Cyprus average salary higher than expected

The latest figures on the average monthly in Cyprus have again appeared to defy common experience, as the average salary was reported as EUR 1,742 (CYP 1,019) in the third quarter of 2008, with males earning EUR 1,923 and females earning EUR 1,515.
Yet questions are being asked how this is possible, when a private sector salary is still often a miserly EUR 850 (CYP 500) regardless of the person’s qualifications.
One answer lies in who is excluded: private households with employed persons (housemaids), who are paid EUR 250-300 and who comprise the largest proportion of foreign workers according to official figures. Then, of course, there is the large unregistered foreign workforce, which also earns only a small proportion of the average.
Another answer could be the salaries paid to those in the traditional “offshore” sector, which are typically higher than local salaries. Yet this sector is not large enough to account for the high average. In 2007 the total number of registered non-Cypriot workers was 53,827, accounting for 14.2% of total employment. Based on previous years’ figures, only around 3,000 of non-Cypriot workers are in the financial services and related business sectors.
The main reason, therefore, must be our large public sector, where salaries above CYP 1,000 are the norm, where employees receive at least three pay rises per year: one for having passed another year on the office chair and two for inflation. And that’s without any promotions.
Together with education and health, the number of employees in the broad public sector amounted to 74,500, or 19.7% of all employment, in 2007. This means that almost one in five jobs in Cyprus are funded by the taxpayer.
The impact of the public sector can be seen in the reported increase in the third quarter. According to the Statistical Service, average monthly earnings rose by 8.4% (males 8.2% and females 8.8%) compared with the same month of 2007. The big rise is partly because of the agreed 2% increase in the salaries of government employees, which was paid in July in arrears as from January 2008, but which was included in the data for the third quarter.
In comparison with the second quarter of 2008 (seasonally adjusted data) there was an increase of 1.8% in the average monthly earnings of employees (males 1.7% and females 1.8%).
This mainly reflects the payment of the Cost of Living Allowance (C.O.L.A.) as from July 2008, representing an increase of 2.28% on the gross earnings of employees, and the arrear payments in the public sector.
Fiona Mullen
www.sapientaeconomics.com