TOMORROW unions and employer organisations could be headed for a confrontation as the latter announced on Tuesday that they would seek an official wage freeze and suspension of the Cost of Living Allowance (CoLA) for collective agreements in the private sector for two years.
Unions, other than DEOK, stayed quiet, saying they preferred to wait until tomorrow’s meeting before saying anything, because they didn’t want to create a problem beforehand.
If DEOK’s negative comments were anything to go by, the other main unions are not likely to welcome the employers’ proposals in any way, shape or form.
There is no doubt that Cypriot companies are suffering. Otherwise there would not be over 32,000 people unemployed.
But in reality there has been a wage freeze in the private sector for the past three years, even in some sectors that are covered by collective agreements such as the media. Most, if not all, private sector workers affected have accepted it, thankful that they still have a job, and none have taken to the streets to complain.
But pushing through an official freeze enshrined in a collective agreement will be a difficult if not impossible task.
As wage freezes have so far not come up against much opposition from workers, the more likely target here for employers is CoLA, which is linked to inflation and must by law be paid to workers. Currently CoLA benefits high-earners as it comprises a percentage raise on salaries.
The twice-yearly allowance has been a bone of contention for years as successive governments have failed to abolish or even tackle it mainly due to populism, despite urgings from the IMF.
Now that the public service has had both a wage and CoLA freeze imposed for two years – involuntarily of course – employers may have decided to have another stab at it. It makes sense if it will keep more companies open and more people in jobs.
However it is doubtful that the employers will get it past the unions, who will view it as just another blow to the working man.
It would be easier to make the case for a CoLA suspension if the actual cost of living in Cyprus had remained frozen over the past three years as wages stagnated.
In other recession-hit countries, the price of basic goods has dropped dramatically. In Cyprus they have continued to rise, as if people had as much to spend as they always did. Companies must also take some of the blame here. If a shop is selling something at 70 per cent off, this means it was already priced 50 per cent higher than it should have been prior to the sale.
For the past three years the average worker, while his wages have practically ground to a halt, has in addition to inflated prices, continued paying out for public service wage increases because of the government’s failure to act in time in cutting back the public wage bill.
Now that this has been sorted somewhat, workers are being hit with benefits and grant cuts, plus increased taxes and utility hikes.
VAT is going up two per cent from March 1, and consumers must now pay for the mistakes and omissions of others – such as the small matter of blowing up an entire power station resulting in an electricity rise of 6.96 per cent. This is on top of a scheduled rise in charges, as well as the ongoing cost of EAC emission penalties and increased fuel charges when they occur.
Electricity increases also filter down the food chain… literally.
So as long as prices continue to rise, unions are likely to see any CoLA freeze in the private sector as an outright loss of income, which will force people to cut back to basics even more, possibly leading to additional company closures and an even longer jobless line.
On the other hand, employers rightly feel there is no reason why they should have to keep paying for the government’s mishandling of the economy with an outdated wage indexing system.
But instead of creating a possible confrontation, which could bring social unrest and instability in the private sector, and which will probably lead nowhere in the end, employers could try to seek a compromise where CoLA is finally restructured so that a company’s costs can be reduced while the lowest wage earners can still get by.
This is something that has been discussed in the last 12 months but it should have been done long ago by the government if it did not want to abolish CoLA outright. The Christofias administration has had four years to sort it out. Instead it waits until the middle of a crisis when employers and workers are both hurting.
