Monday, May 17, 2010

Greek Myths

Well, well. We need to revise our stereotypes. Greeks work more hours per worker than Germans, and German households are more indebted than Greek households:

And don't forget Ireland.


TexExile said...


Let's not get carried away here. German households owe more but they also SAVE more. On the most recent data I have seen, German household NET savings rates are 15-18 percentage points higher than Greek. Greek net savings rates are -- and have been since long before the crisis -- negative.

On all the data I know, Greeks do appear to work more hours than most. The question is what they are doing at work: Greek labour productivity is on average about 63-64% of German labour productivity.

There's no great virtue in working longer to produce less.

TexExile said...

A quick postscript. The variable that really matters here is unit labour costs (ULCs). This is the average cost of labour per unit of output.

Greek ULCs for the whole economy rose about six times faster than German ULCs during 2000-2008. Actually, Greek manufacturing did not do too badly -- the rise in ULCs was modest (but German manufacturing ULCs were declining over the period, so Greek manufacturing was still losing ground).

The real problem thus seems to be in Greece's non-tradable sector, where ULCs exploded. Wage growth massively outstripped productivity growth.

Unknown said...

Thanks, Tex.

TexExile said...

While I am hammering the Greeks -- or rather, hammering the people who think the graphs you spotted mean anything much -- I should add that Germany's labour-force participation rate is consistently 11-12 percentage points higher than Greece's.

Unknown said...

Yes, actually, I think the labor force participation rate stat is the most telling of those you cite.

TexExile said...

As far as the labour market goes, it it is critical, but I think the savings rates are as big a worry.

This is where Portugal and Greece stand apart from the likes of Italy and Spain: savings rates appear to be so low that fiscal adjustment can only come out of consumption.

Countries with high public debt/deficits but also high (or at least 'normal') net private savings are in far better shape.