Growth in productivity and real wages in Cyprus has been concentrated in a limited number of economic sectors over the past three decades, according to research by the University of Cyprus Economic Research Centre.
The study examined labour productivity and wages across 10 major sectors of the economy between 1996 and 2025, as well as estimates of total factor productivity (TFP) up to 2024.
Strong overall growth masks sector gaps
The research found that labour productivity across the economy increased by an average of 1.44% per year during the period.
However, performance varied significantly between sectors.
The strongest gains were recorded in:
- Information and Communication: +5.27%
- Financial and Insurance Activities: +2.33%
- Wholesale and Retail Trade: +1.61%
By contrast, productivity declined in:
- Agriculture, Forestry and Fishing: -0.90%
- Real Estate Activities: -0.84%
- Arts and Other Services: -0.82%
- Construction: -0.10%
Similar picture in total factor productivity
The study found that total factor productivity across the economy grew by an average of 0.99% per year.
Again, Information and Communication stood out, recording annual growth of 4.38%.
Negative TFP growth was recorded in agriculture, construction, manufacturing, and arts and other services.
Researchers said the findings show that productivity gains have been concentrated in a relatively small number of sectors.
Wage growth did not move evenly
The analysis also compared productivity with changes in real wages.
Between 1996 and 2025:
- Labour productivity grew by 1.44% annually
- Real wages rose by 1.10% based on sector output prices
- Real wages increased by 1.12% when adjusted for inflation using the Consumer Price Index
However, the relationship between productivity and pay differed significantly across sectors.
In Information and Communication, both productivity and wages rose strongly.
In Agriculture, productivity declined even as wages increased.
Stronger wage growth since 2022
During the 2022-2025 period, wage growth accelerated across most sectors.
Economy-wide:
- Labour productivity rose by 1.70% annually
- Real wages increased by 1.30% using sector prices
- Real wages rose by 1.95% when adjusted for consumer inflation
The best-performing sector remained Information and Communication, where:
- Productivity increased by 6.51% annually
- Real wages rose by 10.37% based on sector prices
- Real wages increased by 9.93% based on CPI-adjusted calculations
In contrast, Agriculture recorded:
- A 4.06% annual decline in productivity
- A 1.83% fall in real wages based on sector prices
- A 0.74% decline in real wages based on CPI measurements
Call for targeted policies
The researchers concluded that two key patterns emerge from the data: productivity improvements are concentrated in a small number of sectors, and the link between productivity and wages varies considerably across the economy.
They said sustained productivity growth remains essential for improving competitiveness, increasing incomes and raising living standards, suggesting that sector-specific policies may be more effective than broad, economy-wide measures.
