Editorial

Finding oneself out of a job must be one of life's most unpleasant experiences everywhere but particularly in places where the prospect of reintegrating into the labour force are difficult, at least in the short term. No fancy talk of job mobility, of globalisation, and of the pull that countries such as China and India are exerting today in manufacturing will ease the heart and mind of the 850 workers who are being laid off by the jeans-processing firm Denim Services Limited over the next two months.

Political capital will no doubt be made of the closing down of the firm by those bent on showing the economy as being on the verge of collapse. Yet, however heart-breaking the laying off of the workers by Denim is, politicising the matter will be both uncalled for and damaging to the politicians restoring to this tactic. By all means, let the ETC and the employers do their best to see how these people can be found alternative work, or be trained for new jobs, but it would be shortsighted if, in view of this firm's closure, the focus is blurred to an extent that hides the reality of today's evolving situation in manufacturing. Denim's closure is no more than the continuation of the process of development in manufacturing that first sought the attraction of labour-intensive firms. Manufacturing industry is moving on, with the stress today being made on the attraction of firms that can produce higher value added goods. The services sector has been expanding rapidly, with exciting new lines stretching the boundaries, as it were, of the new potential waiting to be explored.

Denim's impending closure brings the island face to face with the threat that fierce competition in low-cost countries is posing to such established places as Malta. How is the island going to meet such threat? Employers have for long been arguing that if costs continue to rise indiscriminately, investment could well migrate to other countries, as has been happening elsewhere.

Generally speaking, their warnings do not receive a sympathetic ear, so much so that irrespective of whether productivity rises or not, the government goes ahead and decrees a cost-of-living wage adjustment annually. In one of its documents, the government says that maximising competitiveness and productivity should not translate into an inward-looking exercise of wage and salary cutting in an effort to reduce labour costs. Rather, it holds, it should reach outwards to increasing output and shifting to higher value added sectors.

Yes, all this makes sense but, as the country is finding out for itself, Malta cannot shift to higher value added sectors overnight. Malta Enterprise is managing to attract new firms in this line but the process takes long and may not be fast enough to create the right jobs for workers laid off by firms edged out of markets by competition.

So, even though the aim should be to reach outwards to increasing output and shifting to higher value added sectors, it is important too not to jeopardise the viability of existing firms. This might create more problems than the government could ever hope to tackle.

Malta's economy is in transition; it may not be experiencing the rate of deindustrialisation other countries have been going through but the signs of industry moving further into higher value added and of an expansion of the services sector are there for all to see. Greater efficiency all round and care in not outpricing the Malta product, both in industry and the services sector, will help make the transition easier.