Public-private wage duality during the Greek crisis

During the recent crisis, Greece experienced a severe contraction and rapid transformation in its labour relations and pay-setting system in both the private and public sectors. Although the quantity (employment) adjustments that followed have been well documented, the changes that were triggered in the wage structures of the two sectors remain largely unexplored. In this article we examine these changes using Greek Labour Force Survey micro-data. We find a differential adjustment across sectors in terms of magnitude, timing, and structure. Despite general perceptions, adjustment in public sector wages has been slow and limited, with pre-crisis premia persisting throughout the period. Instead, the private sector recorded substantial adjustment, changing noticeably its valuation of worker and job characteristics and emerging from the crisis with a structure of returns that rewards more intensively marketable skills. This may be an important feature in the prospective recovery of the Greek economy