FOI denies wanting to remove minimum wage

The Federation of Industry denied yesterday it was engaged in any exercise aimed at eroding conditions of employment.

"The FOI categorically denies that it has suggested removing the minimum wage concept, (although this has been done in certain countries with beneficial effects to the economy)," it said in a statement.

It is proposing that compensation for cost-of-living increases be limited to minimum wage earners.

The FOI recently said it was not sustainable for private employers to pay compensation for inflation on top of wage increases negotiated with trade unions in collective agreements.

It had also pointed out that the minimum wage in Malta was very high when compared to that in other EU candidate countries and EU member states.

When contacted, FOI director general Edwin Calleja said that a better thought-out wages policy would in the long run be based on national productivity increases and national competitiveness.

"We are working on both things, and Malta is to be placed on the competitivemess index of the World Economic Forum for 2003," he said.

"Under the present rules, and with the information now available, granting the cost-of-living increase to those with the minimum wage is perfectly acceptable to the FOI.

"However, in the future, we would like to see a re-thinking in the way in which all wage increases are awarded, including those in the publc sector.

"The implications for the minimum wage would then depend on the structure chosen, slotting them into a system which would make more economic sense, reflecting the realities of our economic development.

"You cannot redistribute wealth until there is actual wealth to distribute."

Prof. Godfrey Baldacchino and other press contributors, mainly from the political field, have taken the FOI to task for its statement.

In the statement yesterday, the FOI said its objectives in issuing last week's press release was twofold. "Firstly to create an awareness as to the level of wages in Malta when compared to a number of EU current and accession countries. These are the countries with whom we have to compete.

"Secondly, to propose that the cost of living increase be applicable to minimum wage earners only.

"The FOI has all along made a distinction between those workers who are on the minimum wage and those who have a collective agreement. The FOI press release on the subject made it very clear that industry was objecting to paying the cost-of-living wage increase on top of wage increases negotiated by collective agreements.

"The reason is simple: enterprises should only pay the increase agreed with the trade unions and this should include any compensation for inflation."

It said it had never hinted that "removing the minimum wage could solve the country's competitiveness".

"If this country is to collectively discuss the issue of competitiveness, an element of maturity is called for."

It also said that the poverty issue thrown into the arena by Prof. Baldacchino could have created some confusion in the minds of readers.

"Although it is easy to make populist statements, we believe that this topic needs a separate debate on its own, as the implications go beyond what a minimum wage should be or not, and how poverty can be avoided.

"Another red herring thrown in by the learned professor is advice to firms about niche marketing. This catch-phrase has become a hackneyed one used by politicians most of the time as a simplistic solution to all competitiveness problems faced by Malta's industry. It ignores inflexibility in the labour market, the problem of unutilised precious human resources tied up in public sector corporations, lack of certain skills in the country and several other factors which will take up a whole article to list and discuss."

The FOI reminded Prof. Baldacchino of one "important point": that only a few months ago all major trade unions signed a collective agreement with the government on behalf of 35 per cent of Malta's workforce employed in the public sector agreeing that the cost-of-living increase will not be awarded in addition to negotiated wage increases but shall be part of such increases.

"The FOI has therefore all the right to ask on behalf of industry in this country: are private employers to be discriminated against because of an anachronistic law? Isn't it about time that the law does not prejudice the future of private enterprises, precious productive jobs and the economy at large?"

Prof. Baldacchino had mentioned in his statement to the press that the law passed 30 years ago "was meant to secure a decent standard of living, avoid excessive speculation with workers' wages and to penalise non-competitive firms".

The FOI replied: "In a liberalised trade environment (unlike what it was when the law was passed) Malta has to compete with manufacturers and service providers across the world. Malta's industry can either consolidate its competitiveness or fall back to Third World status.

"Prof. Baldacchino should know that economic development is the prime mover for social development. No one can say that employers in Malta are taking advantage of keeping wages low because the situation in the labour market is quite tight and shortages are reported in a number of areas. This on its own drives wages up without the need of collective agreements or cost-of-living increases. Doesn't this confirm the anachronism of an across-the-board wage increase imposed by law ?

"Everyone should also bear in mind that this country cannot escape the hard facts of life. Firms are struggling to be more efficient, increase productivity through better management and better machinery and integration of information technology. There is an unending effort to reduce costs whatever their nature.

"However, one cannot say that wages and conditions of employment of workers can be excluded from the problem of competitiveness because these constitute an integral and important part of industry's costs."

The FOI said it must therefore continue to insist, for the reasons given, that the question of compensation for cost-of-living increases be limited to minimum wage earners.