TRADE UNIONS warned yesterday that a proposal for a two-year wage freeze in both public and private sectors, was tantamount to putting a bomb under labour relations.
The warning came after it was revealed that the Employers and Industrialists Federation (OEV)was putting forward the proposal at its AGM on Monday. The measure was motivated by concern over spiralling wage costs in a time of global crisis.
“This kind of proposal can’t just appear out of the blue, and on a sloganeering basis. The established channels for discussion and negotiation are there to be used. We’re not about to allow a state of mind created by the crisis to be used to undermine employees’ rights and collective agreements,” PEO trade union General Secretary Pambis Kiritsis told the Cyprus Mail yesterday
SEK trade union General Secretary Nicos Moiseos said OEV was “putting a bomb under labour relations”, while DEOK trade union General Secretary Diomides Diomidous said: “A wage-freeze would mean a social uprising, a social revolution. This is not the time for crazy ideas that would tip Cyprus’ economy into complete catastrophe.”
OEV Director General Michalis Pilikos is reported to have said that the organisation’s proposal for a discussion on “the adoption of a conservative wages policy” was motivated by its “concern over the continuously inflating public sector payroll, the consequences of the crisis on the economy, but also forecasts that things may not develop favourably for the economy”. The OEV proposal also includes the notion of a simultaneous commitment from companies to freeze the prices of their goods and services.
“It is very clear that the state payroll is absurdly high, which unfortunately has been confirmed yet again by Eurostat figures”, Pilikos said. “In combination with the very high pensions enjoyed by civil servants, this deprives the state sector of resources which could otherwise be applied to social benefits or additional measures to stimulate the economy.”
Speaking to state broadcaster CyBC yesterday, SEK’s Moiseos was highly critical of OEV’s proposal because the union’s “policy to renew the collective agreements in 2009 is known to have been formulated in a restrained way in view of the economic crisis”.
Labour Minister Sotiroulla Charalambous weighed in saying: “The last thing we need right now is to head into social confrontation and actions that would explode peaceful labour relations.”
A source in the Labour Ministry told the Cyprus Mail: “The institutional labour relations mechanism is well-defined. Employers and employees enter into discussion or negotiation over a particular issue, and if necessary, the Ministry will play a role to facilitate, arbitrate, etc. where it can. Mr Pilikos can make his proposal, and it is up to the social partners to respond.”
Questions remain as to how a wage-freeze could be imposed in free market conditions and where the guarantee would come from that private businesses would freeze prices.
Pilikos is also reported to have said that the automatic wage indexation system known as CoLA (ATA in Greek) should remain unchanged. CoLA has become a political issue in recent years with successive governments pledging not to lay a hand on it.
“This is a complete proposal aimed at enabling us to face up to the crisis,” said Pilikos.
But Kiritsis said: “In no circumstances will reducing purchasing power help counter the crisis – quite the opposite, it creates a vicious circle. The emergency measures taken by the government are aimed at encouraging growth through economic activity, not reducing wage-earners’ incomes.”
Many economists would take an opposing view, based on the likelihood that – assuming prices will continue to rise – driving down the purchasing power of the majority of consumers will reduce their ability to consume and will therefore slow the economy down even further, rather than encourage it to grow.
This is no great surprise. As economist Costas Apostolides puts it, “COLA works in the employer’s favour in a recession, because through its link to inflation it will bring down wages naturally. Since the trade unions are committed to the COLA system, as long as a recession lasts, [public sector] wages will go down until the current collective agreements expire.”
Public sector wages are already being reduced in real terms in Cyprus. According to research presented last week by European Union agency Eurofound, collectively-agreed nominal wage increases (i.e. not adjusted against inflation) in Cyprus increased by 2.5 per cent in 2008, up from 2.1 per cent in 2007. However, when set against the 2008 inflation figure of 4.4 per cent, this represents a wage decrease in real terms.
OEV’s AGM is due to be attended by President Demetris Christofias, various ministers and other political figures, and trade union leaders.
Regarding Pilikos’s comments, Apostolides said: “I would argue that his statements are unnecessary. There should already be a fall in prices since the oil bubble has burst, and the world crisis means that things will slow down, which will also work in favour of the employers. It sounds like an attempt to exploit the situation.”
