Notis Mitarachi Former Deputy Minister for Labour and Social Affairs)

Notis Mitarachi
Minister of Migration and Asylum (Former Deputy Minister of Labour and Social Affairs)

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Reforming to ReBrain Greece

Notis Mitarachi, former Deputy Minister for Labour and Social Affairs, says labour and social security reforms will create quality new jobs and a more viable pension system, while efforts are underway to get young professionals who left the country in recent years to return and help ‘ReBrain’ Greece.

GIG: What are your key objectives at the Ministry for Labour and Social Affairs? What are the first steps you are pushing forward with regards to the social security system?

Notis Mitarachi Former Deputy Minister for Labour and Social Affairs)

Mitarachi: The key objectives of the Ministry for Labour and Social Affairs are to reduce unemployment and increase the quality of employment in Greece.

On the other hand, the brain-drain phenomenon has been momentous in the years of the crisis as it is estimated that over 400,000 Greek scientists, experts, and professionals left the country. Specialised human capital is crucial for the growth of the Greek economy and, as a result, this phenomenon is a major blow to development as well as wider social, cultural, and national dynamics.

Therefore, our aim in this regard is to curtail this exodus and bring back as much of this human capital as possible to Greece, so that emigration abroad will be a matter of choice in the future.

Furthermore, we are working on the necessary structural reforms in order to improve the functioning of the labour market. To be more specific, the government has announced the reduction of the corporate income tax rate from 28% to 24%, as well as the gradual decrease of social security contributions (SSC) by 5% by 2023.

Regarding the social security system, we are introducing a liberal system of seven levels of SSC. Those who are self-employed will have the right to choose among these levels based on their ability to contribute. Furthermore, by creating a link between the social and the taxation system, people will contribute less to the state in total yet receive higher pensions. 

In addition, regarding the pension system, the major change relates to the capitalisation of auxiliary pensions. Today, these pensions do not differ from the main pension and, therefore, both main and auxiliary pensions have the same limitations. The new auxiliary system will be a defined contribution with individual accounts. 

The new supplementary pension system will not only be shielded from financial and demographic constraints but also will be a more ‘rewarding’ system. In the long run, we expect the value of private pension funds versus GDP in Greece to increase from today’s 0.8% to close to 100%.

We will follow the best international practices that have been implemented for decades in many western European and South American countries.

GIG: The system has been the subject of reforms in recent years; will we see more changes? How effective were the previous round of changes in making the system viable?

Notis Mitarachi Former Deputy Minister for Labour and Social Affairs)

Mitarachi: High wage costs in combination with low wages contributed, substantially, to the erosion of the Greek economy’s competitiveness.

The previous round of changes created a system that was expensive for corporates as well as for self-employed people, and that at the same time was not appropriately recognising long periods of service in employment. We want to change the level of contributions to make the system more geared towards people having spent 35, 40, or 45 years in employment – increasing this pension – providing an extra incentive for people to stay in the labour market. Labour participation is a critical contributing factor for economic growth.

GIG: The social security asset management is fragmented and could, in some instances, benefit from professional managers. Do you have any plans to streamline this?

Notis Mitarachi Former Deputy Minister for Labour and Social Affairs)

Mitarachi: We do use foreign and domestic asset managers to manage asset wealth within the pension system. But to be fair, the existing social security system is in the Pay-As-You-Go Pension system that requires individuals to fund their own retirement savings accounts with a portion of their earned income, and it is not based on assets. So, the reserve we have does not exceed one year of pensions and is not an asset-heavy pension system.

To that end, we find it very important to create a second pillar using the existing contributions of employees and employers, starting with the new entrants into the labour market from 1 January 2021. Throughout the transition to the accumulative insurance system that will come into force, the insured person will have their individual accounts where contributions are saved and invested. This will create a robust asset management industry.

GIG: Are you looking at any particular incentives that will help businesses up staff levels and, as a consequence, create more jobs?

