The Cyprus Labour Study in 2023 reveals that despite nominal wage increases, workers’ incomes have actually decreased since the pandemic. The study highlights income distribution favoring businesses over workers, slow investment in productive capital, high unemployment rates, trade imbalance, and stagnating labor productivity as additional economic challenges.
What are the key findings of the Cyprus Labour Study in 2023?
- The Cyprus Labour Study shows that despite nominal wage increases, workers’ incomes have decreased since the pandemic.
- Real wages have not kept up with the pre-pandemic era, resulting in income losses.
- Income distribution has shifted, favoring businesses over workers.
- The study advocates for the restoration of the cost of living allowance (CoLA) mechanism.
- It also highlights slow investment in productive capital, maintaining high unemployment rates.
- Trade imbalance and stagnating labour productivity present additional economic challenges.
Economic and Employment Landscape
A detailed report was released by the Cyprus Institute of Labour, associated with the Pancyprian Federation of Labour (Peo), which scrutinizes the economic and employment situation facing Cyprus in 2023. The study highlighted several critical points that are influencing the Cypriot labour market and how income is distributed in the aftermath of the pandemic. One of the key findings is a devaluation of labour, evidenced by a substantial increase in nominal wages that paradoxically coincided with historical income losses for workers, a trend that compounds the impact of the financial challenges experienced between 2013 and 2015.
The analysis ties this devaluation directly to the significant profits businesses have gained after 2020, indicating that effectively addressing this issue would require higher wage increases, which depend largely on negotiations and the power balance between employers and employees. The beginnings of wage recovery were observed in early 2023 as average salaries increased, albeit not sufficiently to keep pace with the pre-pandemic era.
Wage Trends and Income Distribution
Despite these wage increases, the report pointed out that salaries still remain approximately 2.5 percent lower than they were before 2006. This gap signifies that the improvement in wages has not successfully bridged the disparity between workers’ earnings and the increased profits that are tilting in favor of businesses. Furthermore, while real wages have held steady regardless of the unemployment rate, the share of GDP going to labour is lower than before the inflationary period, hinting at a partial redistribution of income that favors businesses over workers.
The suspension of the full and automatic wage indexation mechanism, known as the cost of living allowance (CoLA), is particularly noted as a contributing factor to the recent income redistribution. The report stresses the importance of restoring this mechanism and broadening its coverage to more workers in the private sector to ensure future economic stability, especially given the geopolitical uncertainties and ongoing risks of further income devaluation.
Investment and Productive Capital
Moving beyond wages and income distribution, the report sheds light on the structural aspects of the Cypriot economy. It discusses how, despite the high GDP growth recorded between 2015 and 2023, the economy reveals significant weaknesses. This situation is closely linked to the observation that only a small portion of the economic surplus, which includes profits, interests, and incomes, is allocated towards capital investments. The slow accumulation of productive capital since 2015 has hindered the economy’s ability to provide employment opportunities for all job seekers, maintaining a steady unemployment rate of around 7 percent.
This contrasts sharply with the pre-2013 period when nearly full employment was achieved. The contemporary narrative that profits will lead to investments and subsequently to employment growth is being challenged. With profits not being sufficiently reinvested in productive capital, the economy faces continuous overheating, which leads to inflationary pressures and persistent deficits in external trade.
Trade Balance and Labour Productivity
The 2023 data also brings to light the trade dynamics and labour productivity within Cyprus. High imports, despite strong export performances, have diminished the contribution of trade to the GDP, particularly post-pandemic. The tendency of rising imports to match exports has been attributed to high-income consumption habits. The report suggests that curbing imports could lead to trade surpluses, thereby boosting both GDP and employment opportunities, a mechanism that could be achieved by redirecting income from wealthier to lower-income households.
Moreover, labour productivity experienced a fleeting increase following the crisis in 2020. However, this upturn was short-lived, with figures in 2023 reverting back to levels of stagnation seen before the crisis. Such trends underscore the complexities of the post-pandemic economic recovery and the challenges that lie ahead for the Cypriot labour market.
What are the key findings of the Cyprus Labour Study in 2023?
The key findings of the Cyprus Labour Study in 2023 are as follows:
– Despite nominal wage increases, workers’ incomes have decreased since the pandemic.
– Real wages have not kept up with the pre-pandemic era, resulting in income losses.
– Income distribution has shifted, favoring businesses over workers.
– The study advocates for the restoration of the cost of living allowance (CoLA) mechanism.
– It also highlights slow investment in productive capital, maintaining high unemployment rates.
– Trade imbalance and stagnating labour productivity present additional economic challenges.
How has income distribution changed according to the Cyprus Labour Study?
The Cyprus Labour Study reveals that income distribution has shifted, favoring businesses over workers. Despite nominal wage increases, workers’ incomes have actually decreased since the pandemic. Salaries remain approximately 2.5 percent lower than they were before 2006, indicating that the improvement in wages has not successfully bridged the disparity between workers’ earnings and increased profits that are tilting in favor of businesses. The suspension of the cost of living allowance (CoLA) mechanism is noted as a contributing factor to this income redistribution. The study advocates for the restoration of this mechanism and its expansion to cover more workers in the private sector.
What are the challenges related to investment and productive capital in Cyprus?
The Cyprus Labour Study highlights slow investment in productive capital as one of the economic challenges. Despite high GDP growth recorded between 2015 and 2023, the economy reveals significant weaknesses due to the slow accumulation of productive capital since 2015. This has hindered the economy’s ability to provide employment opportunities, maintaining a steady unemployment rate of around 7 percent. The report challenges the idea that profits will lead to investments and subsequently to employment growth, as profits are not being sufficiently reinvested in productive capital. This situation leads to inflationary pressures and persistent deficits in external trade.
What trade dynamics and labour productivity trends does the Cyprus Labour Study reveal?
According to the Cyprus Labour Study, high imports, despite strong export performances, have diminished the contribution of trade to the GDP, particularly after the pandemic. The tendency of rising imports to match exports has been attributed to high-income consumption habits. The report suggests that curbing imports could lead to trade surpluses, thereby boosting both GDP and employment opportunities. Additionally, labour productivity experienced a fleeting increase following the crisis in 2020 but reverted back to levels of stagnation seen before the crisis in 2023. These trends highlight the complexities of the post-pandemic economic recovery and the challenges faced by the Cypriot labour market.
