Social partners must swim or sink

The International Monetary Fund believes that it is time for Malta to scrap the cost of living adjustment (COLA) mechanism. Little does the IMF care that such statements hurt its already low credibility. Their prescription would imply having to forget yesterday, start afresh and hope to live happily ever after. COLA is not a perfect system and can be improved. Defending COLA should be about building a better future and not about living in the past.

Much of the 20th Century was tormented by the divide between capital and labour. Labour had to struggle to secure a fairer share of the wealth created by society. Up to the 1980s the world was plagued by industrial unrest. Malta was no exception. An important milestone in local industrial relations was the introduction of a statutory national minimum wage in 1974. The belief that every worker has a right for a wage that would assure a basic standard of living, was an outcome of the principles propagated by the French Revolution: liberty, equality and fraternity. Today most advanced societies, including the USA and Japan, have a minimum wage.

COLA was introduced in 1990. It too marks a milestone in the socio-economic development of our society. The social partners and government agreed on the need for an incomes policy that would guarantee industrial stability. In return, employees were promised that rising prices will not be allowed to erode their standard of living.

Additional benefits were to be negotiated through collective bargaining. Malta has enjoyed an extensive period of industrial stability. Over the last six years, Malta lost 20 working days whereas the average in the EU was 31 working days per 1,000 employees. Nowadays professionals (doctors, lecturers, pilots) and the public sector are more likely to strike than blue-collar, factory workers.

This marks an important shift in our social structures. The working classes have borne the brunt of neo-liberal policies. It is true that some workers assumed higher expectations and started to shun certain jobs (refuse collection, construction and so on). Gone are the days when they aspired for a cosy job with the government. Now they are lucky if they have a full-time, permanent job with decent pay and acceptable conditions of work. No wonder many opt for the comfort of the social security system. The standard of living of the lower classes has been further eroded by fiscal policy, especially the introduction of VAT, and the inflow of legal and illegal migrants. Now we are told that Malta has the second highest cost of living in Europe. That food, and meat, is becoming prohibitively expensive. Guess which classes are hurt most by these price increases?

Workers lament that the way that the cost of living is calculated does not take into consideration their particular consumption patterns. The Retail Price Index, which is the measure through which price changes are gauged, is built on the national consumption pattern as derived through the Household Budgetary Survey which is carried out every five years. Moreover, compensation for price increases is given on a retroactive basis.

The truth is that whereas inflation hurts workers most, the current recession is hurting our enterprises. Employers are justifiably worried that this year's inflation will lead to hefty increases (of about €5 to €7) in weekly wages. They are warning that such an escalation in wages could lead to further inflation, erosion of competitiveness and possibly job losses. Employers have been talking about linking COLA to productivity. At this stage, this seems to be empty talk. Determining the level of productivity is primarily their prerogative and responsibility. Society has made it easier for our enterprises to increase productivity by securing access to a 500-million market, eliminated exchange rate and transaction costs and helping make available significant EU funds for upgrading and innovation. This is not about apportioning blame but about finding sustainable solutions.

The employers' proposal is for COLA to be given only to workers on the minimum wage or low pay. The former would involve only one in every 14 workers. The latter raises a number of questions including how low is low pay? Will special consideration be given to workers with a greater number of dependents or having special needs? COLA should be given to every worker because it affects each one of them. Other mechanisms may then be necessary to help our enterprises remain competitive. Trade unions may accept to give a helping hand by "freezing" additional benefits arising out of collective agreements.

With the EU breathing down its neck, the government is in no position to alleviate the situation through tax concessions. It has to let the social partners try to sort matters among themselves. For both sides it is a question of swim or sink.