Employers devising plan to contain welfare gap

The Malta Employers Association is finalising proposals on ways for the government to address the welfare gap.

The proposals, including a survey among employers, are to be presented to the other social partners for discussion next month, MEA president Paul DeBattista said in an interview.

The welfare gap is a situation that will gradually get worse unless corrective measures are taken in the near future, he said. This was a complex problem that should be broken down to the different issues that constituted it.

"The welfare gap is a result of pension benefits, the sustainability of health services and other social benefits given out by the government, relative high employment within the public sector and mismanagement of public finances.

"The fact that there is now an awareness of these problems is conducive to a discussion on possible solutions. However, it is imperative that we start taking decisions now," Dr DeBattista said.

Asked whether the "new spring" envisaged by the Prime Minister reflected the feeling among association members, Dr DeBattista said that one could expect a reversal in economic activity (for the better) in a couple of months.

Besides, the indecision over EU membership had been so prolonged that the country was still on the road to recovery.

The MEA had consistently said that joining the EU would not automatically mean a solution to Malta's economic ailments but accession was a necessary condition for the country to move forward, Dr DeBattista said.

The current spate of redundancies, predominantly in the manufacturing sector, was not directly linked to the decision to join the EU, he said.

He insisted that economic restructuring was a priority for Malta to compete successfully in a globalised environment. In the same way that customers could make purchases worldwide through the internet to obtain better deals, investors could shift their operations to countries that offered them the best return on investment.

During this adjustment phase, there would be casualties along the way but one should focus on creating new job opportunities, Dr DeBattista said.

That should be a priority of the Malta Council for Economic and Social Development and the government.

The MEA contended that wage increases should be the result of increases in productivity and not indexed to inflation. However, it also acknowledged that there was also a social aspect to wage increases and did not oppose the principle of awarding cost of living increases to minimum wage earners in order to alleviate hardships.

Nonetheless, wage increases that were not backed by productivity meant an erosion of competitiveness. Collective bargaining was a more effective tool to relate wage increases to productivity, Dr DeBattista said.

And decisions on cost of living increases could not be taken in isolation. One should also take into consideration other benefits that the employees gained during the years, such as vacation leave and public holidays. All these benefits are being paid for by the employers. They were part of the social cost that has nothing to do with production costs, he pointed out.

Speaking about the government deficit, Dr DeBattista said there seemed to be an unwillingness to accept the fact that one major reason for the deficit was the cost of an overmanned public sector. The social partners had to seek ways how to best channel these resources from the public sector to productive use in the private sector. In this manner, there would be a lower current expenditure and also increased revenue generated through economic growth.