Cypriots and the community in general "refuse" to cover the gaps in the Cypriot labor market
In the west of 2023 labor emerges as a major issue for the real economy and the multiple issues raised will have an effect on the course of the economy in the coming year.
Last week, the spotlight fell on the revision of the national minimum wage to 1,000 euros (gross). The announcement was made on Wednesday. Two days earlier, on Monday, employers were sounding the alarm because of a lack of workers, especially in sectors such as tourism, catering, agricultural production, construction.
The Cypriot labor market presents a paradoxical picture: growth in many sectors (from the academic sector to construction, tourism and the technology sector) is creating new jobs, employment is at a historically high level, but at the same time unemployment is not retreating towards full employment rates (it rose to 5.8% in the third quarter and in absolute numbers the unemployed are estimated at 28,504), job vacancies are in the thousands (in tourism alone they are estimated at 10,000 to 12,000) and domestic businesses are troubled by the increase of the minimum wage by 60 euros. A quick answer to this paradox is that there is a mismatch in the supply and demand of skills in the Cypriot economy. Cypriots and the community in general "refuse" to cover the gaps in the Cypriot labor market.
In addition, Cypriot companies have not invested as much as they should in increasing their productivity, as a result of which they cannot offer higher wages (and be attractive for employment by Cypriots and EU citizens) and the increase of the minimum wage by 6.5% to 1,000 euros to be a problem.
Regarding the latter, the gap in investments, the findings of the latest report of the PEO Labor Institute are revealing. According to the report, "gross fixed capital investment in the three years after the pandemic (2021-2023) amounted to 18.4% of GDP compared to 19.3% in 2016-2020 and 22.8% in 2006-2011, therefore we are in a long-term downward trend in capital investment effort. As a result, while today the production system is fully utilized (as shown by official statistics), the unemployment rate cannot be reduced below 7%. In other words, the size of the productive system is not sufficient to employ those who wish to work and are actively looking for work, and 7% of them will remain unemployed regardless of the economic situation."
Call for staff
But there is a practical problem before us. Hotels, restaurants, farms, supermarkets are still at risk of not being able to operate if the problem of staff shortages is not solved. And this staff cannot be found in Cyprus.
The abolition, from October 1, of the favorable employment status for asylum seekers opens a big hole in the labor market. Today, approximately 15,000 asylum seekers are employed. If it is taken into account that 90% of applications are rejected, then there will be 2,000 left.
The Christodoulidis promise
What the business community is asking for is the implementation of the promise made by the President of the Republic, at a regular meeting of the OEB Board of Directors in Limassol, on September 27. Mr. Christodoulidis announced the repeal of the decree on the employment of asylum seekers and promised that within a month there will be a response to requests for employment of workers from third countries.
"There is a decision that ends on October 1. It is not my intention to renew it", said Mr. Christodoulidis. At the same time, he added, work is being done with the Ministry of Labor for a plan from January 1 (of 2024), so that in one month there will be a response when applications are made for foreign staff to come to Cyprus, while today this can take three- four months.
Labor Minister Yiannis Panagiotou informed OEB and KEBE on Friday about the steps taken regarding the fulfillment of President Christodoulides' commitment. According to the Minister of Labor, the time for considering business applications for the employment of workers from third countries has been reduced to three from six months. Simplification of procedures, electronic submission of applications and overall streamlining of the internal application management process are expected to lead to the goal of completing the examination of applications in one month.
However, other countries from the European South have a problem similar to Cyprus. In Greece, the government was forced to issue work permits to non-permanent residents in the country, a move that was particularly welcomed by the farming world, but caused a mini-party crisis in the ND, with former Prime Minister Antonis Samaras dissenting.
On the agenda of the Cypriot government is the conclusion of international agreements with third countries for the organized movement of workers. India is on the radar, but also closer countries, such as Moldova and Georgia.