Table of Contents
Chapter 1 – Literature Review
1.1 Greek public sector
1.2 The size of Public Sector in Greece
1.3 Private and Public Sector – Differences
1.4 Reform Proposals for the Greek Public sector – Human Resources
1.5 Theory of Human Capital
1.7 Job satisfaction
Chapter 1 – Literature Review
1.1 Greek public sector
The last three years, Greek economy has entered a stage of high instability, insecurity and unpredictable perspective.
The sharp drop in economic activity and the dramatic rise in unemployment have already made a significant impact on real income and living standards of employees and pensioners, testing therefore, the limits of social cohesion in Greece. A milestone of these developments was the financial crisis experienced by the Greek economy since the autumn of 2009 and in particular, the Greek public sector which is subject to strong pressures from the external environment, to enhance its effectiveness and improve the efficiency of its services. The financial crisis has revealed chronic structural problems of the financial system and the Greek economy as a whole.
Although the debate is stuck in the trap of bankruptcy and economic policy imposed by the creditors of Greece through the International Monetary Fund (IMF), the European Commission and the European Central Bank (ECB). In relevant discussions emphasis (Tsiafi, 2011) was given to the size of the Greek public sector and the need to shrink the state, reduce costs and reduce public employment.
The concept of the public sector is in terms of legal content, is not clearly defined and uniform. The legislation refers to its organizational function, is scattered and fragmented and is often integrated in texts which are not directly related to the organization of the public administration, but various issues not related among them (Tsiafi, 2011).
For the first time the legal concept of "public domain" is introduced by Law 1256/1982 (Government Gazette No. 65 31 May 1982, issue A) and delimited the context of broader government agencies that make up the concept.
In particular the concept of "public domain" includes:
a) The state or public services
b) The state or public institutions that act as Public Entities
c) The state or public companies and concession, such as PPC, OTE
d) The charitable foundations of the Civil Code which were placed under state financed or subsidized by it.
e) The Bank and other anonymous Companies
f) The State entities designated by law or the courts as legal entities funded or sponsored by any of the above entities
g) The subsidiary companies of the above legal entities of the subsections controlled directly or indirectly by them.
As it is apparent from the wording of the law a state legal person in the public sector to belong to the public sector, it is required on the one hand, to be characterized as private entity (NPID) and on the other hand, to be funded or subsidized (Tsiafi, 2011).
The organizational model of ' bureaucracy ' is a global organizational form that has affected both public organizations and the business field around the globe. .
The managerial organizational systems are the means by which the exercise of power carried by the public administration are organized, so that this power is, on the one hand, practiced both across the country and solve all the problems of social and civic life in the context of operation of the rule of law (Tsiafi , 2011).
The systems of managerial organization, in general, are classified as following (Pesch, 2008:39):
The centralized system: decisive authority is exercised by the institutions of public administration, which are located in the capital of state. The institutions of the region simply exercise executive responsibility. The centralized system is necessary to maintain the unity and security of any State.
The decentralized system: decisive authority over local affairs exercise, to the extent that is applicable, and government bodies located away from the state capital.
The system of administrative authorities: part of the administrative affairs is managed by separate bodies, non-government, on their own responsibility. These cases may relate to a particular place, so that is why the local government or certain kind of needs, which refers to a particular universal government.
In Greece coexist, under the Constitution, the three aforementioned systems: the central exercise special powers to direct, coordinate and control the regional bodies. The regional bodies are generally responsible for deciding the affairs of their region. The management of local affairs belongs to local authorities, while not ignoring the government, such as higher education institutions.
The choice, however, of one or the other system of administrative organization belongs to the sovereign power of the State is the natural carrier of the organizational power of the government and is under the direct influence of factors of historical, ideological, economic and social nature. Units of managerial organization are public services and authorities (Tsiafi, 2011).
The authorities are single-person or collective bodies of the State exercising jurisdiction of issueing enforceable administrative acts. A feature of the principles is to exercise decisive power. Public services, in the material sense of the word, is the activity of public legal persons or individuals acting by concession, designed to treat the basic needs of society (Tsiafi, 2011).
Public services in the formal or organic sense are governing bodies responsible by law to manage certain administrative affairs (Pesch, 2008) . A key feature is the treatment of the public interest. The instruments of managerial organization are physical persons who by bringing public power they express through their actions the will of the public organization . These are the institutions of the legal entity of the state, which perform the will of the state acting instead, which, based on the predominant organic theory, it is recognized as a social entity, having separate intention than those of the bodies (Moulton & Bozemna, 2010). The aforementioned systems, units and institutions of administrative organization , as applicable in the Greek legal system , they establish the concept of public bureaucracy .
Bureaucracy has historically been an effective system of management because it allowed the decoupling of the activities of an organization from certain people who exercised it (Moulton, 2009:879). The introduction of standardized procedures, the maintenance of records, promotions based on ability and expertise provide an organization, above all, with duration and continuity. The bureaucratic model has certain advantages, such as the rational division of labor, the system of rules and operating standards and the merit-based selection of human resources, which contribute positively to the efficiency of the public sector. However, bureaucracy has major drawbacks, such as formalism and the rules and regulations of work that make an organization inflexible and ineffective (Moulton, 2009:890).
Bureaucracy can be discerned in 2 categories (Lyn et al., 2001) :
Internal, i.e. that the one that is not visible to the citizen, refers to internal affairs of public administration . The citizen , unfortunately, is the final recipient of its consequences.
External bureaucracy, namely the one that the citizen lives everyday.
