The relationship between wage levels in the broader public sector and economic growth is of particular interest. Academic literature confirms the view that comparatively low wages increase the risk of corruption, but, at the same time, presents a more complex picture.

Low remuneration for public and semi‑public employees, relative to the private sector, tends to reduce the cost of dishonest behaviour and acts as an obstacle to a modern and effective state service. This forms the basis of the “efficiency wages” theory.

However, wage adjustment alone is not sufficient. A World Bank study documents that wage inequality within the broader public sector is an additional critical factor: in countries with low wage inequality, wage increases tend to reduce corruption, whereas in countries with high inequality, they can even reinforce it.

The link between wages and economic growth is indirect but significant: corruption, over the long term, reduces investment, distorts the allocation of resources and undermines the confidence of economic agents.

A rational wage policy can help reduce corruption and contribute to the stable environment required for sustainable growth.

Some international examples confirm the above analysis.

Singapore, for instance, combines competitive wages relative to the private sector, especially in supervisory, regulatory and scientific positions, with a strict supervisory framework and an independent, highly empowered anti‑corruption authority.

The country’s approach is holistic: remuneration is aligned with market benchmarks, performance‑based incentives are used extensively and breaches of integrity are met with swift and severe sanctions.

This integrated model has contributed to Singapore’s consistently high rankings in global governance and competitiveness indices.

In Georgia, after 2004, the country implemented substantial wage increases, alongside a deep restructuring of public institutions. The reforms included the dismissal of corrupt officials, simplification of administrative procedures and the introduction of transparent recruitment systems.

The combination of higher pay and institutional overhaul produced one of the most notable reductions in corruption recorded in the post‑Soviet region, improving both public trust and economic performance.

Denmark maintains relatively compressed wage scales and very strong supervisory institutions. Its model relies on transparency, clear ethical standards and a culture of accountability embedded across all levels of government.

The limited wage dispersion reduces incentives for rent‑seeking behaviour (ie it reduces the employees’ motives to chase extra benefits or abuse their positions), while independent oversight bodies ensure a comprehensive enforcement. As a result, Denmark has long been among the world’s least corrupt countries.

New Zealand offers another instructive example. Public sector wages are set through transparent collective bargaining processes, supported by rigorous conflict‑of‑interest rules and open‑data practices. The country’s emphasis on integrity, public participation and clear performance expectations has helped maintain a highly trusted civil service and a stable environment for investment and innovation.

For Cyprus, four key lessons emerge.

First, it should avoid underpaying critical positions in the broader public sector: the country competes with the private sector and international organisations for specialised personnel.

Underpayment in managerial, regulatory, supervisory, audit and other specialised roles increases the risk of talent leakage and creates incentives for conflicts of interest. Competitive wages strengthen the stability and quality of public administration.

Second, it should reduce wage inequalities within the broader public sector: through the creation of coherent and transparent pay structures that reduce incentives for corruption.

Next, it must reject the notion that “very high wages equal good governance”: world-wide experience shows that, without a strong institutional framework, strict oversight and accountability, high wages do not deliver the expected outcome.

Lastly, embedding wage policy within a broader transparency strategy is necessary, accompanied by merit‑based recruitment, effective evaluation mechanisms and continuous skills development, reduction of bureaucracy, transparency, open access to data and effective enforcement of codes of conduct based on modern standards.

Cyprus, with its small size and relatively adequate administrative capacity, can draw on international best practices and shape a wage system for the broader public sector that benefits public and semi‑public employees while simultaneously supporting economic development.