One in three employees in Cyprus earns gross monthly wages of up to €1,500, an income level that is insufficient to cover the rising cost of living and inflation, which is expected to intensify further by the end of the year due to forecasts of higher price growth.
Despite wage increases in recent years, those gains have not been distributed equally across households, with many continuing to struggle to meet their financial obligations. On its own, an increase in the minimum wage is not enough.
But how easy is it to increase wages in Cyprus? Is it possible, and how can it be achieved? Politis sought the views of economists, most of whom stressed that there are no easy solutions and argued that the key lies in strengthening productivity and competitiveness across the economy.
Two factors determine wages
Demetris Georgiades, chairman of the Economy and Competitiveness Council (SOAK), says there are two main factors that determine pay levels.
The first is productivity, which remains relatively low in several sectors of the Cypriot economy.
"The reasons have been repeatedly identified both in the interventions of SOAK and by other institutions and experts: limited penetration of technology, weaknesses in education and the administration of justice, bureaucracy, high energy costs, obstacles to business activity, including closed professions and sectors, as well as labour shortages and skills gaps," he says.
Increasing productivity, he adds, requires, among other things, opening professions and markets, removing unjustified restrictions and improving the match between workforce skills and the needs of the economy.
He believes the role of education and training is particularly important.
"The education system cannot operate disconnected from developments in the economy and labour market. It must adapt, while also possessing mechanisms that allow it to continuously adjust to changing needs, providing young people with knowledge and skills that correspond to real employment prospects. At the same time, education must be complemented by an effective system of lifelong learning, reskilling and upskilling so that people already in the labour market can adapt to technological and economic change," he says.
The second factor, he notes, is supply and demand in the labour market.
"Although conditions today are close to full employment and one would therefore expect stronger upward pressure on wages, pay remains relatively low in several sectors. This highlights even more strongly the importance of increasing productivity and, by extension, the competitiveness of the Cypriot economy," he says.
At the same time, he adds, there is a need to make the labour market function more effectively so that workers and businesses can adapt more quickly to changing economic conditions.
"What is needed is a more modern and flexible labour market that facilitates mobility and offers more opportunities for both employees and employers."
Policy interventions should be used with caution
Georgiades also addresses policy interventions relating to wages, stressing that such measures should be used only as a last resort.
"Relatively low wages intensify demands for political intervention in pay determination. Setting wages through legislation cannot substitute for productivity growth and, if used carelessly, may create distortions or even more problems than those it seeks to solve. In my view, such interventions should be a last resort, targeted and, where appropriate, of limited duration," he says.
"The real goal must be for wages and productivity to rise together. Only in this way can income improvements be meaningful and, above all, sustainable."
A dual approach
"The challenge of low wages in Cyprus cannot be addressed solely through periodic increases to the minimum wage. It requires a dual approach: short-term support for the disposable income of low-paid workers and, at the same time, medium- to long-term productivity growth and a shift towards higher-value economic activities," economist Marios Soupasis tells Politis.
According to Statistics Service data for the first quarter of 2026, one in three employees (33.9%) earns gross monthly wages below €1,500. The figure is 27.4% for Cypriots and 46.7% for non-Cypriots. The average wage stands at €2,601 and the median wage at €1,968. Wages increased by 3.7% on an annual basis.
"From an economic policy perspective, we should focus on those three figures: 33.9%, the average wage of €2,601 and the median wage of €1,968. They show that Cyprus's problem is not only whether wages are increasing. It is also how wages are distributed and in which sectors high-productivity, high-value-added jobs are created."
According to Soupasis, available data show that low wages are concentrated in sectors such as hospitality, tourism, retail, cleaning services, auxiliary work, manufacturing and certain unskilled or technical occupations.
In 2024, average pay stood at:
- €1,583 in accommodation and food services.
- €1,781 in wholesale and retail trade.
- €1,805 in construction.
- €1,870 in manufacturing.
By contrast, average pay reached:
- €4,217 in information and communications technology.
- €4,710 in financial and insurance activities.
"This picture suggests that the low-wage problem in Cyprus has a strong structural dimension, linked to the composition of the country's economic model. We have a large number of jobs in labour-intensive sectors with relatively low value added per worker and often low requirements for specialised skills," he says.
According to the latest available data, the lowest wages are concentrated in sectors with large employment shares, including wholesale and retail trade, hotels and restaurants, construction, manufacturing, other services, and agriculture, forestry and fishing.
"To illustrate, in 2024 retail and wholesale trade employed around 78,300 people, hotels and restaurants around 57,500, construction about 39,700 and manufacturing approximately 38,000. Therefore, the issue of low wages is not confined to small or peripheral sectors. It concerns major employers and carries significant economic and social implications."
"If we want to solve the problem of low wages, increasing the minimum wage is not enough. We need to examine how productivity can be increased precisely in these sectors and, more importantly, how the Cypriot economy can create more jobs in higher value-added activities. Productivity growth should be at the core of any policy aimed at sustainable wage increases."
"The reason is simple: over the long term, real wages cannot continue to grow faster than productivity without creating pressure either on profit margins, prices or employment. If we want genuinely higher wages in Cyprus, rather than simply redistributing a fixed slice of the pie, the pie itself must grow."
At the same time, he notes, productivity growth is a necessary but not sufficient condition for higher wages.
"Mechanisms are also needed to ensure that part of the additional value created is transferred to workers' pay."
In terms of economic policy, he argues, the key objective should be the adequacy of wages and disposable income.
"The real question is how to ensure that a person working full-time can enjoy a decent level of disposable income without creating disproportionate pressure on low-productivity, labour-intensive businesses with limited profit margins."
According to Soupasis, short-term measures could focus on housing support and assistance for families with children.
Over the medium to long term, he would focus on:
-
Linking training to real labour-market needs. Not simply offering more seminars, but funding skills that demonstrably increase the value of workers, including digital skills, technical professions, financial technology, data analytics, artificial intelligence, engineering and energy.
-
Shifting the economy towards higher-value activities. A country cannot rely excessively on business models where competitiveness is based primarily on low labour costs. Greater emphasis is needed on technology, professional services, high-end financial services, education, research and development, the green economy and higher-quality tourism.
-
Providing incentives to businesses that combine investment with wage increases. For example, a company that invests in equipment or digital transformation and achieves measurable productivity gains could receive tax incentives if part of the benefit is passed on to employees.
Productivity and stronger institutions
"Wage growth is a complex issue for which there are no easy solutions," says economist Michalis Florentiades.
"Traditionally, wages are linked to productivity. Therefore, increasing productivity through capital investment, better workforce education, improved infrastructure including energy, transport, telecommunications and other public utilities, as well as stronger institutions and regulatory frameworks, are the main ways this objective can be achieved."
"Technology can improve productivity, but it can also replace workers through automation. For example, if a factory that once employed 500 workers can now operate with 20 robots and 10 supervisors, productivity per worker may rise dramatically. That does not automatically mean wages will increase."
He says this point is particularly important in relation to artificial intelligence, which, although still at an early stage, has the potential in the future to exacerbate labour-market challenges such as youth unemployment, graduate unemployment and low wages.
"More generally, Cyprus needs to strengthen entrepreneurship by reducing bureaucracy and creating a more flexible and dynamic economy."
"There has been a long-standing overreliance on attracting foreign capital through favourable tax and other incentives, rather than creating a positive domestic environment that promotes genuine local entrepreneurial activity. That is the only force capable of creating higher-quality, better-paid jobs," he says.
