Sek general secreatary Andreas Matsas on Monday issued a strong defence of the Cost of Living Allowance (CoLA), warning against what he called “a dangerous effort to demonise and dismantle” a key component of labour relations.

In an opinion article published by Politis, Matsas said there had been “a recent absurdity” in the way the discussion on CoLA was being approached, and criticised those who “either misunderstand or deliberately misrepresent the institution’s role”.

“CoLA is not an arbitrary bonus,” he said. “It is a right that arises from collective agreements. Any distortion of its philosophy amounts to an attempt to violate a core component of those agreements, threatening to undermine the entire framework of collective bargaining.”

He argued that reducing or abolishing CoLA would have “unpredictable negative consequences for the labour market, social cohesion, and economic development.”

Matsas also challenged the widespread belief that CoLA only benefits public sector employees.

“In reality,” he explained, “92,475 workers in the private sector, amounting to 25.45 per cent of salaried employees, receive CoLA through collective agreements.”

He said that this figure exceeds the 75,353 employees in the public, broader public and local government sectors, who represent 17.17 per cent of the wage-earning labour market.

Moreover, the union leader dismissed suggestions that modifying the way CoLA is calculated, such as through staggered payments, would help low-wage earners.

“Reducing CoLA for some does not mean increasing it for others,” he stated. “On the contrary, full restoration, even if gradual, offers the possibility of expanding its application to more workers.”

“If CoLA is incorporated into the decree for improving the national minimum wage,” Matsas continued, “then 53,000 additional workers, representing 12.2 per cent of the salaried labour force, would automatically benefit.”

He also underscored CoLA’s economic importance, saying that “this is not about milk, bread, cucumbers and tomatoes”, but rather that the allowance “aims to restore the purchasing power of wages, which are eroded by inflation”.

“Let us be clear,” he continued, “CoLA is not a tool of social policy, nor is it meant to improve wages per se, those are different discussions.’

“What CoLA does“, he said, “is support real economic growth by maintaining consumption and reinforcing labour peace.”

Matsas also rejected the notion that CoLA fuels inflation. “This is an unproven theory,” he said.

“Even during the recent reactivation of CoLA, there was no corresponding increase in inflation. And let us not forget, it was frozen during the financial crisis,” he added.

He went on to criticise attempts to link CoLA to the state payroll and public finances.

“There are studies confirming that the impact of staggered CoLA payments on public sector wages is negligible,” Matsas said.

He further stated that “suggesting otherwise creates a false narrative aimed at weakening collective agreements, rewarding populism, and punishing the workers who benefit from it”.

He added that Cyprus is not alone in using a cost-of-living mechanism.

“The argument that CoLA is a Cypriot anomaly is simply false,” he said.

He explained that the European Commission itself “promotes wage-linking mechanisms to prevent worker impoverishment”.

He mentioned that “CoLA, or versions of it, are implemented in Belgium, Luxembourg and Malta. Meanwhile, countries that lack such mechanisms, like Germany, Italy and the UK, have recently seen significant labour unrest driven by wage demands”.

Moreover, Matsas warned that any attempt to “redefine or redesign” CoLA is not a genuine effort to modernise, but rather “a veiled strategy to dismantle it entirely.”

“There have been attempts to abolish CoLA since the 1980s,” he said, “but each time, it has proven its value and survived, thanks to social dialogue and sensible reform, not rejection.”

He pointed to the most recent revision, introduced in 2017 and implemented in 2018, which shifted CoLA to a once-yearly payment based on economic growth.

In 2023, the benefit increased from 50 per cent to 66.7 per cent of the consumer price index, “with the goal now being its full restoration”.

What is more, Matsas stressed that completing the restoration process now “would allow social partners to turn their attention to other major labour challenges“, including pension reform, wage regulation and the extension of collective agreements.

“Quality and dignity in work reflect the quality and dignity of everyday life,” he said.

“They are essential to social cohesion and to healthy, balanced economic development within the framework of the social market economy, which is the cornerstone of the European Union,” he union chief concluded.