Louis N. Christofidis *
The study examines the expansion of the minimum wage (SM) institution in the hotel sector, a development that seems to affect the consultations for the definition of a national SM system in Cyprus. Possible forms of the institution and levels of the national EMs and problems that will arise are analyzed.
In sectors where employees do not belong to trade unions, a mandatory monthly EM system is applied for the professions of salesman, clerk, nursing assistant, babysitter assistant, babysitter assistant, school assistant and caregiver. By ministerial decree, the monthly salary was set from 2012 at € 870 and, after 6 months of continuous employment with the same employer, at € 924. For security guards and cleaners, the hourly wage was set at € 4.90 and € 4.55 respectively, and after 6 months of continuous employment with the same employer, at € 5.20 and € 4.84 respectively. In trade unions, collective agreements include “indicative” starting salaries for about 180 occupations.
With the consent of the unions and employers, a 2020 ministerial decree designated initial EMs for 19 low-paid occupations in the hotel sector. The agreement facilitates the transition to a system of national EMs by setting starting salaries equal to or higher than € 870.
The new salaries exceed the agreed “indicative” salaries of 2019 in the 19 professions by 10% to 30%. No explanations have been given regarding the factors that have differentiated and document the increases in 2020, while the substantial wage distinctions between the 19 professions are problematic. The total number of professions with EM that the state must supervise, has, based on the new arrangement, changed from 9 to 28, increasing the administrative costs. At least one guild wants to extend the hotel model for EMs to the rest of the economy. In addition, the unions will seek the legal guarantee of all the provisions of the collective agreements. What will be the system of national EMs that will emerge from the Labor Advisory Board, in which the state participates, 3 unions and 2 employers' organizations, without the substantial participation of independent experts?
The essay discusses possible forms of a national EM system as well as the desired level of wages under discussion. Regarding the first issue: The level and the correlations between the professional salaries are constantly changing and their consolidation in the hotel model creates rigidities and financial costs. In addition, the legalization of wages requires their universal application, regardless of the conditions that may prevail in individual sectors and business units. The range of professions to be monitored has increased significantly and the full implementation of the new EMs has become difficult. Based on the financial view and best practices, no extension of the number of professional EM is preferred. The labor market has adapted to the existing system of the non-trade union sector and could therefore be the basis for a more general system of national SMEs.
Regarding the second issue: How do the salaries of € 870 and € 924 correspond to the Cypriot data and international practices? (a) The initial EM of € 870 exceeds the minimum guaranteed income of € 864 for a family with a child under 14. (b) The reduction of the EM in real terms due to inflation, and the increase of productivity from 2012 will justified an increase in the initial EM of € 26. (c) In the hotel agreement, the lowest starting salary is € 870! (d) According to the International Labor Office (ILO), the usual level of EM is 55% of the median monthly salary. With this index, recent data for 2019 indicate an initial EM equal to € 844. Finally, (e) according to the ILO, international practices in Europe and Central Asia show that the initial EM in Cyprus is significantly lower only than countries with a very high standard of living. With these data, and in order to avoid negative side effects in the labor market, the level of national EMs should not significantly exceed the monthly € 870 and € 924.
The essay also refers to the effects of EM on other wages, product prices, employment, undeclared work, etc. The prevailing opinion is that such problems are alleviated when the system of national EMs and its subsequent adjustments are carefully implemented, based on analysis by experts, in the framework of a technical-scientific committee, which transparently proposes measures to the respective government. A system of national SMEs must help the state's social policy, alleviate employment poverty and inequality. The respective government adopts, modifies, or rejects the suggestions of the experts according to its own policies and assessments for the views of the society. These broader goals apply to collective agreements, but apply to society as a whole and should not be defined solely in the narrow sense of the social partners (employers' organizations and unions). The most specific problems of employers and employees are solved in collective bargaining and contracts, given the social and economic policies that are adopted and incorporated into the practices and / or legislation of the state.
The article is a summary based on a study conducted for the Center for Economic Research of the University of Cyprus. Announced as the Economic Policy / Analysis Essay No. 05-2021, December 2021. The essay has been posted on the website of KOE at the following link.
https://www.ucy.ac.cy/erc/documents/%CE%94%CE%9F%CE%A0_2021/%CE%94%CE%9F%CE%A0_05-2021.pdf. The text is also published on the Blog of the Cyprus Economic Studies Company, https://cypruseconomicsociety.org/blog/blog-posts/. The views contained in the study and in this abstract reflect those of the author. Any mistakes that remain are borne by him.
* Louis N. Christofidis, Emeritus Professor, University of Cyprus and University Emeritus Professor, University of Guelph. The summary presented below is based on a study conducted for the Center for Economic Research of the University of Cyprus.
