Minimum wage hike splits employers and unions

The government’s decision to raise the national minimum wage to €1,088 per month, has drawn strong and conflicting reactions from employers’ organisations and trade unions.

The increase was approved by the council of ministers on Tuesday, following a proposal by the ministry of labour and social insurance.

Labour Minister Marinos Mousiouttas said the decision was based on macroeconomic and social data, including inflation, economic growth and employment trends.

He said the adjustment aimed to strengthen the purchasing power of low-paid workers without harming competitiveness.

Under the decree, the minimum wage before completing six months of employment will rise from €900 to €979, and after from €1000 to €1088.  

The changes are expected to benefit around 50,000 workers and will apply from January.

According to the minister, the calculation also incorporates the cost-of-living allowance at a rate of approximately two per cent.

The employers and industrialists’ federation (Oev) warned that the scale of the increase was disproportionate and unprecedented.

Oev remarked that the rise would push the minimum wage to around 58 per cent of the national median.

According to the organisation, companies unable to pass on the additional costs could face challenges to their viability, while those that do pass costs on would contribute to inflation and undermining competitiveness.

The Cyprus chamber of commerce and industry (Keve) adopted a more measured tone.

While acknowledging that the increase was higher than initially expected, it said it respected the government’s decision.

Keve stressed that the priority now was the smooth implementation of the measure to safeguard labour market stability, business sustainability and employment.

Trade unions, meanwhile, expressed strong disappointment, arguing that the increase falls far short of what is needed to protect workers amid rising living costs.

In a joint statement, Sek, Peo and Deok said the decision constituted a setback and failed to meet the guidelines of the EU directive on adequate minimum wages.

They alleged that when cost of living is taken into account, the effective increase amounts to only €67 after six months of employment.

According to the unions, this places the minimum wage at around 57.8 per cent of the median wage, down from 58.5 per cent in 2023, and below the EU benchmark of 60 per cent.

Peo general secretary Sotiroulla Charalambous described the decision as provocative, given evidence of widening income inequality.

She said that if the cost-of-living allowance is deducted, the real improvement for workers is even smaller.

Sek general secretary, Andreas Matsas, questioned how the final figure was determined and criticised the lack of transparency in the process.

Adding to the debate, fiscal council president, Michalis Persianis, cautioned against hasty wage adjustments.

He stressed that indicators based on gross domestic product can be misleading and that competitiveness indicators for the domestic economy are gradually declining.

Persianis also highlighted persistently high youth unemployment and the vulnerability of small enterprises, which employ a significant share of the workforce.

He warned that policies designed with large firms in mind can disproportionately affect smaller businesses and jeopardise employment during periods of slower growth.