The healthcare economy: Cyprus is not immune from the “looming global healthcare crisis”



Cyprus remains deficient in many ways, largely due to the size of its underground economy

By Les Manison

Aging populations and the devastating socio-economic effects of the Covid pandemic and financial crises all underscore the need to build robust “care economies”. Indeed, the International Labor Organization calls for “urgent action to prevent a looming global health care crisis”.

But what is the care economy? It involves activities and work of caring for children, supporting the elderly, providing physical and mental health care, and education, as well as providing paid and unpaid personal, social and household services. .

During the pandemic of the past 18 months, access to care has been crucial for people to continue to work and care for their families, while lack of care has contributed to declining market participation of work and employment, especially for women and migrant workers, intensifying gender inequalities and racism. And the need to strengthen the care economy in many countries has been magnified by the aging of their populations and the devastating effects of the global and euro area financial crises, which are strikingly reflected in a lack of opportunities for care. decent employment and affordable housing, especially for young people.

Despite the growing demand for care, the current systems and policies to support the care economy in most countries remain inadequate. In particular, caregivers remain underpaid and undervalued, which contributes to high attrition rates and affects the quality of care. Indeed, the two crises of a lack of good care and a lack of good jobs coexist and, therefore, investing in the care economy would create positive returns allowing families to find quality care and caregivers. to find quality jobs.

Cypriot situation

What is the situation regarding the strength of the care economy in Cyprus? According to Eurostat figures, Cypriot government spending on social protection and health care before the Covid pandemic in 2019 was 17.2% of GDP, well below the average of 26.3 % for the 28 members of the EU. In contrast, Cypriot government spending on education represented 5.4% of GDP in 2019, compared to an average of 4.7% for 28 EU members.

While public expenditure figures suggest that Cyprus’s healthcare economy is relatively weak compared to most other European countries, other factors actually make its healthcare economy a bit stronger. In fact, large private sums are spent on migrant workers caring for the elderly and children of working parents. In addition, the close and extended family systems of Cyprus and other southern Mediterranean countries offer much more socio-economic support to their relatives and friends than in northern European countries.

In addition, from 2019 a National Health System (Gesy) was phased in in Cyprus, resulting in increased health spending. Indeed, public spending on Gesy has increased from 1.3% of GDP in 2019 to 4.0% in 2020, and is expected to reach around 5.5% of GDP in 2021.

Gesy has many shortcomings including overpaid system doctors and clinics

Nevertheless, the healthcare economy in Cyprus remains weak in many respects. A large informal sector of economic activity exists in Cyprus. A study by academics from the University of Cyprus indicates that using the electricity consumption method, the size of the ‘underground economy’ averaged around 29% of official GDP over the years. 2012 to 2018. Participants in this economy mostly earn low incomes, have few jobs. security and, by definition, do not have access to public assistance in the form of pensions, unemployment and other benefits. However, there is a scheme for the payment of a guaranteed minimum income to eligible Cypriot residents, thus providing some support to low-paid workers in the informal economy as well as unpaid work, including that of housewives.

In addition, the uneven impact of the repercussions of the Covid pandemic on various households and businesses has exacerbated inequalities and highlighted the shortcomings of the care economy in Cyprus. With the collapse of economic activity in the informal sector, mainly due to lockdowns, companies and employees there were not compensated by financial support from the state due to their situation outside the social security system. social security and, therefore, more suffering compared to their counterparts in the formal sector. And with low-paid employees, especially women and migrant workers in the retail, hospitality and leisure industries, disproportionately dismissed, income and gender inequalities are rising. are dug.

Moreover, apart from the considerable temporary tax support provided to households and businesses suffering from the economic crises linked to the Covid pandemic, the strength of the care economy in Cyprus in more normal times is weakened by the relatively low level of benefits. social government. With a guaranteed minimum monthly income of only 480 euros for an eligible applicant, plus much lower amounts for spouse and dependent children and unemployment benefits at 60 percent of the basic weekly wage and lasting only up to 156 days, many people are at risk of being driven into poverty without substantial support from extended family and friends. And with an average drop in the incomes of private sector employees of more than 10 percent over the past 18 months and an increase in the cost of living, the ability of many Cypriots to provide such social support is diminishing.

Strengthening the healthcare economy

Therefore, improving the care economy seems to require, among other things, the provision of more generous government benefits. Without significantly reducing other public expenditure, funds are not available to sustainably increase the level of social benefits, given the current number of beneficiaries. As noted in the previous articles, it is imperative to improve the standards of social protection and health care in Cyprus at the level of the countries of Northern Europe through funding from higher revenues from tax reforms and measures. serious efforts to combat widespread tax evasion.

And, more importantly, increasing the supply of decent jobs through reforms and policies aimed at supporting the sustained and inclusive growth of the economy would not only help reduce inequalities, but should also significantly reduce the number of people claiming social benefits and help alleviate pressure on social security funds. These policies should include actions aimed at increasing women’s participation in the labor market by improving childcare and flexible working arrangements, as well as by strengthening job search assistance for younger people.

But allocating more funds does not necessarily improve the care economy. The strength of the care economy depends on the quality of the services provided. In this regard, the government allocates more resources to education than most EU members, but the quality of primary and secondary education appears to be deteriorating and lower than in many countries. Social workers, including teachers, must provide high quality services, which at the same time must be affordable for the general public.

The government not only needs resources to pay high quality care workers, but also needs funds and good management to produce efficient systems. Already, Gesy has many shortcomings, including the mushrooming doctors and clinics in the system being overpaid, while other healthcare workers such as nurses are underpaid. And it is worrying that the current operation of Gesy contributes to the increase in public deficits with Gesy’s expenditure estimated by the IMF likely to exceed Gesy’s revenue by nearly 500 million euros in 2021. Therefore, in l Absent a substantial and sustained increase in public expenditure revenues, funds intended to improve other areas of the care economy, including social protection in Cyprus, could be seriously depleted.

Reference: Chris Andreou, Elena Andreou, Stephanie Michael & George Syrichas, “The Shadow Economy in Cyprus”, University of Cyprus, Economics Research Center, Economic Policy Papers, n ° 07-19, December 2019.

Leslie G Manison is an economist and financial analyst specializing in macroeconomic policy analysis, bank sustainability assessments and international financial relations. He is a former Senior Economist at the International Monetary Fund, a former Adviser to the Ministry of Finance of Cyprus and a former Senior Adviser to the Central Bank of Cyprus.


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