A. Doxiadis and his book, Το Αόρατο Ρήγμα, on the structural characteristics of the Greek economy. That's not to say he has endorsed the post of course. All errors etc are my own.

Are You Into Detailed Sector Statporn?

Veteran readers know that I am a big fan of the Eurostat website. I have no interest to declare here; I am not an employee or contractor or associate of Eurostat or any of the national statistics agencies it oversees. I do, however, perform regular fact-checks and so I appreciate two things that Eurostat does to make my life easier.

One is of course their database's bookmark function - the ability to capture a set of tables as I have customised them and share them in the precise same layout to anyone else. I'm amazed at how rare this is (eg the Bank of International Settlements publishes Bankstats with almost the same functionality - the OECD is nowhere near), and how little it is used by commentators.

The second thing I like about the Eurostat database is the sheer coverage of national-level statistics. Greece's ELSTAT produces a shit-ton of data that the average Greek can never access except through Eurostat. Of these, my firm favourite is the SILC dataset on poverty and living conditions (see eg here) - as grim as it is to read the findings. However, I have recently found a close second to SILC in Eurostat's annual detailed enterprise statistics.

I urge you to consider this dataset because it really exposes the guts of the economy - both by providing rich data (number of businesses, employment, value added, investment, etc) but also by providing data by 456 detailed sectors (4-digit NACE, not including agriculture, government and social and community services). Want to find out how many call centre workers there are in Greece, and how much they get paid? Done. Want to know what the finances of Greek newspapers look like? Done. Maybe how much was invested into Greek winemakers (because allegedly much of this activity was money laundering)? Done.

I started looking into these data again the other day a propos of my post on mixed income and its relationship with tax revenues. The figures on mixed income are very interesting, but where do they come from? Who are all these self-employed people? What do they do? More importantly, does the decrease in mixed income as a share of GDP represent structural reform as I had originally suggested? Or was there something else at play?

A Mixed Income Scoreboard

So I ran the detailed tables for industry, construction, trade and services - and prepared a comparison between 2009 (the last pre-Memorandum year) and 2013 (the latest available data). I would ideally have picked 2008 but there are substantial gaps in that year's figures. Even with 2009 I have had to extrapolate once or twice (eg taking averages between 2008 and 2010).

The sectors included here accounted for 2.54m of 4.6m working persons in 2009 (of which 37% were unpaid) and 2.11m of 3.5m working persons in 2013 (of which 36% were unpaid). Two notes: first- these figures do not include the entire private sector, as explained above. Second- the 'unpaid' counted by Eurostat were not employees who hadn't been paid what was owed to them. They were people not drawing a salary from the business - working proprietors and their families, perhaps a few volunteers too. That's not to say they weren't earning an income from the business, however: their income might eg be a share of the profits of the business, as opposed to a salary.

So I ranked all of the 456 detailed sectors according to the absolute number of unpaid workers in each of them and kept the top 20 in each year. I avoided a ranking based on relative ranking because a) in turbulent times a small, niche sector's workforce can change more dramatically than that of a major sector and b) my intention is to track Greece's reliance on household mixed income - so the larger sectors are a priority.

As you can imagine, there's a big overlap betweem the 2009 and 2013 rankings; there have only been two movers in each direction; so I've opted for a top 20 + 4 leaderboard.  These 24 3-digit sectors (see list below) accounted for 21% of all employment in 2009 (971k). Of this 971k, 499k were unpaid (51%). Not one of the 24 top sectors had more than 64% of its workforce on the payroll in 2009. In 2013, the top 24 sectors accounted for 23% of all employment (798k); of this total, 427k were unpaid (54%). Only one of the top 24 had cleared the previous 64% ceiling for payrolled workers (the sector in question being the Greek equivalent of off-licences or 7-11s, which now had 69% of its workers on payroll).

This is Not the Reform Proxy You're Looking For

The key outcome here is that the industries that are core users of unpaid work (ie producers of mixed income) have not reformed quite so drastically. The improvement in the balance of mixed income to GDP seems, instead, to have come from the reduced income of these sectors. That's not really what I had in mind when wondering whether the fall in mixed income as a share of GDP could be a possible proxy for structural reform.

This is clear if you look at the supposedly 'reforming' sectors, in which reliance on the unpaid fell: bakeries, homeware stores, architects' practices, off-licences, and legal practices. The relative share of the unpaid fell by more than 38%. Yet only construction companies and law firms improved their labour productivity at the same time. On the other hand, a number of the top 20+4 sectors saw the role of the unpaid expand: look at hotels, specialist retailers, car repairs. All of these saw their reliance on the unpaid grow by 43%  or more, as business grew too tight for anyone with a payroll. All of them also saw labour productivity fall.

Now for the big picture. In 2009, the top 20+4 produced EUR16bn of value-added* (7.5% of all gross value added). clearly underperforming the rest of the economy. In 2013, they underperformed even further, producing EUR9.5bn. (5.9% of all gross value added). Their apparent labour productivity fell by 27%.

What does this mean? Far from reforming, Greece's mixed-income generating industries are withering on the vine. It's unlikely that one explanation alone can account for this, but clearly turning failing, near-informal businesses into companies takes substantial amounts of credit, which Greek banks still struggle to provide, and equity, which even well-off households are running out of. Moreover, an antiquated insolvency framework and treacle-slow courts make it harder to dissolve failed businesses. Perhaps, of course, the fall in apparent labour productivity is simply a reflection of subsdued demand, and a recovering economy will reveal structural reform of the kind I was hoping for. We will have to wait and see.

*I've had to tweak one figure in all of this - the value added number for bakeries, which may or may not have been inflated by money laundering. I'm not sure but the numbers don't stack up. See for yourselves. The difference between my 'extrapolated' figure (average of 2008 and 2010) and the one Eurostat records is about EUR200m.

TO BE CONTINUED