Our View: Economic situation changes dynamic of the debate on minimum wage

For months now, the labour minister, Zeta Emilianidou has been having meetings with union bosses and representatives of employers’ organisations about the introduction of a national minimum wage, which was a pledge of the Anastasiades government. This has been a long-standing demand of the unions and exists in most EU countries, although not in all.

The dispute is how it should be calculated. The practice in other countries is for it to be calculated as a percentage of the national median wage, which is lower than the average wage. The International Labour Organisation’s suggestion was of it to be 53.5 per cent of the median wage. In Ireland, according to Michalis Antoniou, general manager of the employers’ federation Oev, it is 48 per cent, in The Netherlands 47 per cent and in Germany 51 per cent. In Cyprus, the idea is for it to eventually reach 60 per cent of the national median wage.

Emilianidou, meanwhile has stated that the national minimum wage cannot be lower than €924 per month which is the minimum for nine sectors. (In these jobs, people start on €870 which rises to €924 after six months). She gave no reason for her decision, especially as there were other sectors in which workers were paid a lower monthly wage. This has been of concern to Oev’s Antoniou, who told state radio there was no reason why the national minimum should not be lower than the amount stipulated by the labour minister.
He explained that a relatively high minimum wage could lead to job cuts by businesses, in order to cover higher labour costs. This was a real danger at a time of rising inflation, on the back of the pandemic and the war in Ukraine, and called on the government to exercise caution.

The Chamber of Commerce (Keve) shares this view and has written to President Anastasiades urging him not to introduce the national minimum wage in 2022, because of the great economic uncertainty. It also advised against paying CoLA this year as it would increase the already high inflation rate.

Sek union immediately issued a response saying the minimum wage was ‘a one way road with no return,’ putting the government in a corner. It does not help the government, which is now expected to find a way out, that in most disputes, Emilianidou sides with the unions, as a matter of policy. Oev and Keve are right to highlight the prevailing economic uncertainty, that did not exist when the discussions about the minimum wage started – there was no Ukraine war at the time.

Perhaps, the solution is to set a relatively low minimum wage for this year, in order to give something to the unions and revisit the matter next year, when the economic situation will, hopefully, improve.