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Our View: Collective agreements for SGOs makes no economic sense

THE AGREEMENT reached between the government and the unions, regarding pay rises at semi-governmental organisations (SGO) and local authorities will be signed on Wednesday. The negotiations for the renewal of the collective agreements had taken almost as long as the latest bout of Cyprus problem talks, having started in August 2015. The two sides agreed that pay rises for 2015 and ’16 would be zero so there would be no retroactive payments as part of the agreement.

For 2017 and ’18 the formula proposed for determining pay rises in the state sector (which would not be implemented because the parties rejected the government reform bills) would be used. In other words percentage pay rises would not exceed the economy’s growth percentage. There would be general, across the board pay increases only if the cost of living allowance and annual wage incrementals combined were lower than the percentage by which the economy had grown.

Everyone seemed very happy with the agreement, the unions citing it as conclusive proof that the government did not need legislation to regulate pay rises in the public sector. Presumably it would have to rely on the sense of responsibility of union bosses, who were nevertheless quick to point out that the agreement would only last until 2018 and after that the unjustifiable pay rises that were standard practice for decades at SGOs would return. Hopefully by then these organisations would have been privatised.

While for the state sector, the formula seemed an acceptable way to keep the growth of the payroll under control, for SGOs it makes no sense at all. First, each one is a different organisation. Why should the staff at the CyBC which costs the taxpayer in excess of €20 million a year guarantee the same pay rises as Cyta which returns a surplus – admittedly contracting – every year? On what grounds are EAC employees guaranteed pay rises when their organisation is just about breaking even?

The idea of a collective agreement for all SGOs regardless of each one’s performance makes no economic sense at all. It is absurd, for instance, that there would be average pay rises at the EAC of 3 per cent, because the tourism industry boosted the growth of the economy. Surely pay rises should be determined by the increases in the productivity and profitability of each organisation separately rather than the overall performance of the economy. This is what economic rationality would dictate, but this goes out the window once the unions step in.

Collective agreements might be necessary for the civil service and state education, but for SGOs that operate in an open market they make as little economic sense as they do for all businesses in operating in the same sector.

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