General secretary of Sek union federation Andreas Matsas had an article published in Monday’s Politis, in which he demonstrated his role as the chief salesman of the automatic price index adjustment of wages, better known as the cost of living allowance (CoLA). Matsas has taken a leading role in arguing for a change in the way CoLA is calculated – increasing the allowance from the current 67 per cent of price index rise to 100 per cent.

Talks between the unions and employers’ organisations under Labour Minister Yiannis Panayiotou, who fully supports CoLA, have been going on for some time without the sides coming close to agreement. Deadlines set by the minister for a deal have come and gone while consultations with the two sides continue. This is probably why Matsas decided to write an article in which his intention was to debunk many ‘myths’ about CoLA.

He explained, for example, that some suggestions such as linking CoLA with fairer income distribution well, as with productivity and competitiveness were completely out of synch with the “meaning and philosophy of CoLA,” which “is a right deriving from collective agreements;” it did not come from nowhere. In the article, Matsas explained that CoLA was not a mechanism of social policy or a means of increasing wages, but a tool “for the restoration of the purchasing power and value of wages that are distorted by the inflationary tendencies of the economy.”

This is the key argument for CoLA, cited by the union bosses of Cyprus. “CoLA does not create more inflation,” wrote Matsas, who in six words has rewritten economic theory, which argues that wage increases without corresponding increases in productivity cause inflation; it is similar to printing money, a surefire method of increasing prices. Was it just for fun that the IMF, in its latest report on Cyprus, urged the government to abolish CoLA in the public sector? Apart from being inflationary, by CoLA pushing up wages every year, it puts an additional strain on public finances. Is this a myth as well?

Here is another myth that Matsas omitted to debunk in his article. That Cypriot union bosses are better-qualified to offer advice on CoLA than the economists of the IMF and the World Bank. This myth has been used in Cyprus for decades and Matsas is still using it because nobody has debunked it yet.

Worse still, because the same CoLA percentage is given to all workers, it creates greater income inequalities. If, for example, it is at 5 per cent a public employee on €5,000 a month will see his salary increase by €250 a month while an employee on €1,200 will get an extra €60. Does this make economic, political or moral sense? Of course not, but Matsas dismisses this point by asserting that CoLA is not a tool of social policy. In effect, it is a tool for creating a bigger gulf between the highest and lowest-paid wage-earner. Policies that lead to greater wage inequality have the full support of our union bosses. And this is not a myth.