Editorial

Malta is running away from a problem that may well threaten the viability of a number of economic operators in both manufacturing industry and the services sector. It is the cost-of- living wage adjustment, decreed by the government annually in the budget. The practice has now been so embedded in the government's policy and in the people's psychology that every call made for its reconsideration is invariably shot down without so much as an intimation of any readiness to even hear about the prospect.

Yet, sooner or later the island would have to come face to face with the problem if it wants to remain competitive. In the opinion of some employers, that stage has already been reached in the case of a number of firms but it looks as if the alarm bells are not yet strong enough. In the way the cost-of-living adjustment is indiscriminately applied across the board, irrespective of productivity, it is obviously assumed that all operators can well shoulder the added burden. But is this really the case?

Employers have for long been forcefully arguing that the cost-of-living wage adjustment should only be tied to the minimum wage. Most workers today are covered by collective agreements, the instruments through which trade unions negotiate working conditions and wage rates for employees in particular firms. It is held that provisions for cost-of-living wage adjustments should be made in such collective agreements. But what happens to workers who are not unionised? This is one problem in the equation that would need to be looked into.

Sadly, it looks as if the country is not prepared yet for any serious non-politically partisan discussion of the issue. Acting as if the adjustment has no effect on the operations of industry and of firms in the services sector, the call is usually for an even higher rate than that usually prescribed by the government in the budget. This is again what is happening today. The government estimated the adjustment for next year at Lm1.75 per week, adding a 50c compensation to make up for the rise in the electricity and water surcharge.

The Labour Party holds the government should either reduce the tariffs or raise the compensation to 70c. On its part, the General Workers' Union intends pressing for higher compensation as, like the MLP, it feels the amount given is inadequate. Unsurprisingly, the union showed its political frame of mind in the discussion of the matter when its general secretary, Tony Zarb, remarked that had the government not squandered the people's money it would have been able to absorb the increase itself.

Well, the party in government is hardly likely to agree with Mr Zarb's political assessment and will, of course, be right if it were to point out to him it would be best for the union to leave politics to the politicians or that if it wants to go into politics it should declare its intentions openly.

The Federation of Industry believes the hike in the electricity and water surcharge will have a strong impact on economic growth potential and competitiveness levels of the economic sectors. In the light of this, the country now needs to take the issue a step further. Perhaps the FOI and the employers should join forces and carry out an assessment of how the surcharge and wage adjustment will hit industry and the services sector so that, on the basis of their findings, decision makers could see how best to tackle the problem and avoid the cost-of-living wage adjustment becoming a distortion.