The intention to revise the national minimum wage is understandable and reflects the pressure households are facing. However, any decision must be guided by careful analysis to avoid unintended consequences, according to a statement by Michalis Persianis, President of the Fiscal Council.
Persianis emphasised that a rushed adjustment could harm vulnerable sectors of the economy and distort the labour market. He outlined several key considerations that should inform the government’s approach.
Differences between GDP and GNI
Persianis noted that average and median wage calculations differ significantly depending on whether they are assessed using Gross Domestic Product or Gross National Income. GNI, he argued, offers a more accurate picture of per-capita income in Cyprus because it is not inflated by the activity of a small number of externally driven sectors. Relying solely on GDP can therefore give a misleading impression of wage capacity across the wider economy.
Youth unemployment and labour market pressures
Although the economy operates under conditions of full employment overall, youth unemployment remains high, particularly among new entrants. The rate stands at 12.7 percent. Persianis said this group faces additional challenges because Cyprus’s evolving growth model and rapid technological changes increase skills mismatches. The shift in the Beveridge curve over the past three years underscores these structural frictions.
Risks for small and micro businesses
Persianis stressed the importance of protecting small and medium-sized enterprises. Micro firms with fewer than ten employees account for nearly 40 percent of total employment and represent 94.8 percent of businesses in Cyprus. Decisions designed with large businesses in mind may disproportionately burden smaller ones, placing jobs at risk and weakening broader economic stability.
Competitive pressures
Cyprus’s terms of trade continue to deteriorate, Persianis warned. Excluding high-technology companies, which are largely foreign-controlled, the data show declining competitiveness. Safeguarding competitiveness is essential for maintaining current growth levels and employment, particularly for permanent residents and young people.
Short-term data not a guide to long-term outcomes
The Fiscal Council president cautioned against using the current positive macroeconomic environment as an indicator of the future. Decisions taken now will apply even in years of lower growth, higher unemployment or rising structural inflation. Policymakers must therefore consider long-term effects rather than immediate political or social pressures.
Persianis reiterated findings from the Council’s Final Report for 2025, which concluded that the economy is resilient but faces widening pay disparities across sectors. He stressed that decisions on the minimum wage should be grounded in long-term economic sustainability and not short-term impressions.