The only way to reverse the ongoing process of labour devaluation is to restore full ATA and extend it to more workers, including low-wage sector workers paid at the minimum wage, the improvement of the new minimum wage regime and the activation of a process of successive general wage increases for workers in the business sector, the annual Cyprus Labour Institute (CLI) PEO Economic and Employment Report 2022 finds.
Speaking at the presentation of the INEC-PEO Report, held at the PEO offices, in the presence of the Secretary General of AKEL Stefanos Stefanos, President of the Board of the Institute and General Secretary of the PEO Sotiroula Charalambous said that "the claim made by the employers' side that ATA would have an impact on the competitiveness of the Cypriot economy is arbitrary and without scientific support". He added that "the implementation of the full ATA is not going to hurt productive investment but the excess profits that are channelled to other, non-productive, uses".
"The reintroduction of full ATA and the strengthening of the militancy of the trade union and political organisations of the working classes are obstacles that can be placed in the process of the devaluation of labour that is underway," he said, adding that "the current attempt at the great devaluation of labour is an episode of the confrontational policy that the owners of capital are now pursuing in order to increase their already high profits."
He also said that "they have left the field unregulated in terms of the compulsory application of agreed collective agreements by all employers and sectors covered by contracts."
He said that the introduction of social housing and rent subsidy schemes is required in this direction to address the excessive cost of housing today, not only for low and middle income earners, the improvement of social benefits such as the social allowance that either even the erosion by inflation since 2014 to date has not been increased to cover it; the expansion of public and community social protection structures and tax reform in a way that eases the burden on wage earners taking into account family composition and proceed with the taxation of excess profits and wealth.
Citing the conclusions of the report on labour productivity, Charalambous said that "it is recorded that the factors responsible for the long-term stagnation of labour productivity remain active and there is no sign of any improvement in productivity in Cyprus", adding that in recent years the productivity chapter has been left out of the scope of discussions in Cyprus, both on the part of the government and employers.
"This is not at all unrelated to the fact that capital has supported profitability and accumulation, low wages and the intensification of exploitation and therefore has no incentive to discuss productivity," he added.
Also, the PEA Secretary General said that "a great and unfair redistribution of the product is currently taking place at the expense of the world of work, because it is confirmed again this year, by the annual report of the INEC, that the great rise in profitability imposed in Cyprus through the structural changes of 2013-2015 has been consolidated, not threatened by the health crisis, and finally continues to be reinforced, by the rise in inflation".
He also stated that the increase in profits is not realized by an increase in labor productivity and added that increases in productivity, when they exist, allow, if the class correlation of forces is appropriate, a parallel increase in profits and the purchasing power of wages with a sharing of the resulting benefit.
"On the contrary, when there are no increases (or only small increases) in labour productivity, as in the present situation worldwide, and in Cyprus, enterprises and the political forces representing their interests turn to reductions in real wages or to very small increases that fall short of increases in productivity and GDP," he added.
The Director General of INEC PEO Paul Kalosynatos said that in this year's report, which discusses the evolution of wages, we find that there is a process of great depreciation of labour through inflation, which is not compensated by increases in nominal wages.
"We also find large productivity increases in 2021 and 2022 that are temporary in nature and do not appear to have been passed on to workers in the form of wage increases," he added.
He said thatthe reductions in workers' incomes can be seen in two measures, the real wage and the labour share, adding that the average real wage, declined in 2022 due to inflation by 3%, while the labour share of national income has in 2022 declined by about 4% of GDP.
"A decrease that adds to the large decrease in the period 2013-2015," he said, adding that, on the other hand, the share of profits has increased by 7.5% of GDP compared to the 2011 level."
According to Mr. Kalosynato, the INEC report demonstrates that increases in workers' wages would not affect the competitiveness of the Cypriot economy, nor would they affect the ability to finance productive investments.
"On the contrary, such a policy would have favourable effects on demand, stimulating production and employment," he concluded.
Presenting the results of the report, Elias Ioakimoglou, Scientific Associate of INEC, referred to the current crisis, the end of which, he said, is not in sight.
He said that it is an unprecedented crisis and the fourth major crisis of capitalism, which is different from the previous ones, as it "affects individual levels of society and the economy."
In relation to Cyprus, Mr. Ioakimoglou said that the average real wage in the third quarter of 2022 was 7% lower than the 2006-2012 average which was stable, adding that this decrease was not far from the lowest point reached under the memorandum policy of 11%.
