There were complaints from representatives of employees on a TV show that I was watching last week. The claim was that although our country exited the financial crisis a couple of years ago and property prices (which plunged during the 2013 recession) have been steadily rising, this is not the case with salaries. (The reference is obviously related to private sector salaries and not to the provocatively privileged public servants.)
Albeit the point does have some merit, I would like to point out a couple of things as food for thought, both for my fellow countrypeople, as well as for foreigners, since I understand that this is a common phenomenon in many advanced economies.
- We are not completely out of the woods yet. Unemployment is around 7.5%. This is close to the EU average, but also slightly up in YOY terms. It is also significantly higher than the historical pre-crisis average of Cyprus. (Around 4%.) This may not be entirely related to the level of salaries in the market, but I don’t believe that giving raises will help with lowering the unemployment rate;
- Contrary to common misconception, the reason why
young couples have difficulty in self-financing their own homes, aren’t the
rich Russians, Chinese and whatnot. Simply put, the multi-million EUR
developments aimed at these people, have nothing to do with the everyday homes
of the… commoners! What really prevents young couples from living in their own,
self-financed homes, are two things:
- The quality of the average home has skyrocketed over the last few years. The average modern home, is the luxury home of the 80s and 90s. A good way to get a grasp of the change, is to check the average number of bathrooms per bedroom;
- Due to the larger income / house prices ratio that the previous generation of baby-boomers enjoyed, they have managed to amass significant savings, that are more than they need for their retirement. This has led to many of them (at least partially) financing the homes of their offsprings. As a result of this artificially ample liquidity in the market however, house prices go up.
Obviously, the argument that now is not the time to push for salary increases, could be seen from the other side: The side which says that many of our co-citizens are often finding themselves working for minimum salaries that can barely support a humane standard of living. Of course, my aforementioned arguments are obviously generalized, not meant to be applicable in all cases.
Personally, I would like to give the economy some additional time for self-imposed adjustments before arguing that the system doesn’t work because of the disconnection between salaries and the cost of living. It would be very interesting to read this article again in a year from now, no?