The south's successful economy kept unemployment rates low. During the 1980s, unemployment rose above 3.3 percent only once, in 1987, when it reached 3.7 percent. In 1988 unemployment was 2.8 percent. Unemployment rates were also low in the years just before the Turkish invasion of 1974, averaging about 1 percent. The invasion and division of the island disrupted the economy, and in the government-controlled area unemployment averaged 16.2 percent in 1975 and 8.5 percent in 1976. During 1977 the rate fell to 3 percent, a rate typical for the south's economy during the 1980s.

The south's economy frequently had to contend with a shortage of workers and in some years was forced to import workers from abroad to meet the needs of various sectors, especially the tourist industry. This shortfall reflected the changing employment patterns of the economy as a whole (see table 11, Appendix). The only population group that consistently had difficulty finding employment was composed of university graduates. Their discontent sometimes resulted in demonstrations and demands that the civil service be expanded.

In 1973 about 37.5 percent of those gainfully employed were members of labor unions. Union membership increased greatly between 1974 and 1977, reaching 62 percent at the end of 1977. This trend continued, and in 1988 labor unions represented more than 80 percent of the work force.

The most prominent unions in the government-controlled area were the left-wing Pan-Cyprian Federation of Labor (Pankypria Ergatiki Omospondia--PEO) with about 70,000 members at the end of the 1980s, and the right-wing Cyprus Workers' Confederation (Synomospondia Ergaton Kyprou--SEK) with about 50,000 members. Third in importance was the civil servants' labor union, with a membership of about 13,000. Employers were organized in various associations represented in the Cyprus Employers' and Industrialists' Federation.

Terms and conditions of employment were negotiated either directly between employee and employer or through collective bargaining between trade unions and employers' organizations. The government's policy was to remain largely uninvolved in these negotiations unless a deadlock had been reached or its participation had been requested, when it acted through its Industrial Relations Section, a part of the Ministry of Labor and Social Insurance. This section routinely acted to prevent laboremployer discord by providing both groups with guidance and information about good industrial relations. As a result, the number of working days lost to strikes was among the lowest in the Western world relative to the size of the work force.

In the 1980s, wages rose faster than prices. A part of the wage increase was brought about through wage indexation, with automatic quarterly wage increases equal to about half the inflation rate. Even at this rate, however, wage increases could be troublesome for the economy. In 1988, for example, average wages and salaries increased 4.5 percent in real terms, but exceeded the productivity gain of 3.5 percen1bb ent. The relative scarcity of labor and rising labor costs affected the economy in the 1980s and were expected to continue to do in the 1990s.

Data as of January 1991