The problem of low wages in Cyprus will not be solved with yet another decree on pay levels. Nor can every increase in the minimum wage, on its own, bridge the widening gap between incomes and the cost of living.
The real question is broader, and it is one raised by Politis' extensive report today: What kind of economy do we want, and more importantly, what kind of economy can generate higher incomes?
The figures cited in the report are revealing. Some 33.9% of employees earn less than €1,500 per month, while the median salary stands at €1,968. At the same time, there are enormous differences between sectors. In 2024, the average salary in hotels and catering was €1,583, while in financial and insurance activities it reached €4,710.
This picture is not simply a wage policy problem.
It is a problem of the economic model.
If Cyprus continues to create a large share of its jobs in low value-added activities, it cannot expect wages to keep rising indefinitely without consequences for prices, business margins or employment. Increasing productivity is therefore a necessary precondition for higher pay.
This is also where the major policy challenge lies.
The country needs to change its productive model and the composition of its growth through greater investment in technology, improved skills, less bureaucracy, more effective institutions and a stronger presence of high value-added activities.
Technology, research and development, digital services, energy, and specialised financial and professional services can create jobs that support higher wages.
This transition, of course, will not be easy.
Nor does higher productivity by itself guarantee that the benefits will reach workers' pockets. Mechanisms are needed to ensure that part of the additional value created is translated into better pay.
But that is the essence of the issue.
We cannot address rising living costs by repeatedly dividing the same pie.
We need to grow the pie.
Only an economy that creates greater value can sustainably provide higher incomes.
The public debate, therefore, should not be exhausted by discussions about how many euros should be added to wages. It should focus on how more euros can be created within the economy.
The objective is to build an economy in which higher wages are the natural result of producing better goods and services, achieving higher productivity and creating higher-quality jobs.
