Trade unions in Cyprus, encouraged by strong economic data, returned to the negotiating table with business leaders and the labour minister, demanding full implementation of ATA, the automatic wage-indexation system based on inflation.
Refusing to consider reforming, let alone abolishing, the six monthly adjustment that favours higher earners rather than low income workers, the rigid trade unions staged a nationwide strike on Thursday, in an attempt to strong-arm their want.
The idea behind ATA, known previously as the cost of living allowance (CoLA), was to compensate workers for higher prices recorded over a period of time for a basket of goods.
One of ATA’s main problems, however, is that while the basket of goods is supposed to be the same for everyone, the compensation resulting from the adjustment mechanism is proportional to the employee’s salary. This suggests that a worker with a gross monthly income of 4,000 euros will receive twice as much ATA than a worker with a 2,000 euro monthly income.
And why should this be? Is it because the price of olive oil and cucumbers went up? Or, is the higher-earning worker expected to consume twice as much olive oil or cucumbers?
Adding insult to injury is that in the case of the public sector, the ATA adjustment is paid largely from indirect taxes paid mostly by people who don’t even receive ATA, ie. with an annual income less than €19,500.
Absurd and grossly unfair
This economic thinking is absurd, unjustified and grossly unfair. It creates an additional fiscal burden and a waste of taxpayers’ money.
If the idea was to defend the living standard of the low income earners, then that would have been a noble cause that could in fact hold some economic sense.
Economic justice and protection of the lower income workers from inflation is good for the economy, because it keeps workers in the country without hurting significantly competition. It also allows workers a decent living standard and a seductive job opportunity to advance their career and climb the earnings ladder.
However, the unions’ economic insurgency threatens future fiscal stability and growth. Their demands are opportunistic and potentially catastrophic.
Such thinking contributed to the economic and banking crisis in Cyprus back in 2013.
Unless parties agree to apply the ATA adjustment up to a certain level, say, up to the first €24,000 annual income, there will come a time when the economy will be in trouble and such fiscal perks will not only be unsustainable, but also disastrous.
If such demands are met then this measure will further damage the income inequality that currently exists between public and private employees, as well as among high and low income workers.
In fact, people on the higher income scale will earn even 4-5 times more ATA than their lower income counterparts, paid by those who don’t even earn any ATA. How fair is that?
Michael S. Olympios is a regular columnist and Editorial Consultant for the Financial Mirror