These two forms are one of the key players of the suffering of civilians and an important feeder of corruption. The incomplete, imprecise and anachronistic legislative - regulatory framework, poor service, limited scientific training, risk- averse employees are the main feeders of bureaucracy (Moulton & Bozema, 2010 ) .
1.2 The size of Public Sector in Greece
The measurement of the size of the public sector is an issue that has preoccupied economists and politicians for many years. The difficulty of accurate measurement arises from the fact that many of the actions of the public sector are administrative and regulatory, which are not easily captured in economic fundamentals. An approach that has been adopted and is widely used is the one of displaying the size based on general government expenditure as a percentage of GDP (Tsiafi, 2011).
Based on this size, the size of the public sector has been increased in all countries , especially in developed countries. The last forty years, for which there are fairly reliable data , it is observed that for both OECD countries and the Euro zone area, there was a noticeable increase until the mid- 1980s onwards and this size was stabilized slightly over 45 % of GDP for the Eurozone countries and around 40 % for all OECD countries. The increase of the size of the public sector was particularly large for Greece, since from 20 % of GDP in public expenditure in the early 1960s, it reached 50 % in 2000, declining slightly in the coming years ( Rapanos,2009 ).
The great increase in public expenditure derived mainly from transfer payments i.e. pensions and expenditure for paying the interest rates of public debt. The latter ones were substantially declined after 1995 where it started the decline of interest rates, particularly after the accession of Greece in the Eurozone (IOVE, 2004).
An alternative approach for the size of the public sector could be the state revenues as a percentage of GDP. This index was also increased considerably over the last forty years in all countries and Greece. For Greece, the change is particularly striking, since increasing the overall tax burden rose by 75% to about 80%.
Apart from the global indicators, it has been attempted for indicators that refer to individual sizes, such as public consumption, public investment and the percentage of added value produced by the public sector and public employment. Many people even believe that the added value, simply salaries, is an appropriate index for measuring the size of the public sector, since public expenditures include transfer payments, which are not part of GDP (Rapanos, 2009).
It is important to note that Greece had the largest change in expenditure, after Portugal and the third largest increase in revenue, after Portugal and Spain . An easy explanation is that southern Europe was less developed in the early 1970s . Due to the rapid growth they experienced, they had a significant increase in all categories of government expenditure and revenue . In Greece, as in other Mediterranean countries the first place in increase rates had social spending, followed by consumption expenditure, interest rates and wages. On the other hand, the significant increase in revenue was mainly through an increase in direct taxes and social security contributions. Assuming that direct taxes are more fair, then it could be said that tax justice was improved in Greece, although it can be also supported that the increase of direct taxation created several distortions with its heterogeneity and complexity (Rapanos, 2009 ) .
From these figures it is clear that the size of the state in Greece, based on conventional metrics was increased significantly and the question is whether its efficacy was increased (IOVE, 2004).
The product produced by the government, i.e. central government, local government and public entities, in the period 2000-2007 was about 18% of GDP, which is not significantly different from the average in the European Union and Eurozone. However, apart from the general government, public sector controls a number of public companies, which have an effect on GDP. In the case of Greece, the number of such companies has declined significantly in recent years due to privatization. Moreover, the companies in which the State participates t are few, eg Electricity, telephone, water, Agricultural Bank, Post. If the product of these businesses is added, then the GDP produced by the public sector will increase, but it is unlikely to exceed 22-23% of GDP (Tsiafi, 2011).
Based on these figures, it is noticed that the product produced may not be as large as in northern Europe, but it is still important to look at exactly what the government produces and how efficiently this product is produced. Apart from the product produced by the state itself, it should not be forgotten that the state manages significant amounts in the form of transfer payments, the effective management of which is an important issue. Some of these issues are related to the effective management of public resources (Rapanos , 2009 ).
Many analysts believe that Greece can increase further its public expenses and therefore, its tax revenue. A more careful look, however, shows that these comparison do not take into consideration the growth level of each country.
Beyond the problems of effective management of expenditure, the countries that have a large proportion of public expenditure to GDP are countries with high per capita income. If this factor is taken into consideration and compare the expenditure as a percentage of GDP with the per capita income of each country, the picture is different. The country with the largest public sector in the European Union is Portugal followed by Greece. Countries such as Sweden, Denmark and the Netherlands are the lowest ranking (Rapanos, 2009).
An important dimension, which is ignored by these indicators is the effectiveness and efficiency in the use of government expenditure. Greece is in the lowest rankings in the European Union, in terms of transparency , accountability and evaluation of public expenditure , unlike other countries where the public sector , based on these indicators, is large.
Apart from the amounts spent by the state, their effectiveness is important. Although measurement is difficult , however, there have been some attempts to measure how effectively these resources are used by the State. One of the most well-known studies is the one by Afonso, Schuknecht and Tanzi (2005). There are essentially two indicators.
The first one measures the effectiveness of inputs. To understand it let us take the EU-15, where the ratio is 0.72. This means that it would be possible to achieve the same level of product and services with 72% of the inputs used now. In other words, on average, the sample of countries used employ 38% more resources than the minimum cost that would be needed to produce the public services offered.
The second indicator measures the effectiveness of service output. Consider again the average of EU-15. This indicator means that, taken for granted public spending, the performance of the public sector is 78% (or 22% less) than it would be if the EU-15 countries were utilizing with full effectiveness the allocated resources.
As it is noticed, the ranking of Greece is not particularly good. Regarding the efficiency of inputs, Greece has the same score the average for the EU-15. This may mean that the public sector does not employ many resources, as in other countries. On the other hand, regarding the effectiveness of the product produced, Greece holds the last position of the 23 countries in the sample (IOVE, 2004).