## sipea2025056

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---

### A. Demographics, human capital, and macro implications
- Working population projected to decline from 6.6 million in 2023 to around 4.3 million by 2050—a 35 percent reduction (Figure 2).
- Greece’s average actual working hours per worker: 39.8 hours (highest in the EU, European Commission, 2024a).
- Policy focus: increase the labor force and raise labor productivity to sustain growth momentum.

### B. Labor force participation (LFP) gaps and distributional patterns
- Greece’s LFP low relative to euro area peers; driven mainly by women’s participation gap.
- In 2023, Greek women’s LFP rate is lower by about 8 percentage points relative to euro area averages; Greek men’s LFP is lower by 0.4 percentage point (Figure 3).
- Women’s LFP gap contributes most to the total LFP gap because women have a larger share in the working-age population.
- Significant LFP gaps also exist for youth and elderly groups compared to euro area averages.

### C. Lifecycle and educational effects on gender LFP gap
- Women’s LFP trails men over the entire life cycle; gap surges at the beginning of working-age period (25-54) when couples typically start having children (Figure 5a).
- During prime working ages (25-54), Greek women’s LFP rate is about 10-20 percentage points lower than that of men.
- Education effect:
  - Among college graduates, the gender LFP gap narrows sharply.
  - Among non-college individuals, a wider gender gap emerges due to lower female participation (Figures 6 and 7).
- Young children effect:
  - Having children under age six drastically reduces women’s LFP and widens the overall gender gap (Figures 8 and 9).

### D. Care responsibilities and employment penalty
- Nearly 28 percent of working-age women cite care responsibilities as their main reason for staying out of the labor force; men: 1 percent (Figure 10a).
- About 25 percent of working-age women cite “any other reasons,” likely weak work incentives, skill mismatches, or other structural hurdles.
- Education/training cited by about 5 percent of working-age women as a barrier; over 95 percent of youth cite it (Figure 10b).
- Childbirth employment penalty:
  - Child Penalty Atlas shows a sharp decline in women’s employment immediately after first child’s birth and persistent lag over time (Figure 11).

### E. Access to childcare facilities
- Over 70 percent of Greek children under three are outside formal programs; euro area average: about 58 percent (Figure 12).
- Regional shortfalls: day care center places in Northern Greece cover less than 7 percent of total infants in the region (Megalonidou, 2019).
- Policy levers: build new facilities, incentivize conversions and private provision, support childcare usage, and consider conditional cash transfer design to incentivize childcare use.

### F. Work incentives in the tax-benefit system
- Greece’s average tax wedge for a two-earner married couple with two children at average earnings is relatively high in Europe (Figure 13a).
- TaxFit microsimulation findings:
  - For some low-income households (wages at or below the average), shifting from one-earner to two-earners increases the marginal effective tax rate (METR) by about 1 percentage point (Figure 13b).
  - Example: one-earner household at 100 percent of average wage; if second earner works at 60 percent of average wage, METR on that second earner increases by 1 percentage point (each 100 euro earned is taxed by 1 euro more).
  - For higher-income households with two earners above the average wage, marginal rate estimated to decrease by about 1 percentage point.
- Suggested reforms:
  - Re-profile unemployment benefit to be higher at the beginning and decline more steeply over time to incentivize job search.
  - Require employment services, skill training, or rules on accepting job offers.
  - Coordinate reforms with the labor market integration function of the means-test Guaranteed Minimum Income (GMI).

### G. Parental leave design and coverage
- Greece provides 56 weeks of paid maternity leave (17 weeks basic leave and additional special leave of 9 months), among the longest in EU and OECD.
- Evidence suggests duration beyond around 30 weeks can reduce female LFP (Del Rey and others, 2021).
- Fathers: 14 working days paid leave at 100 percent earnings, paid by employer; each parent granted four months leave per child, first two months paid at minimum wage (Hatzivarnava-Kazassi and Karamessini, 2023).
- Policy options: make paternity leave non-transferrable or impose take-or-lose requirement to increase use.
- Self-employed coverage:
  - Self-employed women entitled to four monthly maternity payments of between €150 and €200 (less than 25 percent of the national minimum wage); no other parental leave rights for self-employed parents.
  - Greece has the highest share of self-employed in total employment among OECD countries; nearly one out of three women self-employed (OECD, 2022).
  - Recent reforms have extended more leaves to the self-employed, but gaps remain.

