WHY ARE THE GREEKS SO GLOOMY?

Because I'm not very smart, I ventured onto Reddit the other day. A user (whom I'm not naming to avoid harrassment) was questioning why every Greek they speak to is so negative about the state of the economy when things look like they're getting better. 

The user linked to this article, written by Michalis Argyrou, the Chair of Greece's Council of Economic Experts - a body directly appointed by the Greek Minister of Finance. Here, Argyrou focuses on a recent (Oct 2024) Eurostat publication on subjective poverty, and asks a very interesting question: 

How is it that Greeks rate themselves subjectively as 'poor' much more frequently than one would expect from more objective indicators of material poverty? Why do their subjective perceptions fail to reflect the significant post-crisis improvements in employment and other economic indicators? 

You could put this down to some level of partisanship; it certainly reads as though Argyrou is rage-baiting certain parts of the Greek internet, stating as he does that

'In Greece, of every 100 people who claim to be poor, only 28 are truly poor.' 

Except, there are receipts. Apparently 67% of Greeks are classed by Eurostat as reporting 'subjective poverty'. Fewer than 19% are at risk of poverty as this measure is defined by Eurostat.  

More importantly, Greece really stands out from the rest of Europe in this regard: Argyrou points to a shocking graph, not purpose-built by some ND partisan but included in the original Eurostat publication, which shows how much of a deviation there is between self-assessed poverty and 'objective' poverty across different European countries. Greece stands out so much it practically needs its own secondary axis. 

Worse, the two figures are of good quality and properly comparable - they come from the same study, SILC, which veteran readers will recognise as one of this blog's favourite surveys. SILC is where all European poverty statistics come from and it's been surprisingly robust to the rise of non-response across Europe.

You don't have to share Argyrou's institutional perspective or have particular sympathies for the current government to raise an eyebrow at this. I did too - and the fact that Balkan countries seem to dominate the ranks of poverty over-estimators seemed to point to a kind of cultural bias - a 600-yr-old legacy of treating all state institutions as predatory and only grudgingly acknowledging them if they can be weaponised against one's enemies.   

So is Argyrou right to speak of an over-reporting bias? More to the point, is he right to claim that 'In Greece, of every 100 people who claim to be poor, only 28 are truly poor.' ?

To get to the facts, we first need to understand what Eurostat means by 'subjective povery' and the 'risk of poverty', how objective the latter is, and how Eurostat figures are used to approximate them. 

First -subjective poverty. 

Subjective poverty is not a term invented by Eurostat or Argyrou - it has a long history (see eg here h/t Cubiclogic). Eurostat appears to have adopted it as shorthand for a specific measure derived from SILC.  

You can read the questionnaire from which this measure is derived here.  The precise wordings in English and Greek are as follows. If you say you can only make ends meet 'with difficulty' or 'with great difficulty', then that makes you 'subjectively poor'. If you're not convinced that's how Eurostat calculates this, see Eurostat's explanation here and the actual data for C5 here and add the two responses up for yourself. 

To my eyes at least, we have a bit of a methodological issue here. The Greek and English versions of this item are not semantically identical. That's always a risk with international surveys but here I think the deviation is significant. The Greek version literally asks 'how do you meet the usual needs of your household?'. There is no negatively charged word in it. The English version asks people whether they can make ends meet, which to the best of my understanding of English, does have a slightly negative energy. One can ask even a wealthy person how they 'meet the needs of the household' and get a complex answer. The bar for saying 'I make ends meet with difficulty' in English is higher than the bar for saying 'I meet the needs of the household with difficulty' in Greek.  

If this does not convince you, you needn't worry. My conclusions do not rely on this observation. 

Now on to 'objective' or 'true' poverty

In fairness nobody truly uses such terms, however Argyrou does contrast the 'objectively' poor from the 'truly' poor, so I'll run with that term for a moment. As you can see here, the Eurostat release Argyrou cites reports on the 'risk of poverty' (not the more common but, in this case, less appropriate concept of 'risk of poverty or social exclusion').  

