Cyprus: Action plan to tackle high unemployment

The Government of Cyprus has been attempting to tackle steadily increasing unemployment. There are three basic prongs to its policy: supporting small and medium-sized enterprises, supporting employment in selected sectors of the economy, and addressing youth unemployment. However, unions have criticised the measures since they were announced in February 2014, saying they are inadequate and that the money would be better spent improving the state of the economy.

Background

On 18 February 2014, the Government of Cyprus Minister for Labour Zeta Emilianidou announced an action plan to create jobs, and to make it possible for those without jobs to gain work experience.

The action plan covers three basic areas: supporting small and medium-sized enterprises, supporting employment in selected sectors of economic activity, and addressing unemployment among young people.

With the exception of a one-off scheme for training hotel staff which was to be entirely funded by the unemployment fund, all of the initiatives were eligible for 95% co-funding by the European Social Fund (ESF).

The minister laid out a timetable to implement the schemes between March and May 2014.

Unemployment fuelled by economic crisis

As a result of the economic crisis, high national unemployment is one of the main challenges faced by Cyprus. In 2012, unemployment was 9.9%. By early 2013, it had reached 14.7% and rose again to 17.2% by December 2013.

Broken down by gender, the figures show that during 2009, the first year of the recession, more men than women lost their jobs because the economic downturn initially affected male-dominated sectors such as construction, real estate and tourism more severely. This trend continued in the years following, although the difference diminished. During 2013, the unemployment rate among men increased from 14.6% in January to 18.2% in December, and for women from 14.1% to 16.1%.

The youth unemployment rate has increased significantly. Among the under-25s, unemployment rates rose from 25.4% in 2012 to an alarming 35.9% in 2013.

In the light of these developments, a number of measures have been adopted at national level to boost growth and tackle the unemployment challenge.

In 2013, Cyprus continued to focus on measures undertaken in the previous years, especially during the period from 2009 to 2012 (CY1304029Q; CY1105049Q;CY1004019Q; CY0912019I). In April 2013, further government measures included three schemes to create about 8,000 jobs. An estimated budget of €30 million for the schemes was to be funded primarily through the re-allocation of funds from the ESF.

Retail trade

The initiatives announced in February this year include schemes to support small and medium-sized enterprises and encourage employment in the retail trade sector.

The first scheme will fund practical training, in conjunction with the subsidising of employment, for employers in retail trade who had between one and 49 employees in December 2013. To qualify for the subsidies and training grants, employers must hire from the target group of those receiving unemployment benefits and registered with the offices of the Public Employment Service. On the date that practical training begins, the beneficiary must be entitled to at least on further month of unemployment benefits. The subsidy covers 50% of wage costs up to a maximum of €3,000 per employment application for the first six months of employment, and an employer can claim the subsidy for a maximum of five people. The employer is obliged to keep the employee on for an additional two months after the subsidy expires.

The second scheme is aimed solely at creating new jobs and targets small enterprises in the sector that were employing between one and four people in December 2013. It subsides 70% of wage costs up to a maximum of €7,000 per employer, for a maximum of 10 months. The employer is obliged to keep the employee on for two further months after the funding ends.

Conditions also apply to employees taking part in this scheme. They must have had employment, either part-time or full-time, in the retail trade sector for at least two years before the scheme was announced in February 2014.

Employers must be able to show that their businesses has had a 25% decrease in turnover year-on-year. They must also make a commitment not to cut staff while they are covered by the terms of the scheme.

Hotel industry

Two schemes have been launched for the hotel industry sector:

  • a one-off scheme for staff training in hotels where work has been wholly or partially suspended during the November 2013–March 2014 period.
  • a vocational education and training programme for unemployed people newly hired in the hotel industry sector.

The one-off training scheme is intended to improve job skills of existing hotel staff and ‘by extension [upgrade] the tourism product of Cyprus’.

Participants have to pay a training allowance equal to the trainee’s regular wages. Social Insurance Services contributions will be calculated on this basis. The Social Insurance Services will pay directly to the hotel the unemployment benefit to which the trainees are entitled in accordance with the provisions of Article 31, paragraph 7 of the Social Insurance Law 59(I)/2010.

The vocational education and training programme for those newly hired in the hotel industry is targeted solely at the long-term unemployed. They must have been unemployed continuously for at least 12 months and must not have worked in the hotel industry in the past. The aim is to provide vocational training to make them employable the hotel sector.

A grant of €125 per week will be paid to participants, and the hotels training them will be compensated for the cost of organising and implementing training, including costs for trainers. If part of a course is conducted in other hotels, the compensation will be paid there instead. Compensation is capped at €100 per month per trainee.

Youth unemployment

Two schemes have been implemented to help young job-seekers find work or improve their prospects of finding work.

The first scheme is essentially the re-announcement of a placement scheme for young unemployed graduates in enterprises and organisations, intended to give participants work experience and practical training to improve their employability. The intention is also give enterprises and organisations opportunities for ‘better utilisation of human resources’.

The second scheme is a work placement scheme for young unemployed people with lower and upper secondary education and the graduates of technical schools and post-secondary schools. Businesses and enterprises are being asked to offer placements of at least two years to improve the employment prospects of young people who have no specific skills.

In both schemes, placements will offer at least six months’ experience of specific occupations. The young people included in these schemes will be paid a training allowance of €125 per week by the Human Resource Development Authority (HRDA).

Contributions will be paid to the Social Insurance Fund and the Social Cohesion Fund in accordance with the provisions of the relevant legislation. The placement does not constitute employment of participants by the enterprise or organisation and for that reason no payment will be made.

Trade union reactions

The unions have strongly criticised the schemes.

The Democratic Labour Federation of Cyprus (DEOK) said they would have ‘limited application’. A number of them had already been tried with poor results, and the profound social decline that Cyprus was suffering as a result of the economic crisis could not be remedied by short-lived measures with low-expectations. Instead, said the federation, plans were needed for extra investment and more public development works. Liquidity in the banking and financial system, helped by low interest rates, needed to be channelled into the real economy to fuel growth that would actually lead to recovery and the creation of new jobs.

The Pancyprian Federation of Labour (PEO) was also unimpressed with the government’s strategies. PEO said the government should support growth in the economy and a fair redistribution of wealth. Support was also needed for better-regulated employment and measures to sanction employers who arbitrarily violate labour laws and collective agreements. The welfare state also needed underpinning.

Minister’s response

In response to the criticism, the Minister for Labour Zeta Emilianidou said these were not measures to curb unemployment. She said this could be done only by relaunching the economy, and this could come about only after the financial system has been stabilised and the economy begins to grow.

She said the initiatives were aimed at relieving the problems of some of the people affected by unemployment. The new measures – the total budget for which has been estimated at over €40 million – aimed to create 5,000 work experience positions and 2,500 new jobs.

Eva Soumeli, INEK

 

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