Aliki Mouriki
Degree of enforcement of regulations
The enforcement of regulations and of labour and social security legislation in particular, is not an
issue in countries with strong monitoring and sanction mechanisms and a quasi non-existent informal
sector, like Denmark and the Netherlands. By contrast, in Southern Europe, very often a rigid and
complicated regulatory framework goes hand-in-hand with widespread violation of legislation and
an extensive underground economy. Greece, is the country with the highest incidence of violation of
employment rights in the EU (Kouzis, 2008), as the benefits of violation still seem to outweigh the
cost of sanctions imposed. Attempts to contain the expansion of the underground economy have
repeatedly proved unsuccessful as the informal sector is constantly boosted by the massive influx
of often undocumented migrant workers and the labour reserve of unemployed women and youth,
that together constitute a vast pool of undeclared and cheap labour. Although hard to measure, un-
declared work is estimated at about 25% of the total workforce and accounts for about 20% of the
national GDP (see INE/GSEE 2007 Annual Report). The non-enforcement of regulations is not the
privileged ground only of the informal sector of the economy. Within the formal labour market too,
organisations and firms often have recourse to a series of practices that violate the labour and social
security legislation. The most widespread illegal or “irregular” practices include: undeclared and/or
unpaid overtime work; minimum or partial social insurance of the workforce; non payment of a part
of the wage an employee is entitled to; non payment of social benefits; the absence of an individual
employment contract or the coercive signing of resignation on behalf of an employee working with
an individual contract; the transformation of a full time contract into a part-time one, against the will
of the employee; the illegal and unpaid extension of the part-timers’ working hours schedule, etc.58
It is hard to say whether it is the relative rigidity of formal rules until recently that encouraged the
Greek entrepreneurs, in particular SMEs owners, to operate partly or totally informally, or whether
this entrepreneurial attitude is the result of the low road to competitiveness adopted in Greece and
the prevailing “culture of convenience”. In any event, the weakness of the inspection mechanisms to
monitor the enforcement of regulations and the rarity of sanctions imposed, 59 but also the fear of
58 See the annual reports published by the Labour Inspectorate, Ministry of Employment and Social Security.
59 There are 647 social inspectors employed at the Labour Inspectorate in charge of controlling 844 103 firms. In 2007,
they carried out 35805 controls and imposed sanctions in 7850 cases. The other inspection mechanisms (the Social
Insurance Foundation and the tax authorities) are also vastly ineffective and capture only a small fraction of viola-
tions.
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