### H. Skill mismatch and education quality
- Tertiary-educated unemployment rate in Greece: 8.5 percent—more than double the euro area average of 3.8 percent (Figure 14).
- College-educated unemployment by gender:
  - Women: 10 percent in Greece; Men: 6.4 percent.
  - Euro area averages: Women 4.1 percent; Men 3.5 percent (Figure 14).
- Secondary-level test scores show significant recent declines (Figure 15).
- Field-of-study mismatch with job demand is high (Figure 16).
- Policy priorities: align education with demanded skills (technology, healthcare), strengthen pre-primary and vocational education, engage private sector and industries, coordinate employment services with training, and monitor and evaluate reforms.

### I. Targeted support simulations and program design
- TaxFit microsimulations evaluated two measures:
  - (i) Childcare-linked cash transfer (targeted to lowest two income quintiles).
  - (ii) Nonrefundable tax credit/allowance to mitigate METR increases for low-income households.
- Simulation assumptions:
  - Childcare transfer/voucher: €100/month per child.
  - Nonrefundable tax credit/allowance: €100/taxpayer per year.
- Estimated fiscal cost for both measures with good targeting to the lowest two income quintiles: less than 0.1 percent of GDP (Figure 17).
- Some fiscal cost offset by model-estimated revenue gains from increased labor supply due to tax-credit incentives for second earners.

### J. Leveraging Guaranteed Minimum Income and conditional cash transfers
- GMI (Ελάχιστο Εγγυημένο Εισόδημα):
  - Means-tested program with three components: minimum income support, essential social service provision, and labor market integration.
  - Recent digitalization (RRF support) integrated information management and employment registration.
  - GMI cost estimated at about 1 percent of GDP in 2024.
  - Low coverage limits poverty alleviation impact; potential to integrate social service and labor components with skill training and childcare support.
- Conditional cash transfers (CCTs):
  - Could sharpen targeted support and strengthen incentives to meet LFP objectives (e.g., sending children to childcare, completing training).
  - Evidence from EU countries and Greek experiences with Roma minorities shows positive results in childcare use, women’s employment, and vocational training.

### K. Complementary reforms, cultural norms, and broader labor demand constraints
- Low business dynamism constrains labor demand and women’s LFP:
  - Vacancies-to-unemployment ratio: 0.2 (2024Q3) — equal to five jobseekers per vacancy (Figure 18).
  - Greece has the highest service-sector barriers-to-entry in the Eurozone, limiting job creation where women are concentrated (Figure 19).
- Flexible work arrangements can improve women’s participation and reduce informality.
- Complementary reforms to raise labor productivity: enhance competition, foster innovation and technology diffusion, reduce red tape, increase judicial efficiency, and strengthen regional integration.
- Cultural norms:
  - Over 37 percent of Greek respondents agreed or strongly agreed that men should have more right to a job than women when jobs are scarce (World Values Survey, 2022).
  - Women’s representation: 23 percent of seats in national parliament in 2023 (EU-average: 33 percent); Greek women represented 24 percent of senior management positions in 2022 (European Commission, 2023).

### L. Estimated impact from addressing care impediments
- Addressing care impediments alone could boost Greek employment by an estimated 3 percent (Figure 20).
- Illustration method:
  - Baseline employment from LFS.
  - Add men and women who cite care responsibilities as primary reason for not working (blue bars).
  - Subtract those likely to remain unemployed using age- and gender-specific unemployment rates (red bars).
  - Net increase in employment results in about a 3 percent overall gain.
- Larger gains possible with more comprehensive reforms (example: Japan estimate—raising women’s LFP by 7 percentage points could raise per capita income by about 4 percent, Steinberg and Nakane, 2016).

