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Shocking austerity: Greece’s poor lost 86% of income, but rich only 17-20%

Greece’s unbalanced austerity and drastic increase of poverty. The poorest households in the debt-ridden country lost nearly 86% of their income, while the richest lost only 17-20%.  The tax burden on the poor increased by 337% while the burden on upper-income classes increased by only 9% !!! This is the result of a study that has analyzed 260.000 tax and income data from the years 2008 – 2012.
According to the study commissioned by the German Institute for Macroeconomic Research (IMK) affiliated with the Hans Böckler Foundation:
– The nominal gross income of Greek households decreased by almost a quarter in only four years.
– The wages cuts caused nearly half of the decline.
– The net income fell further by almost 9 percent, because the tax burden was significantly increased
–  While all social classes suffered income losses due to cuts, tax increases and the economic crisis, particularly strongly affected were households of low- and middle-income. This was due to sharp increase in unemployment and tax increases, that were partially regressive.
– The total number of employees in the private sector suffered significantly greater loss of income, and they were more likely to be unemployed than those employed in the public sector.
-From 2009 to 2013 wages and salaries in the private sector declined in several stages at around 19 percent. Among other things, because the minimum wage was lowered and collective bargaining structures were weakened. Employees in the public sector lost around a quarter of their income.
-The extent of the wages cuts were grossly overstated at least ten percentage points, the study researchers estimate.
Unemployment & Early Retirement

Unemployment surged from 7.3% in the Q2 2008 to 26.6% in the Q2 2014. among youth aged 15-24, unemployment had an average of 44%.

Early retirement in the Private Sector increased by 14%.

Early retirement in the Public Sector* increased by 48%

The researchers see here a clear link to the austerity policy, that’s is the Greek government managed to fulfill the Troika requirements for smaller public sector. However, this trend caused a burden to the social security funds.

* Much to KTG’s knowledge public servants with 25 years in the public administration rushed to early retirement in 2010 out of fear of further cuts in their wages and consequently to their pension rights.
Taxes
Taxes were greatly increased, but they had a regressive effect.

Since beginning of the austerity, direct taxes increased by nearly 53%,  while indirect taxes increased by 22 percent.
The taxation policy has indeed contributed  significantly to the consolidation of the public budget, but by doing so the social imbalance was magnified.
Little has been done against tax avoidance and tax evasion, however, the tax base was actually extended “downwards” with the effect that households with low-income and assets were strongly burdened.

Particularly poorer households paid disproportionately more in taxes and the tax burden to lower-income rose by 337%. In comparison, the tax burden to upper-income households rose by only 9%.
In absolute euro amounts, the annual tax burden of many poorer households increased “only” by a few hundred euros. However, with regards to the rapidly declining of incomes and rampant unemployment, this social class was over-burdened with taxes.
The Poor suffered more

On average, the annual income of Greek households before taxes fell from €23,100 euros in 2008 to just below €17,900 euros in 2012. This represents a loss of nearly 23 percent.
The losses were significantly different to each income class with the poorest households to have suffered the biggest losses.
Almost one in three Greek household had to make it through 2012 with an annual income below €7,000.
Income losses 2008-2012
1. Class: i.e. 10% of Greek total: households that have lowest income: loss 86%
2. and 3. class: loss between 51% and 31%
4. – 7. class: households with higher income: loss between 25% and 18%
8. Class: 30% of Greek total: households with the highest income: loss between 20% and 17%.
Shocked?
KTG has been saying this since 2011,  has been saying this and criticizing every new taxation law: that the burden to the poor, the low-incomers, the low-pensioners and even the jobless was over-proportional when compared to the  economically better society classes.
I wonder what a study will bring in results for the years 2013 and 2014 that were the worst years of austerity.

 

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5 comments

  1. Hmm interesting, not shocking really but goes to show who saved their asses.

    Correct me if I am wrong, but the demanded reforms did not demand that the burden had to be carried on the shoulder of the small folk, or am I mistaken?

    I certainly haven’t read anything along those lines.

  2. By putting the burden on the tax payer it is automatically carried by the “small folk”. None of the “big folk” pay their fair proportion of taxes anywhere in the world. Be it good times or bad, taxes are for the small man, nobody else. Law is there to protect the big folk (and their “wealth”) and keep the small folk in their place. It is also the means by which the “big” folk transfer the wealth of the “small” folk to their pockets. This is a perfect example of this mechanism…

  3. I looked at the document – a little bit shocking. I mean for example:
    Incomes from wages diminished, incomes from pensions relatively rose (but who will pay the pensions if there are fewer people with incomes from wages – somebody must work and pay the social security to pay the pensions, and there is less working people now );
    I understood why Greeks hated so much the property tax , it was really hitting mostly the poorer …
    All in all, a sad picture of something badly done. The first big experiment in history with internal devaluation… What I hope is that they learned a little at the experiment. It will not help Greeks, but maybe it will help somebody else.

  4. In a socialist country (such as Greece) it is always the poor who suffer the most. The only reason you do not know that because you do not study the life in 20th Century Socialist countries: Soviet Union, China, Eastern Europe etc… The government people of these (past) countries were richer then the Millionaires of the Western World.

    The most surprising is that the Socialist (PASOK) governments ruined Greece, even though presently Greeks hope that an other Socialist government will save them. NOT POSSIBLE.

  5. What puzzles me, Franz, is that the Troika was looking over the shoulders of the government throughout the past 5 years and blithely went along with everything that was done to satisfy the broad austerity requirements. At no point did anyone outside of Greece admit that the results were catastrophic. Many noted economists spoke out, but they have no “standing” in the chambers that are running this fiasco, so people like Paul Krugman and pre-Syriza Varoufakis were simply ignored. It wasn’t until the Syriza government came into office that there was even the slightest recognition of the nighmare that this report details, and that is simply because whether they like it or not, the lenders have to deal directly with Syriza, and they are obviously not happy having to deal with the truth of what has happened in Greece over the past 5 years under the “magic medicine” of haphazardly applied austerity. Afterall, the “official” line of the lenders is still, “You were doing just fine until Syriza stirred the pot.” If what is detailed in the IMK Report is “Just fine”, I’d really hate to see what Herr Schauble et al consider a humanitarian crisis to be.