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Our View: It’s time to abandon collective agreements for industries


HOTEL workers, earlier in the week, were threatening 24-hour strikes at random hotels, without warning, to push their demand for the return of their pay and benefits to pre-2013 levels. This is a new form of industrial action designed to cause maximum disruption and inconvenience to hotel guests as no hotel would be prepared for a staff walkout. By Friday, the threatened action was suspended so that labour minister Zeta Emilianidou, who undertook mediation, would be allowed to find a compromise.

The random strikes were being threatened now, when many hotels are still closed, unions calculating they would frighten hoteliers into giving in to their demands so that similar action does not take place when the tourist season starts. A bumper year for tourism has been forecast and the last thing hoteliers would want is a strike when their hotels are full of tourists. It would not be the best advertisement for the hotel or for Cyprus as a tourist destination.

But this is of no concern to union bosses who know that strike threats are most effective when they can cause maximum harm to the employer. Cyprus Airways workers and especially pilots always called strikes at the peak of the tourist season and usually were given what they wanted, regardless of how unreasonable it may have been. They became wealthy workers but the airline, eventually, went bust because it could not afford to pay such wages.

Cyprus’ hotels have not been faring very well despite last year’s record arrivals (nobody factors in how many visitors end up in the north). A significant number have been taken over by the banks while others are crippled by big loans. They also operate in a very competitive market which forces them to keep rates low in order to ensure high occupancy rates. And still, industry experts urge Cyprus to increase its competitiveness to ensure long-term success.

Union bosses have never shown an interest in the long-term viability of businesses. Their credo is ‘higher pay now’. In the case of the hotels, they felt their members had made a big sacrifice in agreeing to benefits cuts of 15 per cent until the end of 2015 and now want them back. Their other demand is for hotels to stop hiring workers on personal contracts and put all staff on the collective agreements negotiated by the unions.

Collective bargaining is what gives power to unions, but is the cause of market distortions, because they impose the same wage levels and annual pay rises across an industry regardless of the size and revenue of each business. These agreements put unnecessary financial pressure on firms with low profitability and/or a small turnover. They are also unfair, because they guarantee the same pay rises to both hard-working and unproductive workers while acting as a disincentive for productivity increases.

Even if they agree to give back the benefits unions are demanding, hoteliers should not budge on the issue of personal contracts, as the phasing out of collective agreements is an imperative for the recovering economy in general. Phasing the practice out would diminish the bargaining power of unions, which would no longer be able to impose the same pay and benefits on all businesses in an industry, regardless of the financial situation it is in.

What used to happen was that unions would cite the best performing companies in an industry to justify their pay demands and often the wealthier more profitable businesses would agree to them, because this would put their less successful competitors, under financial pressure. With unemployment now at almost 15 per cent it would be criminally irresponsible to make it more difficult for struggling businesses to survive by imposing pay rises they cannot afford.

If there has to be collective bargaining, it should be held at each business separately so that an agreement is based on its’ financial capabilities. This would also encourage its workers to take a real interest in how their employer is faring and realise they would have a stake in contributing to achieving good results. It would also end the confrontational nature of industrial relations, cultivated by union bosses, as workers would eventually realise they are on the same side as their employer and would also benefit when the business does well. Under the collective agreement regime, workers are disconnected from their employer.

The truth is that collective agreements and industrial relations based on confrontation have no place in a modern economy. In the most successful economy in Europe, Germany’s, worker-employer co-operation has been a feature for decades. Cyprus would do well to follow Germany’s example and abandon collective agreements for industries. By holding out against the unions’ demand for collective bargaining and defending the right to hire people on personal contracts, the hoteliers could score an important victory for the whole economy.





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