Greece is creating jobs, attracting tourists and recording economic growth, but a major study by the London School of Economics warns that the country’s underlying productive capacity remains weak, with falling productivity, declining real wages and a growing concentration of employment in low value added sectors.
The study, The Café Economy: Structural Transformation in Greece in the Wake of Austerity and Reforms, published in October 2025 by the Hellenic Observatory at the London School of Economics, describes an economic model increasingly reliant on accommodation, food services and related activities.
According to the researchers, Greece’s labour productivity per employee fell by 16.13% between 2009 and 2023, while average real wages declined by 34.02% when adjusted for consumer price inflation.
The findings raise questions about whether the country’s economic recovery is translating into better paid jobs, stronger businesses and sustainable long term growth.
Greece Creates More Jobs but Produces Less Per Worker
The researchers, Michalis Nikiforos, Vlasis Missos, Christos Pierros and Nikolaos Rodosakis, examined how Greece’s economy changed following the financial crisis and the austerity measures introduced during the subsequent years.
Their analysis found that real gross value added across the economy fell by 12.52% between 2009 and 2023, even as total employment increased by 4.30%.
As a result, productivity per employee declined by 16.13%. Measured by output per hour worked, the reduction was 11.87%.
The study found that productivity remained around 16% below its 2009 level in 2024, suggesting that the recovery in economic activity has not yet reversed the longer term decline.
The researchers argue that the problem extends beyond the number of jobs being created. The key issue is whether those jobs generate enough additional economic value to support higher wages, investment and improved living standards.
Hospitality Absorbs 43% of New Jobs
The accommodation and food services sector has become a major source of employment, but the study highlights a significant gap between the number of workers hired and the additional value produced.
Between 2009 and 2023, employment in the sector increased by 86.96%, while real value added grew by just 10.93%.
Productivity per employee consequently fell by 40.67%, according to the study.
The sector also accounted for a substantial share of Greece’s job creation during the recovery from the crisis.
Of approximately 740,000 jobs created across the economy between 2013 and 2023, around 320,000, or 43%, were in accommodation and food services.
The researchers stress that the problem is not the existence of cafes, restaurants or hotels. Rather, they argue that the growing concentration of employment in relatively low productivity activities has not been matched by sufficient expansion in more productive parts of the economy.
Their calculations suggest that the accommodation and food services sector accounted for approximately 5.2 percentage points of the overall 16.13% decline in productivity between 2009 and 2023.
Real Wages Fall as Living Standards Come Under Pressure
The study also identifies a steep decline in workers’ purchasing power.
Across the Greek economy, average real wages fell by 34.02% between 2009 and 2023 when adjusted using the consumer price index. Using a different measure, the value added deflator, the decline was 25.67%.
The impact was particularly severe in accommodation and food services, where real wages fell by 58.62% under the consumer price index measure.
The researchers argue that lower labour costs have not produced the expected improvement in productivity.
Instead, they suggest that an environment of compressed wages can discourage businesses from investing in technology and other improvements that would allow workers to produce more value.
This creates a cycle in which low wages and weak productivity reinforce each other, limiting the potential for sustainable wage growth.
Productivity Problems Extend Beyond Tourism
Although hospitality plays a prominent role in the study, the researchers found that Greece’s productivity challenges affect much of the economy.
Of the 20 main economic sectors examined, 16 recorded a decline in productivity between 2009 and 2023. In 14 sectors, the decline exceeded 10%.
Transport and storage recorded a 49.53% fall in productivity per employee, while energy saw a 38.06% decline. Professional and scientific services recorded a 27.56% reduction, and information and communications experienced a 25.21% fall.
Manufacturing was a notable exception, recording a 2.17% increase in productivity per employee. However, its real value added fell by 7.02% over the same period, while employment declined by 8.99%.
Construction also experienced a sharp contraction, with real value added falling by 51.58%.
The findings suggest that Greece’s economic difficulties cannot be explained solely by its reliance on tourism. The researchers point to a broader challenge in developing productive industries and activities capable of generating greater economic value.
More Low Skilled and Part Time Work
The study also raises concerns about the changing nature of employment.
Between 2009 and 2023, highly skilled jobs across the economy declined by 17.97%, while low skilled positions increased by 4.68%.
In accommodation and food services, highly skilled employment fell by 28.87%, while low skilled employment rose by 41.77%.
Part time employment in the sector increased by 81.74%. Involuntary part time work, involving people who wanted full time employment but could not obtain it, rose by 78.18%.
The researchers identify a growing mismatch between the education of Greece’s workforce and the types of jobs being created.
While workers’ educational attainment has improved, the economy has generated a disproportionate number of positions requiring fewer specialised skills.
This could limit opportunities for graduates and make it harder for businesses to move towards higher value activities.
Reforms Failed to Deliver Expected Productivity Gains
The researchers also examine Greece’s austerity measures and structural reforms during the years following the financial crisis.
Between 2009 and 2017, real public spending fell by approximately 30%, while total public revenue increased by around 10 percentage points of gross domestic product. The study attributes about six percentage points of that increase to indirect taxes.
In 2012, Greece cut the minimum wage by 22% and the sub minimum wage by 32%.
The study notes that more than 90% of the recommendations in three OECD competition policy toolkits had been implemented by July 2019. Despite the extensive reform programme, the anticipated productivity improvements did not materialise.
Using an econometric model covering 1995 to 2024, the researchers estimate that declining demand and falling real wages contributed significantly to the productivity slowdown.
Their findings challenge the assumption that reducing labour costs alone is enough to make an economy more competitive.
The study also points to persistent market concentration in key sectors. The three largest commercial banks accounted for 93% of banking assets in 2021, while three companies produced 95% of Greece’s electricity that year.
The researchers argue that market concentration can limit competition, even when formal market liberalisation has taken place.
Tourism Remains Vital, but Dependence Carries Risks
The study acknowledges tourism’s major contribution to Greece’s economy, particularly through foreign currency earnings and employment.
Between 2009 and 2023, the surplus generated by travel services improved by five percentage points of GDP, contributing to around half of the overall reduction in the current account deficit.
However, the researchers warn that excessive dependence on lower productivity activities can expose the economy to several risks, including seasonal employment, environmental pressures, overtourism and rising housing costs associated with the expansion of short term rentals.
They also make an important distinction: accommodation and food services are not synonymous with the entire tourism industry, so their sector specific findings should not automatically be applied to all tourism related activities.
The challenge, they argue, is to build on tourism’s economic contribution while developing a broader range of productive industries.
The Challenge Is Creating Better Jobs
The researchers’ central conclusion is that Greece needs more than employment growth to secure a stronger economic future.
They advocate measures to strengthen demand, encourage productive investment, improve technology and expand sectors capable of generating greater value added.
Without such changes, the country risks remaining dependent on a model in which employment grows but productivity and real wages struggle to recover.
Fifteen years after the financial crisis, the study argues, Greece’s challenge is no longer simply to grow its economy, but to change how that growth is generated.
Source: Hellenic Observatory, London School of Economics, The Café Economy: Structural Transformation in Greece in the Wake of Austerity and Reforms, October 2025.
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