Left-wing union PEO’s Cyprus Labour Institute (INEK) report for 2025 argues that income has been redistributed at the expense of wage earners through inflation and through productivity increases, which are captured entirely or mostly by businesses. As a result, GDP growth is not reflected in wage levels, leading INEK to recommend substantial increases in workers’ pay.
According to the report, in 2025 Cyprus ranks 21st among the 27 EU member states in purchasing power of wages per employee, and 13th in the ranking based on GDP per capita purchasing power. These rankings mean that Cyprus is the 13th richest country in the EU, but when ranked by the purchasing power of the average wage, Cyprus is among the lowest (21st), alongside countries whose GDP per capita is 15% to 30% lower than that of Cyprus.
“The countries with a GDP per capita comparable to Cyprus – Italy and Spain – pay average wages whose purchasing power is 25% to 30% higher than Cyprus,” the report notes. Using the return on fixed capital as an indicator of corporate profitability – which INEK describes as the most reliable indicator – this figure is currently 75% higher than in 2010. The average wage appears to be 13% higher than the average for the years 2006–2012.
INEK estimates that the post-2005 increase in profitability is due almost entirely to the decline in the wage share of income within the business sector of the economy.
Distortions
INEK nevertheless considers that the increase in real wages is smaller.
It explains that the average wage presented in official statistics is calculated across all employees, including managerial staff, who make up 4.5% of all wage earners. The average earnings of this category raise the overall average wage by about 15%, creating the misleading impression, INEK stresses, that wages in general are higher than they actually are. A similar effect (5%), though smaller than the impact of managerial salaries, is recorded due to the increasing presence of highly skilled foreign workers in economic sectors that are growing faster than the overall economy.