Tax revenue must be steadily rising, and the government has more money to spend than it had budgeted. There can be no other explanation for the bizarre decision to offer companies cash subsidies to hire unemployed men over 50 years of age and unemployed women of all ages. Three new schemes, worth €15 million, will be submitted for approval by the council of ministers next week, Labour Minister Yiannis Panayiotou said. The target of the schemes is the employment of 1,760 people.

Does a country that boasts full employment conditions and imports foreign workers to cover the requirements of businesses need to set up subsidised employment schemes? What is the economic justification of subsidised employment schemes at a time of labour shortages? Panayiotou himself provided arguments against his schemes by talking about full employment conditions, illustrated by an unemployment rate below 5 per cent. The employment percentage of 80 per cent “constitutes the highest percentage ever recorded,” he said, while the “reduction in unemployment placed Cyprus in the top positions among EU member-states.”

But as there is plenty of state money available, Panayiotou could not resist the temptation to tamper with the labour market. The first scheme, worth €4m, offers incentives to businesses to hire unemployed men over 50. The target is the hiring of 470 men and the state will contribute €8,600 for a minimum of a year’s employment. A second scheme, worth €7m will subsidise wages for 820 unemployed women and the third (€4m) scheme will target “inactive women” who will be offered flexible forms of work – 470 will benefit.

Asked whether there was interest in these schemes, head of the labour department Alexandros Alexandrou said “there is big interest, and the budget is used up almost always.” Of course, businesses are interested when the state covers about 60 per cent of a new employee’s salary for 12 months. They might take on the workers even if they do not need them, depriving businesses that are more in need of extra workers of them. Wage subsidies can cause misallocation of labour resources.

“The more unemployment is reduced the more difficult it is to reduce unemployment more,” said Panayiotou, failing to mention that the cost of such an undertaking becomes much higher. The taxpayer will be paying €15m to secure employment for 500 men over 50 and 1,200 women of all ages, when they can easily find work if they needed to. As the minister said, we have full employment conditions, in which nobody – not even men over 50 – should have difficulty finding a job.

In such conditions, it is absurd for the state to offer incentives to businesses to hire workers. It is a complete waste of the taxpayers’ money which could be put to much better use than enhancing the reputation and popularity of the labour minister.