### Key findings and policy priorities (summary)
- Increasing labor force participation (LFP), including women, requires policies that target both labor supply and labor demand simultaneously.
- Top priorities to raise LFP, particularly for women:
  - Targeted measures to reduce care burdens.
  - Improving parental leaves.
  - Raising the work incentives in the tax-benefit system.
- Addressing skill mismatches is crucial to support a productive and competitive Greek labor force and to achieve higher prosperity.
- Implementation priorities:
  - Sustained implementation, monitoring mechanisms to evaluate effectiveness, and coordination across overlapping ministries.
  - Complement supply-side reforms (childcare, parental leave, tax-benefit) with demand-side reforms (reduce barriers-to-entry, support firm entry and growth, improve judiciary efficiency).

### Appendix I. The IMF’s TaxFit Model (summary)
- 1. TaxFit combines country-specific household survey microdata and tax/benefit regulations to determine household net income (Cots-Capel, Davis, MacDonald, 2024).
- 2. Generates indicators including the effective tax rate (ETR) and marginal effective tax rate (METR).
- 3. Can use uploaded microdata to produce additional diagnostics (e.g., Kakwani index) and model reform scenarios, welfare, and fiscal impacts; supports gender and fiscal policy analyses.

*Source: sipea2025056 - IMF selected issues paper content provided.*

### 6.6 million in 2023 to around 4.3 million by 2050—a 35 percent reduction (Figure 2). This decline

### sipea2025056 - 6.6 million in 2023 to around 4.3 million by 2050—a 35 percent reduction (Figure 2). This decline

### A. Demographics, human capital, and macro implications
- Working population projected to decline from 6.6 million in 2023 to around 4.3 million by 2050—a 35 percent reduction (Figure 2).
- Greece’s average actual working hours per worker: 39.8 hours (highest in the EU, European Commission, 2024a).
- Policy focus: increase the labor force and raise labor productivity to sustain growth momentum.

### B. Labor force participation (LFP) gaps and distributional patterns
- Greece’s LFP low relative to euro area peers; driven mainly by women’s participation gap.
- In 2023, Greek women’s LFP rate is lower by about 8 percentage points relative to euro area averages; Greek men’s LFP is lower by 0.4 percentage point (Figure 3).
- Women’s LFP gap contributes most to the total LFP gap because women have a larger share in the working-age population.
- Significant LFP gaps also exist for youth and elderly groups compared to euro area averages.

### C. Lifecycle and educational effects on gender LFP gap
- Women’s LFP trails men over the entire life cycle; gap surges at the beginning of working-age period (25-54) when couples typically start having children (Figure 5a).
- During prime working ages (25-54), Greek women’s LFP rate is about 10-20 percentage points lower than that of men.
- Education effect:
  - Among college graduates, the gender LFP gap narrows sharply.
  - Among non-college individuals, a wider gender gap emerges due to lower female participation (Figures 6 and 7).
- Young children effect:
  - Having children under age six drastically reduces women’s LFP and widens the overall gender gap (Figures 8 and 9).

### D. Care responsibilities and employment penalty
- Nearly 28 percent of working-age women cite care responsibilities as their main reason for staying out of the labor force; men: 1 percent (Figure 10a).
- About 25 percent of working-age women cite “any other reasons,” likely weak work incentives, skill mismatches, or other structural hurdles.
- Education/training cited by about 5 percent of working-age women as a barrier; over 95 percent of youth cite it (Figure 10b).
- Childbirth employment penalty:
  - Child Penalty Atlas (Kleven and others, 2024) shows a sharp decline in women’s employment immediately after first child’s birth and persistent lag over time (Figure 11).

### E. Access to childcare facilities
- Over 70 percent of Greek children under three are outside formal programs; euro area average: about 58 percent (Figure 12).
- Regional shortfalls: e.g., day care center places in Northern Greece cover less than 7 percent of total infants in the region (Megalonidou, 2019).
- Policy levers: build new facilities, incentivize conversions and private provision, support childcare usage, and consider conditional cash transfer design to incentivize childcare use.