Notis Mitarachi Former Deputy Minister for Labour and Social Affairs)

Mitarachi: First of all, the entire Greek government is undertaking a collective effort to become more pro-business, and all ministers are working together with our prime minister to establish a framework that allows investments to flourish in Greece.

The fiscal environment plays a key role, as does the legal environment, and the Ministry for Labour is offering incentives for corporates to increase employment. In this direction, we have reduced the non-wage cost by five points for full-time employees to incentivise the creation of full-time jobs. 

On the other hand, in December 2019 we announced a pilot project called ReBrain Greece, through which we’re providing incentives to companies to hire young, highly skilled, and highly educated Greeks living abroad who want to come back.

We will follow with more programmes in 2020 to catalyse the labour market to improve and create higher quality jobs. But acting alone will not solve the unemployment problem. We need to work together with the ministries that are responsible for licensing investments. We need to make key changes to the investment laws, which was one of the main priorities of this new government in August 2019. We need to work together with the Ministry of Finance in reducing the fiscal burden, and we need to work together with the Ministry of Justice to make the court system faster in tackling cases that are related to business.

GIG: What initiatives have you set out to achieve to reduce red tape in the labour market?

Notis Mitarachi Former Deputy Minister for Labour and Social Affairs)

Mitarachi: One of the key objectives of 2020 is to digitally transform both the labour system and the pension system to allow companies to interact electronically with the system to register new employees, make changes in employment, and have pensioners and injured people access the pension system directly. This will reduce bureaucracy and also make the public administration more efficient. 

We have a ministry called the Ministry of Digital Transformation coordinating all the efforts of the government in this respect.

GIG: It is commonly said that one of Greece’s biggest assets is its human capital. Why is this?

Notis Mitarachi Former Deputy Minister for Labour and Social Affairs)

Mitarachi: Indeed, one of the key strengths of the Greek economy is its human capital. Greeks traditionally invest in education, particularly graduate and doctoral education, and for us this is a priority. We have set out to change the Greek constitution – something we hope we will be able to achieve – to allow private universities to further strengthen the high quality of public education we already have in the country.

Also, a lot of Greeks choose to study abroad, and we are one of the highest exporters of students in the world. All of this creates a very strong human capital base, comprised of white-collar jobs, and highly skilled, well educated, multilingual professionals.

I do believe our human capital is being underutilised today. Therefore, we want more quality investments to provide young people with the opportunity to thrive as well as for foreign businesses to see that Greece is an ideal place to do business.

GIG: One of the biggest problems caused by Greece’s crisis is the brain drain. What will the ministry do to reverse this situation?

Notis Mitarachi Former Deputy Minister for Labour and Social Affairs)

Mitarachi: We estimate that around 400,000 people left Greece during the crisis due to the brain drain phenomenon.

We recognise there are a lot of people, for personal, family, or other social reasons, that do want to come back to Greece when they find the right opportunity. So, we’re sending the signal that the country is back on track. The economy in 2020 is set to grow 2.8%, and we’re seeing unemployment come down to 14%. This is a much more favourable environment and a good opportunity for people to continue their careers back home.

To this end, the Ministry of Labour and Social Affairs is trying to catalyse the recovery of this talent. Through ReBrain Greece, our pilot repatriation programme, we are offering 500 postgraduates aged between 28 and 40 a job and a €3,000 minimum monthly gross salary in exchange for them returning to Greece and bringing with them the knowhow, innovations, and fresh ideas they have gained abroad.

The Ministry of Labour will cover 70% of their salary, or €2,000 per month, for the first year, with the participating company being required to retain the employee for at least an additional 12 months.

It should be noted that this creates a very big opportunity. A big chunk of the Greek population is now living abroad, being highly trained and becoming highly skilled in international environments. So, if we can get a fraction of these 400,000 people to come back with all the experiences they have gained in the countries where they migrated to, that would be something very positive for the Greek economy as well as very attractive for new investors in Greece. Investors will find English-speaking professionals who have learnt how international companies and international markets operate.

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