"If this devaluation continues next year, we will reach the lowest point we were at immediately after the implementation of the memorandum," he added.
He also said that "the general finding that applies to all countries is that labour productivity is now stagnant and there is nothing on the horizon to encourage us that this will change", adding that the productivity recovery seen in Cyprus at the end of 2022 was "contrived and related to the Covid-19 crisis" which had sunk productivity.
INEC Report Conclusions
According to the report, at the end of 2022 it is confirmed that a major new labour devaluation is underway in most countries of developed capitalism driven by inflation.
It states that "in the case of Cyprus (as in Greece), this devaluation is added to the labour devaluation of 2013-2014 and is highly visible in the statistics of real wages, unit labour costs, profits and product distribution".
More specifically, the report states that "a downward trend in the purchasing power of average wages has now been consolidated in almost all European countries, and its continuation in 2023 could lead to a decline in the purchasing power of wages greater than the depreciation of labour in 2013-2014".
Such a development, it adds, "has not been completed, and the total restoration of the purchasing power of wages to the level they were at before the rise in inflation began is the subject of political and trade union intervention in all the countries of Europe".
As the report notes, "the claim made by the employers' side that the ATA would have an impact on the competitiveness of the Cypriot economy is arbitrary and without econometric support" and "there is no statistical correlation between unit labour costs and export prices or GDP".
"Cypriot export prices (hence competitiveness) did not change when there was a dramatic reduction in unit labour costs with the implementation of the memorandum programme, but even in the current context, after 2020, export prices show a dramatic increase while unit labour costs have decreased during the same period," it adds.
According to the report's conclusions, the depreciation of labour caused by the price increases is likely to come to an end once the process of deflation has been completed.
It states, however, that it is possible that the recession or slowdown in the economy may in the meantime have increased the unemployment rate and reduced the bargaining power of employees and their ability to defend the purchasing power of wages, and "if it is verified that these will be the prevailing conditions in the next period, they will not be at all favourable for the remuneration of wage labour".
It also states that if Christine Lagarde, President of the European Central Bank, and the European Commission's forecasts are verified, inflation will not return to the very low levels of the previous period even after the economy slows down or declines in 2023, when "we will find ourselves in an inflationary context of around 3% that may bring about small additional reductions in the purchasing power of wages."
"Under these circumstances, the Automatic Price Adjustment becomes very important, not only for the current context but also for the future, which apparently may bring more episodes of inflation, both because of the geopolitical instability that has been created and because of the transformation of the depreciation of labour into the sole driver of profitability," it adds.
In the current context, according to the report, "the restoration of full RTD and the strengthening of the militancy of the trade union and political organisations of the working classes are the only obstacles that can be put in the way of the ongoing process of the devaluation of labour".
In relation to the profitability of enterprises, the report states that "based on the indicators describing the changes in profitability, it is demonstrated in an undeniable way that the large increase in profitability imposed in Cyprus with the tool of the structural changes of 2013-2015, was consolidated, was not threatened by the health crisis, and was eventually further strengthened, and continues to be strengthened, by the rise in inflation and nominal wage increases that fall short of the corresponding price increases'.
It is stated that capital income (profits, interest, annuities) increased by about 7.5 percentage points of GDP over the 2006-2011 average, of which about 4 points come from the 2013-2014 income redistribution, and 3.5 points from the 2022 redistribution, adding that "the same changes, over the same period but with a negative sign, were observed in the labour share of GDP".
Gradual rise in productivity
According to the report, overall labour productivity growth for the eleven years 2008-2019 cumulatively amounted to around 5% (or 0.4% per annum), while today there is a return of the labour productivity index to the situation of long-term stagnation that prevailed before the health crisis.
It is also reported that when output was restored to pre-crisis levels, increases in the number of people employed were smaller than the corresponding increases in output because workers were not laid off to be rehired and "it turns out that the long-term stagnation in labour productivity persists, and it remains very doubtful whether there will be any significant increase in labour productivity in the near or somewhat more distant future."
"The current attempt to greatly devalue labour is an episode of this confrontational policy that the owners of capital are now pursuing in order to increase their profits," it adds.
With regard to the labour market situation, the INEC-PEO report states that "underemployment is on the rise and this is an indication that it is a phenomenon that has become entrenched and is expanding, dragging an increasing number of employees into part-time employment conditions undesirable by the workers themselves but desired by many employers" and adds that "long-term unemployment has also become structural, which has declined, but has not returned to the low level of 2008-2010".
Source: CNA
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