### F. Work incentives in the tax-benefit system
- Greece’s average tax wedge for a two-earner married couple with two children at average earnings is relatively high in Europe (Figure 13a).
- TaxFit microsimulation findings:
  - For some low-income households (wages at or below the average), shifting from one-earner to two-earners increases the marginal effective tax rate (METR) by about 1 percentage point (Figure 13b).
  - Example: one-earner household at 100 percent of average wage; if second earner works at 60 percent of average wage, METR on that second earner increases by 1 percentage point (each 100 euro earned is taxed by 1 euro more).
  - For higher-income households with two earners above the average wage, marginal rate estimated to decrease by about 1 percentage point.
- Suggested reforms:
  - Re-profile unemployment benefit to be higher at the beginning and decline more steeply over time to incentivize job search.
  - Require employment services, skill training, or rules on accepting job offers.
  - Coordinate reforms with the labor market integration function of the means-test Guaranteed Minimum Income (GMI).

### G. Parental leave design and coverage
- Greece provides 56 weeks of paid maternity leave (17 weeks basic leave and additional special leave of 9 months), among the longest in EU and OECD.
- Evidence suggests duration beyond around 30 weeks can reduce female LFP (Del Rey and others, 2021).
- Fathers: 14 working days paid leave at 100 percent earnings, paid by employer; each parent granted four months leave per child, first two months paid at minimum wage (Hatzivarnava-Kazassi and Karamessini, 2023).
- Policy options: make paternity leave non-transferrable or impose take-or-lose requirement to increase use.
- Self-employed coverage:
  - Self-employed women entitled to four monthly maternity payments of between €150 and €200 (less than 25 percent of the national minimum wage); no other parental leave rights for self-employed parents.
  - Greece has the highest share of self-employed in total employment among OECD countries; nearly one out of three women self-employed (OECD, 2022).
  - Recent reforms have extended more leaves to the self-employed, but gaps remain.

### H. Skill mismatch and education quality
- Tertiary-educated unemployment rate in Greece: 8.5 percent—more than double the euro area average of 3.8 percent (Figure 14).
- College-educated unemployment by gender:
  - Women: 10 percent in Greece; Men: 6.4 percent.
  - Euro area averages: Women 4.1 percent; Men 3.5 percent (Figure 14).
- Secondary-level test scores show significant recent declines (Figure 15).
- Field-of-study mismatch with job demand is high (Figure 16).
- Policy priorities: align education with demanded skills (technology, healthcare), strengthen pre-primary and vocational education, engage private sector and industries, coordinate employment services with training, and monitor and evaluate reforms.

### I. Targeted support simulations and program design
- TaxFit microsimulations evaluated two measures:
  - (i) Childcare-linked cash transfer (targeted to lowest two income quintiles).
  - (ii) Nonrefundable tax credit/allowance to mitigate METR increases for low-income households.
- Simulation assumptions:
  - Childcare transfer/voucher: €100/month per child.
  - Nonrefundable tax credit/allowance: €100/taxpayer per year.
- Estimated fiscal cost for both measures with good targeting to the lowest two income quintiles: less than 0.1 percent of GDP (Figure 17).
- Some fiscal cost offset by model-estimated revenue gains from increased labor supply due to tax-credit incentives for second earners.

### J. Leveraging Guaranteed Minimum Income and conditional cash transfers
- GMI (Ελάχιστο Εγγυημένο Εισόδημα):
  - Means-tested program with three components: minimum income support, essential social service provision, and labor market integration.
  - Recent digitalization (RRF support) integrated information management and employment registration.
  - GMI cost estimated at about 1 percent of GDP in 2024.
  - Low coverage limits poverty alleviation impact; potential to integrate social service and labor components with skill training and childcare support.
- Conditional cash transfers (CCTs):
  - Could sharpen targeted support and strengthen incentives to meet LFP objectives (e.g., sending children to childcare, completing training).
  - Evidence from EU countries and Greek experiences with Roma minorities shows positive results in childcare use, women’s employment, and vocational training.

### K. Complementary reforms, cultural norms, and broader labor demand constraints
- Low business dynamism constrains labor demand and women’s LFP:
  - Vacancies-to-unemployment ratio: 0.2 (2024Q3) — equal to five jobseekers per vacancy (Figure 18).
  - Greece has the highest service-sector barriers-to-entry in the Eurozone, limiting job creation where women are concentrated (Figure 19).
- Flexible work arrangements can improve women’s participation and reduce informality.
- Complementary reforms to raise labor productivity: enhance competition, foster innovation and technology diffusion, reduce red tape, increase judicial efficiency, and strengthen regional integration.
- Cultural norms:
  - Over 37 percent of Greek respondents agreed or strongly agreed that men should have more right to a job than women when jobs are scarce (World Values Survey, 2022).
  - Women’s representation: 23 percent of seats in national parliament in 2023 (EU-average: 33 percent); Greek women represented 24 percent of senior management positions in 2022 (European Commission, 2023).

