The cold after chilling out

Will a breathing space of two weeks lead to getting any useful, as well as acceptable outcome to the saga over public holidays? The answer should not be the usual wrong one when a question is couched in such terms. To say "hopefully" is not to reply with a considered opinion, but to express a wish. We all hope that tomorrow will be a fine day - but what do the weather indicators suggest?

Hopefully indeed, the social partners will find a cure for all Malta's ills, starting with stabilising and then mitigating the malady, moving to removing the cause and embarking on the road back to health. Will another fortnight of hoping and cajoling lead to that?

The available indicators do not converge towards a positive likelihood.

It should be easy enough to correct a simple error contained in the Budget Speech delivered on November 24. The Prime Minister and Minister of Finance had said that all the social partners recognise the need to strengthen competitiveness and productivity as the only means to attract investment, underpin employment and create new jobs.

He referred to some measures he had announced, but said the government did not feel these would, on their own, be enough to influence on productivity and competitiveness.

"Therefore," the PM went on, "the government had decided that all public holidays which happened to fall on a Saturday or a Sunday would not be compensated with additions to vacation leave."

The simple error lay in confusing the outcome of the proposed measure with an increase in productivity. The error persisted - and persists - with the switch to an intention to amend the Act covering public and national holidays, rather than the Conditions of Employment and Industrial Relations Act.

However an effective reduction in days off is effected, it will not affect productivity. Companies lucky enough to have an order book so full as to necessitate that they call on an employee not to take a unit of leave, but to report to work, increase output by the amount the worker produces - not his productivity.

Flexibility with working hours, as with utilising part-time workers not beyond the point where they acquire the same rights as full-time colleagues, makes an economic operator more able to compete. It does not necessarily improve competitiveness in terms of unit cost.

This latter point is not in the debating pot. The first one is, and debate continues to be distorted. What the employers' association wants, and what the government has decided to give, is a saving in total labour costs, because there would be a reduction in total leave from its present 38-day level.

Will the coming fortnight see any change in the government's intent and the unions' and employees' disgruntlement with its impact?

The Prime Minister has said he is open to proposals for an acceptable way to achieve the government's target. Apart from the confusion on production and productivity, the administration seems to remain oblivious to the fact that employers who do not have enough orders to enable them to supply all that they are able to produce (manufacturing) or offer (services) will not make savings in labour costs.

Whether employers are telling this to their association or not is irrelevant. Official economic indicators suggest that the economy is operating at nearly a third below capacity.

That is not to say that nothing needs to be done, or that any saving in labour costs for those operating at full capacity would not be welcome. An increase in margins, however small, would not only be positive. It is crucial. It is easy to see it polemically as an addition to the employer's profits. (It could also translate into a reduction in losses.)

The less shortsighted view would be not only that employers only stay in business if they can make a profit, but in particular that profit and good cash flow are essential to enable an enterprise to invest in ways and means to raise productivity, to be able to compete better.

Where labour is organised in unions, or where employees have strong marketable skills, higher profits should also lead to better remuneration through the wage-work bargain.

Profit is not a motive relevant only to owners of capital. It is of direct interest to the owners of trades and skills, and to the taxman. If one uses the less emotive language of 'margins', without an acceptable margin economic enterprise will not continue to exist. It will either be killed, or the owners will move out.

Saying that improvement in margins is crucial to remaining in business - particularly in the context of the rapidly intensifying competition, now mainly from China, but from other locations as well - should not equate to getting it at any cost.

The government will stick to its intention to reduce days off from the present 38 days total. If it does so at the cost of industrial strife, the net effect will be counter-productive.

Giving the social partners - specifically, the unions - a fortnight to chill out and think through, without a similar process taking place in the government's own nest, is unlikely to yield much positive outcome. Recourse to spin will not help in any way. Yet the government remains oblivious to that as well.

The current spin is that it was a Nationalist government that had raised annual vacation leave from 20 to 24 days, and public and national holidays from eight to 14. The spin could be crudely and irreverently interpreted as, the Lord giveth, the Lord taketh away.

That message the spinners wish to weave is less sublime. What they clearly want to do is to make the heart swell with gratitude towards the Nationalist government of yesteryear and the mind rationalise that, giving up a few days from the bonanza that deserves so much gratitude would be the natural and right thing to do.

Such spin produces killer boomerangs. It reveals that yesterday's Nationalist government had been irresponsibly short-sighted. It had piled costs on employers which the present government now wishes to shave away somewhat, but without honestly and seriously admitting it had been wrong.

There is every sign that the government will not act to stop the spin, and to be more forthright and honest about past misdeeds and the real economic situation.

What of the unions?

There are also signals that, following a return to the classic divide between employers and unions, a fresh divide is developing within the union movement. It would not seem that the coming days will see the GWU and a number of the smaller unions budging from their outright opposition to a reduction in employees' leave - not unless there is some corresponding burden taken up by employers.

The UHM will remain opposed to the proposed cut and the way the government wants to implement it, but it will make proposals which, if taken up, could allow it to go along for a limited period.

The government may be congratulating itself that there has been a broad shift in consciousness and attitudes: the discussion has in part turned on "how" not "whether" to trim costs. It continues to display and rustle the whip, insisting that if no concrete and acceptable proposals are put forward it will go ahead and amend the Public Holidays and National Holidays Act.

That is patently not enough. While the UHM, say, talks about the dire state of the economy, as it positions itself to make proposals that could enable it to accept a dose of bitter medicine, the government remains determined not to shoulder any responsibility for even the possibility of past policy and operational mistakes.

Politics, instead of harsh realism, remains at the consideration of the balancing act. A broader and more honest outlook would offer a different platform on which to base and effort to move forward.

If the economic and social situation are seen and described as they really are, and if the prospects are made against that backcloth, it will become clearer that a reduction in days off from 38 to 34 or 35 will hardly offer the start of a way out of the quicksand towards safer economic ground.

It is essential to contain costs in the short term, in the public as well as the private sector, since higher government spending will only translate into an increased tax burden and more borrowing, squeezing the private economic sector and society at large to a point where the pips start to crumble rather than just squeak.

Achieving that, along with true pruning of government outlays, starting with conspicuous if relatively small cuts from the President's Office down, and with a reduction in bureaucracy and its cost to leave more air in private lungs might stabilise the situation.

Repositioning the economy on a radically different and upgraded human resources base to make it more possible to attract investment and sectors that can really try to compete, rather than make futile flapping gestures, will take much longer to achieve.

The more time is wasted in spin, political reluctance to own up and face the music, in stancing as if we can live beyond our national and private means for ever, the longer it will be before that repositioning begins to be attempted. And the colder it will get.