The Cyprus Economy and Competitiveness Council, an independent advisory body set up in June 2018 to carry on the functions of the national productivity board, said in its report that net wages in Cyprus are lower than all reference countries in the EU, as well as the average wage in European Union.
This is due not only to low wages but also to low non-wage costs. The tax burden on labour cost is also significantly lower than all reference countries.
Presenting the report to Finance Minister Haris Georghiades, the Council’s chairman Takis Clerides, himself a former finance minister, said that low labour costs could have provided a competitive advantage for enterprises to relocate to Cyprus. However, the report’s findings reveal low levels of productivity which in turn leads to employees receiving lower wages while their purchasing power diminishes.
Labour productivity in Cyprus is below the EU average and is significantly lagging behind northern European economies, such as the Netherlands and Finland, while it is higher than other Mediterranean economies.
The Council noted that while labour costs are relatively low, businesses face higher operating costs, such as electricity bills and other utilities, and experience issues with broadband Internet access.
In its 179-page report, the Council identifies six areas where measures need to be taken to mend structural weaknesses.
The six areas in which the council finds that Government's policies and reform measures should focus on in the short term are:
- Encouraging entrepreneurship and boosting the dynamic growth of Cypriot businesses;
- Strengthening partnerships between Cypriot businesses;
- Enhancing the use of digital technologies;
- Improving access to funding, including the development and availability of alternative sources of finance;
- Education and training of human resources;
- Developing a single strategy on transport in Cyprus.
Source: Financial Mirror