Greeks are often referred to as the poorest citizens of the European Union. But statistics often give an incomplete picture and can be misleading. A recently released study by Eurostat, the European Union’s statistics service, based on 2000 data, gives the possibility for a different approach from the ones usually employed, which show a considerable gap from the EU average.
The new approach lies in the three different ways in which incomes are measured — showing that Greeks are better off than commonly believed — but with one serious reservation: these are incomes available before we make a series of expenses. It is also to be remembered that comparisons between countries always need great caution.
Three measurements
The first measurable element is primary income. This includes wages, salaries, profits from any privately conducted economic activity and investment gains; we deduct interest paid.
The second measured element is disposable income, which comes after its secondary distribution by the government and which includes subsidies, pensions and all other kinds of income transfers. It does not include transfers in kind, such as services in health, welfare or municipal facilities. Finally, in its most usual form, income is measured in terms of the gross domestic product (GDP).
According to Eurostat, “GDP, and thus GDP per capita, are indicators of a country’s or region’s output and are thus a way of measuring and comparing the degree of economic development... GDP is not synonymous with the income ultimately available to private households...”
In order to compare the wealth of countries or regions, Eurostat has been using for some time a statistical unit known as the “purchasing power equivalent.” With the new approach, and in order to overcome the problem that prices of goods and services differ among regions, it has introduced a new factor: the Purchasing Power Consumption Standards (PPCS).
In terms of primary income, with the EU average set at 100, Greece’s PPCS equivalent stands at 85, just below Ireland’s 86 and Spain’s 91. Portugal is at 67, Southern Italy at 80 and Finland at 93. Among Greek regions, the Southern Aegean and Western Macedonia stand highest at 111, and the Peloponnese lowest at 54. Attica is at 104. In terms of disposable income, Greece’s PPCS equivalent is 97, faring better than Spain (92), Portugal (93), Finland (86) and Sweden (91), and just below Denmark (99). Among Greek regions, Attica’s PPCS equivalent of disposable income is highest at 123 and the Peloponnese lowest at 63.
The paradox of Athenians appearing better off than Stockholmers or Dubliners (whose GDP is 132 percent of the EU average) in terms of disposable income has its explanation. To begin with, a wide range of goods and services remain cheaper in Greece; these include rent, many agricultural products and certain utilities, such as electricity and public transport.
Apart from the lower cost of living, Greek disposable income is further enhanced by much lower taxes, especially in the lowest-income brackets which include most of the population. Disposable income includes interest received from deposits, which was still considerable in 2000, to which the Eurostat study refers.
Poor welfare
But the role of social services which governments (central and local) and many private employers provide is crucial in determining real disposable income. Northern Europeans, in particular, receive many social benefits in kind which do not affect their disposable income. By contrast, Greeks’ disposable income often has to meet the cost of services in healthcare, education, leisure, social events and welfare.
This new approach by Eurostat is useful in that it explains something which appears as a paradox to many Greeks and foreigners alike: much money is privately spent, giving the impression of general prosperity. But the structure of incomes distributed and the way they are redistributed, instead of highly qualitative public services, in fact depletes disposable income. Evidently, such measurements do not take account of incomes circulated through the black economy, tax evasion and corruption; if they did, they would give a fuller picture.
But the most important conclusion is that the country needs to give a big push to its national domestic product. This remains the crucial and really important statistical indicator, showing Greece among the laggards in the EU in terms of productive potential.
The new approach lies in the three different ways in which incomes are measured — showing that Greeks are better off than commonly believed — but with one serious reservation: these are incomes available before we make a series of expenses. It is also to be remembered that comparisons between countries always need great caution.
Three measurements
The first measurable element is primary income. This includes wages, salaries, profits from any privately conducted economic activity and investment gains; we deduct interest paid.
The second measured element is disposable income, which comes after its secondary distribution by the government and which includes subsidies, pensions and all other kinds of income transfers. It does not include transfers in kind, such as services in health, welfare or municipal facilities. Finally, in its most usual form, income is measured in terms of the gross domestic product (GDP).
According to Eurostat, “GDP, and thus GDP per capita, are indicators of a country’s or region’s output and are thus a way of measuring and comparing the degree of economic development... GDP is not synonymous with the income ultimately available to private households...”
In order to compare the wealth of countries or regions, Eurostat has been using for some time a statistical unit known as the “purchasing power equivalent.” With the new approach, and in order to overcome the problem that prices of goods and services differ among regions, it has introduced a new factor: the Purchasing Power Consumption Standards (PPCS).
In terms of primary income, with the EU average set at 100, Greece’s PPCS equivalent stands at 85, just below Ireland’s 86 and Spain’s 91. Portugal is at 67, Southern Italy at 80 and Finland at 93. Among Greek regions, the Southern Aegean and Western Macedonia stand highest at 111, and the Peloponnese lowest at 54. Attica is at 104. In terms of disposable income, Greece’s PPCS equivalent is 97, faring better than Spain (92), Portugal (93), Finland (86) and Sweden (91), and just below Denmark (99). Among Greek regions, Attica’s PPCS equivalent of disposable income is highest at 123 and the Peloponnese lowest at 63.
The paradox of Athenians appearing better off than Stockholmers or Dubliners (whose GDP is 132 percent of the EU average) in terms of disposable income has its explanation. To begin with, a wide range of goods and services remain cheaper in Greece; these include rent, many agricultural products and certain utilities, such as electricity and public transport.
Apart from the lower cost of living, Greek disposable income is further enhanced by much lower taxes, especially in the lowest-income brackets which include most of the population. Disposable income includes interest received from deposits, which was still considerable in 2000, to which the Eurostat study refers.
Poor welfare
But the role of social services which governments (central and local) and many private employers provide is crucial in determining real disposable income. Northern Europeans, in particular, receive many social benefits in kind which do not affect their disposable income. By contrast, Greeks’ disposable income often has to meet the cost of services in healthcare, education, leisure, social events and welfare.
This new approach by Eurostat is useful in that it explains something which appears as a paradox to many Greeks and foreigners alike: much money is privately spent, giving the impression of general prosperity. But the structure of incomes distributed and the way they are redistributed, instead of highly qualitative public services, in fact depletes disposable income. Evidently, such measurements do not take account of incomes circulated through the black economy, tax evasion and corruption; if they did, they would give a fuller picture.
But the most important conclusion is that the country needs to give a big push to its national domestic product. This remains the crucial and really important statistical indicator, showing Greece among the laggards in the EU in terms of productive potential.
3287.99
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