The interim results of a study by the Cyprus Labour Institute (INEK/PEO), published in early April 2007, examine factors affecting wages and wage inequalities in Cyprus. In recent months, interest has grown in the issue of low-paid work in the Cypriot labour market. The INEK/PEO study, which is due for completion in November 2007, provides findings in relation to the incidence of low pay, as well as the characteristics of low-paid workers.
In early April 2007, the Cyprus Labour Institute (Ινστιτούτο Εργασίας Κύπρου, ΙΝΕΚ/PΕΟ) published the interim results of a study on factors affecting wages and wage inequalities in Cyprus. The study, due to be completed in November 2007, is funded by the Cyprus Research Promotion Foundation (Ίδρυμα Προώθησης Έρευνας, ΙPΕ). It is the first full, in-depth study on wage structure and pay inequalities in the Cypriot labour market. The study, whose scope includes the entire economy, was based on the 2002 Structure of Earnings Survey (SES), with data provided to the INEK/PEO by the Statistical Service of Cyprus (Στατιστική Υπηρεσία της Κυπριακής Δημοκρατίας, CYSTAT). The issue of low-paid work in the Cypriot labour market has attracted increased interest in recent months. The study’s main conclusions provide an insight into both the incidence of low pay and the characteristics of low-paid workers.
Characteristics of low-paid workers
Gross pay
In 2002, the hourly gross pay of one in two employees in Cyprus was below CYP 3.90 (about €6.67 as at 30 July 2007). Low pay is generally defined as two thirds of the average wage. Thus, people earning a gross hourly pay of less than two-thirds of CYP 3.90 – in other words, CYP 2.60 (€4.45) an hour, or around CYP 380 (€650) a month – should be characterised as being low paid. The results of the INEK/PEO study show that approximately 25% of employees are low paid, while the vast majority of these low-paid workers are concentrated in the private sector of the economy. More specifically, in 2002, the average gross hourly pay of low-paid workers was CYP 2.30 (€3.93), compared with CYP 5.40 (€9.23) for better-paid workers.
Education
The characteristics of both groups of workers, as reflected by the 2002 SES, help to explain this wage gap. To begin with, large differences are evident in the education sector: whereas about one quarter of better-paid workers had less than a secondary education, the corresponding figure for those in the low-paid category was one third of workers. Furthermore, just one in 10 low-paid workers had completed a third-level education, compared with one in three better-paid workers.
Job tenure
In addition, the mobility of low-paid workers is clearly higher; as a result, the average length of service in the most recent job (tenure) of low-paid workers is approximately four years, compared with nine years among better-paid workers. When taking the public sector along with the private sector of the economy into account, the job tenure for better-paid workers is even longer. Therefore, in 2002, low-paid workers in Cyprus had less accumulated work experience. Assuming that a linear relationship exists between job tenure and work experience, in 2002, low-paid workers had around half the work experience of better-paid workers, with the anticipated effects on their gross hourly earnings.
Occupational background
Another factor explaining the poor pay levels is the concentration of low-wage workers in certain occupations. Just 5% of low-paid workers are employed in occupations involving skilled, intellectual work, whereas about 53% are concentrated in two sub-sectors of the services sector where unskilled jobs prevail, namely: retail sales workers, and clerks and service workers (International Standard Classification of Occupation (ISCO) 4 and 5). Some 24% of low-wage earners are employed as unskilled manual labour (ISCO 9), while the remaining 76% of workers in this group are employed in three occupational categories of predominantly unskilled work. Moreover, a large proportion of low-paid workers are employed under fixed-term and part-time contracts, with few opportunities for overtime and shift work.
Collective agreements
Coverage by collective agreement is also of decisive importance with respect to the level of hourly gross wages. In the private sector, approximately 70% of better paid workers were covered by a collective agreement in 2002, compared with only 33% of low-paid workers.
Gender discrimination
The study’s findings also reveal that two out of three low-paid workers are women. Thus, gender discrimination appears to be another significant factor in relation to low pay.
Commentary
Taking all of these characteristics into account, the report concludes that the core group of low-paid workers is made up of women with a low level of education and of accumulated work experience in their last job. This is attributed to the high mobility of low-paid workers and to the fact that they are employed as unskilled workers in small enterprises, mainly in trade and tourism. These workers are generally not covered by collective agreements, do not have any supervisory duties and have fewer opportunities for overtime or shift work.
Elias Ioakimoglou, Cyprus Institute of Labour (INEK/PEO)