Labour costs increase by 2.3% in a year

Wages and other salary related costs in Malta have witnessed a rise of 2.3 per cent in the past year, according to data released by Eurostat yesterday in Brussels.

Although when compared to the high rate of inflation Malta experienced in the past 12 months the rise in wages has been contained it is still higher than the average in the EU 27, although lower than the average rise in the eurozone.

However, according to Eurostat, higher wages and labour costs in Malta have not been across the board.

Reflecting a lower demand for construction services due to fewer new building projects in the pipeline, particularly due to the oversupply in the market, wages and salaries in the construction sector have been decreasing.

According to the EU figures, while until last March wages in the manufacturing industry went up by a staggering 4.8 per cent and those for workers in the services sector increased by 1.6 per cent, labour costs in the construction industry fell by 2.5 per cent when compared to March 2008.

"It is obvious even from these figures that Malta is going through a construction recession," an EU official told The Times Business.

"Malta's construction industry has been on a high for some years and it is now suffering the consequences of over-supply and lesser demand. This can explain lower labour costs in the sector as there is not much new work available," the official said.

On the other hand, the substantial rise in the industry sector is also raising some eyebrows as it is quite significant, although lower than the EU average for the sector, at 5.2 per cent in March 2009.

"Wage fluctuations in this sector might compromise a country's competiveness particularly for an island like Malta which is highly dependable on exports. Caution is necessary, particularly by trade union demands in this sector," commented an EU official.

On a general level, Eurostat's new labour cost statistics show that total hourly labour costs in the eurozone rose by 3.7 per cent in nominal terms in the year up to the first quarter of 2009, compared with four per cent for the previous quarter. In the EU 27, the annual rise was 1.5 per cent up to the first quarter of 2009, compared with 4.5 per cent for the previous quarter.

The two main components of labour costs are wages and salaries (direct remunerations, bonuses, and allowances) and non-wage costs (employers' social contributions and employment taxes).

Among the member states for which data are available for the first quarter of 2009, annual decreases in hourly labour cost were observed in the United Kingdom (-5.5 per cent), Greece (-3.3 per cent) and France (-0.6 per cent). The highest annual rises were registered in Bulgaria and Romania (both 18.6 per cent).