Bargaining coverage a factor in protecting wages

According to the results of a survey on factors that determine wages and wage inequalities, carried out by the Cyprus Labour Institute in December 2007, coverage by collective agreements is emerging as a determinant of wage protection. Their influence mainly affects wages concentrated in the lower part of the wage spectrum. In the statutory framework for setting wages, this finding is directly associated with the discussion on the absence of an extension mechanism.

In December 2007, the Cyprus Labour Institute (Ινστιτούτο Εργασίας Κύπρου, ΙΝΕΚ/PΕΟ) completed a survey on the determining factors of wages and wage inequalities in Cyprus, submitting it to the Cyprus Research Promotion Foundation (Ίδρυμα Προώθησης Έρευνας, ΙPΕ) on 18 December 2007 (CY0704059I). According to the results of the survey, coverage by collective agreements has a significant impact on workers’ earnings. In this context, coverage by collective agreements is also one of the three most important factors for determining the gross hourly earnings of low-paid workers. The other two factors are discrimination against women and establishment size.

Workers covered by collective agreements

In 2002, the last year for which data from the Earnings Survey are available, average gross hourly earnings throughout the economy amounted to CYP 5.6 (about €9.57 as at 14 January 2008) for workers covered by a collective agreement, compared with CYP 3.6 (€6.15) for the remaining workers who are not covered by such agreements. Rates of coverage by collective agreements show great variability by sector of economic activity, type of occupation, level of education and gender. This variability is also reflected in wage inequalities: accordingly, where coverage is lower, earnings are also lower. More specifically, the sectors worst affected are wholesale and retail trade, business services and real estate management, along with those working as clerks, sales workers and service workers (International Classification of Occupations (ISCO) categories 4–5), plant and machine operators and assemblers (ISCO 8), as well as graduates of secondary education and women.

The importance of collective agreement coverage in determining wage amounts is also confirmed by linear regression analysis, which was used to define the determining factors for low wages. Logistic regression analysis was also carried out and showed that coverage by a collective agreement offers substantial protection, markedly reducing the chances that a worker will be lowly paid.

Wage gap between men and women

As regards the wage gap between men and women, collective agreement coverage plays a significant role. This is not so much related to the fact that the percentage of men covered by a collective agreement is around 60%, compared with 52% of women, but because the benefits of trade union coverage for male workers is around 50% greater than that for female workers. Men benefit more than women as coverage by collective agreements has a greater impact on their earnings, assuming that all other characteristics, such as personal and job factors, are the same. A second element regarding the difference in bargaining power of the two sexes is the different wages paid to both sexes according to different sectors of production: in industry sectors where profits are high and there is thus an increased ability to pay higher wages, men are in a better position than women to increase their earnings.

It should be noted that the wage gap between women and men in Cyprus – which in 2002 amounted to 24% in the economy as a whole and to 31.5% in the private sector – is the highest in the EU27, except for Estonia.

Statutory framework

The role of collective agreement coverage as a means of protecting basic terms and conditions of employment, mainly for the more vulnerable categories of workers, seems to be emerging as a growing concern for the trade union movement than previously. One possible reason for the increased interest is the fact that coverage by collective agreements has shown a tendency to fall; even more worrying is the fact that this drop is occurring in sectors with relatively high rates of collective agreement coverage, such as the hotels and restaurants, and construction sectors. However, such a finding needs to be investigated more fully by analysing the data from the next Earnings Survey.

According to the Pancyprian Federation of Labour (Παγκύπρια Εργατική Ομοσπονδία, PΕΟ) and the Cyprus Workers’ Confederation (Συνομοσπονδία Εργαζομένων Κύπρου, SΕΚ), the fall in trade union coverage is an overall problem related to a growing move towards the deregulation of labour relations. PEO and SEK believe that this new labour market situation, particularly in the context of Cyprus’s EU membership, has led to a constant increase in the number of non-Cypriot workers – the most vulnerable category of workers. This, in turn, has resulted in the greater use of such workers as a cheap, casual form of labour, with all that this entails. In order to address this problem, the trade union movement is focusing on promoting a range of measures aimed at modernising labour relations and thus restoring the balance of power and interests between workers and employers. Among the proposed measures is the issue regarding the existence of a mechanism for extending collective agreements, which is officially being raised for the first time (CY0607019I, CY0602104F).

Eva Soumeli, Cyprus Labour Institute (INEK/PEO)