### L. Estimated impact from addressing care impediments
- Addressing care impediments alone could boost Greek employment by an estimated 3 percent (Figure 20).
- Illustration:
  - Baseline employment from LFS.
  - Add men and women who cite care responsibilities as primary reason for not working (blue bars).
  - Subtract those likely to remain unemployed using age- and gender-specific unemployment rates (red bars).
  - Net increase in employment results in about a 3 percent overall gain.
- Larger gains possible with more comprehensive reforms (example: Japan estimate—raising women’s LFP by 7 percentage points could raise per capita income by about 4 percent, Steinberg and Nakane, 2016).

*Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025056.pdf*

### 23. A balanced mix of policies targeting both labor supply and demand issues is vital to

### 23. A balanced mix of policies targeting both labor supply and demand issues is vital to 

### Key findings and priorities
- Increasing labor force participation (LFP), including women, requires policies that target both labor supply and labor demand simultaneously.
- Top priorities to raise LFP, particularly for women, include:
  - Targeted measures to reduce care burdens.
  - Improving parental leaves.
  - Raising the work incentives in the tax-benefit system.
- Addressing skill mismatches is crucial to support a productive and competitive Greek labor force and to achieve higher prosperity.

### Labor supply policies (supply-side)
- Targeted measures to reduce care burdens and improving parental leave systems are emphasized as central to increasing female LFP.
- Raising work incentives through tax-benefit reforms is highlighted as a priority to increase LFP.
- Sustained implementation, monitoring mechanisms to evaluate effectiveness, and coordination across overlapping ministries are essential to deliver efficient results.

### Education, skills, and lifelong learning
- Further modernization of the secondary and tertiary education system to align with labor market needs is necessary.
- Expand life-long learning programs.
- Scale up vocational and technical training focused on technology and healthcare to meet emerging demand.

### Labor demand and business environment (demand-side)
- Complementary reforms to enhance business dynamism and maintain labor market flexibility can better accommodate women.
- Addressing demand-side constraints requires:
  - Streamlining regulations to remove barriers for new and growing firms.
  - Broadening regulatory impact assessments to enhance efficiency, innovation, and competition.
  - Prioritizing reforms in sectors with the largest distortions, such as non-tradable services with a high share of women workers.
- Supporting small and young firms to grow and improving the judiciary system to facilitate efficient resource allocation can stimulate business and job creation.

### Appendix I. The IMF’s TaxFit Model (summary)
- 1. The IMF’s TaxFit model is a cross-country tax and benefit simulator that combines country-specific household survey microdata, and country-specific information on tax codes and benefit regulations to determine household net income once these rules are applied (Cots-Capel, Davis, MacDonald, 2024). The model computes taxes and benefits for hypothetical households—defined by user-provided inputs on gross income levels and family structures.
- 2. Cross-country comparisons are possible across a wide range of indicators that comprehensively capture the structure of the personal income tax regime—the tax rate schedule, allowances, deductions, credits, etc.—as well as features of the social protection systems that are likely to influence labor supply decisions—including contributions, unemployment insurance, family benefits, social assistance, and care benefits. For example, TaxFit generates indicators of the effective tax rate (ETR)—the average tax rate paid by an individual or household—and the marginal effective tax rate (METR), which represents changes in ETRs due to changes in income and/or labor supply decisions.
- 3. Where microdata is available, it can be uploaded to the model to produce additional diagnostic indicators that better reflect the population, such as the Kakwani index of the progressivity of the tax and transfer system (Kakwani, 1977). It can also model reform scenarios that estimate the welfare and fiscal impacts of past or proposed reforms. Additionally, the data used to build the model can also be used to perform gender and fiscal policy analyses.

*Source: sipea2025056 - 23. A balanced mix of policies targeting both labor supply and demand issues is vital to; IMF selected issues paper content provided.*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025056.pdf_