By Stelios Orphanides
A year ago, members of Pasyno, the union representing nurses at government hospitals, held a 15-day strike, to force the government upgrade their pay scales to reflect their university qualifications.
Back then, as Cyprus was about to officially complete its adjustment programme, the government declined to make any concessions beyond a vague promise to engage with Pasyno, which represents round 1,900 of the 3,200 nurses at public hospitals (the rest are members of the civil servants’ union Pasydy), citing the direct and indirect fiscal impact such a decision would have.
As the government asks nurses to have a university degree as a required qualification for new hirings at public hospitals, it would have to reward them in equal fashion as it does with other government workers with university degrees, Pasyno argued back then.
It would cost around €30m a year, the government had responded at the time. In addition, making such a concession to Pasyno, would increase the appetite of other groups which would seek similar pay upgrades for their members which in turn would have an incalculable budget impact. And the minister of health said it should all be discussed in the context of introducing the national healthcare scheme, widely known as Gesy, which aims at curbing the rate of healthcare spending increase.
On Friday, almost 11 months after the prolonged Pasyno strike and the completion of the adjustment programme which helped Cyprus avoid defaulting on its debt which meanwhile increased to €19bn and exceeds a year’s economic output, and almost 11 months before Cypriots elect a new president, the government seems to have run out of reservations.
Suddenly, the government, which had been repeatedly warned by the European Commissioner in charge of Economic and Financial Affairs, Taxation and Customs Pierre Moscovici over the past four months of budget risks related to the abolition of the property tax and the increase in public spending, also found the money to satisfy not only Pasyno but possible imitators.
In December, Finance Minister Harris Georgiades told members of the parliament that for a post-reunification Cyprus to be successful, it will have to be disciplined in fiscal matters. What is sure, is that the government’s commitment to fiscal discipline is at best inconsistent.
Truly, €30m a year accounts for less than 0.2 per cent of the economy and would hardly overturn the fiscal balance. But it would again inflame criticism of the finance minister’s fiscal policy, which in turn will send the wrong messages to the markets and will create commitments for spending that cannot be taken back easily.
Exact details of the agreement have not been made public yet. Critics of the deal argue that it could lead to an explosion of salaries paid to nurses of up to €45m in salaries a year over a 20-year period in which their pyramid matures. On top comes another €25m for pensions.
Currently, nurses with a university degree get a first annual salary of the “A5 pay scale” of roughly €17,000 gross. Without getting a promotion, their last salary before retiring increases to €35,000 at the “A7 pay scale”. With the new arrangement, by beginning their work at “A8 pay scale” nurses would get a first annual salary of €25,000 gross and would retire at A11 scale with a salary of €56,000 gross provided there is no promotion throughout a nurse’s career.
One would argue that these figures are exaggerated as not all nurses have a university degree. But experience shows that like the case with teachers in the past, extra pay for extra qualification resulted in almost all teachers doing additional courses to improve their academic qualification. All this did not improve the results of their teaching. On the contrary, Cypriot students are still among the worst achievers in the EU.
And same goes with healthcare. The upgraded qualifications of the nurses did not lead to an improvement in healthcare services over the past years. And what the upgrade of their pay scale is most likely to cause is new demands from Pasyno. It is likely that as nurses are treated in terms of earnings as holders of a university degree, they will soon demand to be exempted from doing work considered unworthy of a degree holder, and will demand the hiring of assistants.
One last word. Commissioner Moscovici also criticised Cyprus recently for not implementing reforms. One of the essential reforms is that of the healthcare system which provides for the operation of state hospitals on a financially autonomous basis. By increasing their wages ahead of making them autonomous, one can only wonder how they will be able to compete with private hospitals.
About a dozen years ago, the University of Cyprus published a study carried out by the Economic Research Centre, led by professor Panos Pashardes. Education in Cyprus, pays off only if you work in the public sector, was its main finding. It’s not surprising after all. When there is a monopolistic – monopsonistic situation in managing public funds and labour supply in the public sector, the only one who loses in the case of pay negotiations, is the one who is not part of the negotiation: the taxpayer and the patient.