Specifically, a person is 'at risk of poverty' if their income, after tax and other deductions such as national insurance contributions, and after social benefits received, and adjusting for household size, is lower than 60% of the country's median income. This is a standard definition, widely used internationally, which feeds into a lot of EU policy and Eurostat figures. It's also baked into SILC statistics, so we can cross-tab almost every poverty statistic in Europe against this. 

We can now restate Argyrou's challenge thus:

• First, 60% of Greeks above the 'at risk of poverty' threshold are reported to be subjectively poor. Can that really be the case?
  
  
• Second, it seems as though Greeks above the threshold are about as likely as those below the threshold to be reported as subjectively poor (though the balance of 'with difficulty v 'with great difficulty' shifts). Again, can that really be the case? 

To avoid subjective measures, we can try to correlate risk of poverty with other objective indications of hardship. You won't see above-poverty-line households struggling to eat, and even the percentage of such above-the-line households that struggle with heating/fuel prices is modest. So, what gives? 

The answer presents itself clearly once you consider housing, debt and arrears. 

• Above-the-line Greeks are much more likely than any of their fellow European above-the-liners to have unpaid bills, unpaid rent payments, etc. Nearly half of them have such unpaid liabilities. Watch out for the massive outlier, does it remind you of some other graph you've seen recently?
  
  
  
  
• If we try to break this down into constituent debts, Greece's above-the-liners stand out a bit in terms of rent and mortgage arrears (2.8x the Eurozone average) but more so when it comes to arrears on utility bills (4.9x the Eurozone average) and even more so for arrears on loans and hire purchase agreements (6.9x the Eurozone average). 
• If you assume that someone who keeps getting final demands from the bank or utility companies and cannot pay these immediately is likely to say they make ends meet 'with difficulty,' well the mystery is solved.  
• Overall, utilities and debts are a bigger deal than housing. Above-the-line Greeks do pay a bigger share of their income into housing costs (29%) than any of their fellow above-the-liners, but admittedly this is not a huge outlier and the share of Greek above-the-liners that Eurostat calculates as facing a 'heavy financial burden' due to housing costs alone is hardly the highest in Europe.

So here is what I think. 

First, Greeks responding to the SILC survey are not describing themselves as poor. This isn't an option in the survey. 

Eurostat ascribes to them a 'subjective poverty' status based on them reporting some difficulty in managing household expenses. The word 'poverty' and its derivatives are never presented to the respondent.I think the slight difference in wording does matter, but I don't believe it accounts for much of the supposed 'over-reporting' called out by Argyrou.

The supposed 'over-reporting' emerges from the fact that 'low income' is only one way in which a person might find themselves in a bad place financially. If expenditures are high, even people with reasonably good incomes could do so. 

In the case of Greece, it seems clear that 'above-the-liners' (ie people with more than 60% of the country's median income, which to be clear is not much) are significantly more likely than their peers in Europea to be struggling with debts of different kinds, primarily related to debt servicing. To be clear, Greek households don't have more debt than fellow European households do on aggregate, but it is likely that the distribution of loan sizes is highly skewed, with 'above-the-liners' having very significant liabilities. 

So what looks, to Argyrou and most casual readers, like a bias in favour of thinking of oneself as poor is, in fact, debt overhang. It's not a hysterical trope but a piece of solid (or not solid, in another sense) economic fundamentals that Greece's Council of Economic Experts should be treating as a high priority risk - not dismissing as mere snowflakery. It creates a reluctance to form households, or have children, or save, invest, start businesses, indeed even to consume. 

Perhaps all these people deserve some hardship. Maybe they were not prudent enough in their spending or borrowing back in the day. But in macro terms, the rights and wrongs of indebtedness do not matter. The resulting economic anemia will hurt even those folks whom one considers virtuous and thrifty.