Our View: Setting of fair minimum wage is a real conundrum

Labour minister Yiannis Panayiotou is expected to meet the labour advisory board on Tuesday to hear the final positions of unions and employers on the increase of the national minimum wage, which has been under discussion for some time now.

Its increase had been a long-standing demand of the unions, which always maintained that the minimum of €940 that was set in 2022 was too low. Its increase had been an election pledge and the labour minister, who has shown a tendency to pander to the unions, announced he would deal with the matter soon after the issue of CoLA was settled.

Not surprisingly, there has been no agreement between the two sides, despite several meetings of the labour advisory committee on which unions and employers’ organisations are represented. Both agree there should be an increase, given the high rate of inflation (8 per cent in 2022 and 4 per cent this year), but disagree on the amount. Unions back the conventional approach for calculating it, which would be 60 per cent of the median wage of €1701. This would make the minimum €1020, an amount employers consider excessive, and argue for a €30 increase.

There is little doubt that the people on the minimum wage have suffered the most from the rising prices seeing their purchasing power diminish over the last couple of years, especially as most of them would not have received CoLA like the overpaid workers of the public and semi-governmental sectors. Any increase on the minimum wage would be welcome, although employers may have a point in complaining that an €80 increase would represent an 8.5 per cent pay rise and affect their operational costs. Such a rise could lead to additional upwards pressure on prices, considering businesses have seen production costs rise in the last two years.

Then again, it would be unfair to leave the minimum wage fixed when people on much higher wages in the public sector and parts of the private sector received CoLA which amounted to a 5 per cent increase. If the minimum wage was subject to CoLA it would have increased to €987, which is probably very close to the figure that would be in the ministerial decree.

Once a figure is approved by the council of ministers, it should be the end of the issue of the minimum wage for a few years. It must not become a practice to increase it every year or two because it would put businesses under pressure and cause more distortion in the labour market, in which the forces of supply and demand must be allowed to operate. We cannot have the state constantly setting wages in the private sector, even if this is beneficial to the lowest earners.