The average wage in Cyprus is lower than the EU average, according to Eurostat’s survey for 2023. The average full-time adjusted salary per employee in the EU is €37,863 whereas in Cyprus it is €26,430. In other words, it is 30 per cent below the EU average and what was worse, according to a report in the Akel mouthpiece Haravghi, was that the rate of growth of wages in Cyprus has been much slower over the ten years up to 2023.
The average wage increased by 22.4 per cent in from 2013 to 2023 in Cyprus whereas in the EU the increase was 30.2 per cent, despite the fact that Cyprus’ GDP over the same period had grown by an impressive 74 per cent compared to the EU average of 48 per cent. This growth rate is even more remarkable when we consider Cyprus was in a deep recession in 2013 and 2014 as a result of the economic meltdown and collapse of the banking system.
During this time there was high unemployment while many businesses cut wages, which may partly explain the lower rate of growth compared to the EU over the ten-year period. We should also bear in mind that this was also the period of the golden passports, during which economic growth was powered by direct foreign investment rather than by high employment and significant increases in productivity and efficiency that would have pushed wages higher in an economically sound fashion.
Still, the average Cyprus wage is significantly higher than Greece’s which is among the lowest at €17,013; this explains the thousands of Greeks now working on the island. Of course, the average wage in Cyprus would have been even lower if it were not for the unjustifiably high wages paid in the public sector, wages that increase annually, regardless of low productivity, because of powerful unions and weak politicians. Here, we have the paradox of the least productive sector of the economy, earning significantly higher wages on average than the wealth-producing private sector. Public sector wages are not determined by the market – by the forces of supply and demand – but by unions that hold governments hostage.
In the private sector wages are determined by the market, and while they could be described as being relatively low, they are what the small size of the economy can sustain. It would be great if the minimum wage could be increased by 30 per cent, to improve the lives of the lowest-paid workers, but this would lead to the closure of businesses and the inevitable increase in unemployment. Is this what we want?
The article about the average wage was published in Haravghi to support Akel’s campaign for the expansion of collective agreements in the private sector. At present, collective agreements, by which wages and working conditions are agreed between unions and employers, cover less then 50 per cent of the work force and there is an EU directive stipulating that they should cover 80 per cent. The government has been criticised by Akel for having done nothing in this direction, despite the November 15 deadline set by the European Commission for compliance with this directive.
The government’s plans on the matter are unclear, but we doubt it would be rushing to comply, because expanding collective agreements and ignoring market forces cannot benefit the economy.
