Rating the real problems

HHowever mixed our very own COLA is not to the taste of the various economic observers who visit Malta, whether as an institutional duty, like the International Monetary Fund, or on a paid job, like Fitch, the credit rating agency. The statutory cost of living adjustment, which gives automatic wage increases related to the minimum wage and based on the rise in the Retail Price Index between October and September, affects the island's competitiveness, reiterated Fitch.

Local anti-COLA voices are led by Malta's employers' associations, who believe that wage rises should be linked to productivity. This is resisted by the trade unions, in particular the powerful General Workers' Union. So far the administration has taken the unions' side, albeit not with any marked enthusiasm. The Minister of Finance ruled out any change this year. He points out that any review in the COLA factor will have to take place in the ambit of Malta Council for Economic and Social Development (MCSED).

Representatives of both the employers and the unions sit on the council, along with government representatives. It has not been revealed whether any attempt was made to put COLA on the MCESD agenda. But it is not unlikely it will happen sooner, rather than later. When it happens the most likely result will be acrimony. Will it be worth it?

There is no automatic link between COLA and the level of productivity. Nevertheless, in place of acrimony and possible strife it would be better for employers to bring up productivity issue for direct discussions with their workers' representatives, where they are organised in trade unions, or directly where no such organization exists.

There is no known hardness on the workers' side in respect of flexibility on their side to combine efforts with measures that must be taken by employers to raise productivity, like regular investment in technical innovation.

I do not believe that any case has been reported for quite a long time of disagreement between a union and an employer in the private sector over ways and means to improve output per capita levels. The majority of disagreements occur in the public sector, between the government or government-run organisations and one of the two largest trade unions, the GWU or the Union Haddiema Maghqudin, or with smaller but still strong unions, like those representing hospital employees and teachers. Measuring such strife will account for the bulk of working hours lost directly and indirectly, even if the inconvenience caused to chunks of the general public is not taken into account.

In contrast the unions and private enterprises operate very closely together. They have been doing so in the context of downsizing and more that had to take place, especially in factories whose output is undercut by the very low wages to be availed of in the Far East and the North African littoral.

I do not believe that anyone has raised or can raise a finger to point at the unions for the inability to compete with countries whose wages and conditions are not far from those of the sweat labour of old.

Rather than embark down pathways which will surely be blocked by disagreement, all those concerned in the wage-work bargain process had better coordinate with the government on how at least to smooth out constraints that are hampering enterprises.

The refund of the eco contribution is one small item of them. There are structural factors to consider, like linking our education system, from the primary to the tertiary level, more closely with our economic infrastructure as it exists and in particular as it needs to evolve if we are to remain competitive in the future.

That is the competitiveness that really counts, one that has to be tied to a learning culture, provided the learning supplied is of the necessary type.

Going on and on about COLA will simply raise the heat without quenching the thirst for what truly needs to be done to raise our economic performance.

Rating agencies like Fitch and international bodies like the IMF produce reports which make for compulsory reading. The main reason for that stems from the fact that their authors are looking at us from the outside, and so do not run the risk of being factory blind.

They comment on various areas which require urgent attention. It should also be said that they are not infallible, or must be agreed with in all aspects. Fitch, for instance, does not seem too perturbed by our rising level of public debt. That is because they compare it to that of other countries measured in relation to the Gross Domestic Product.

On that basis, yes, there is still a margin that may be raised by public borrowing. But the servicing of the debt is draining scarce revenue which is needed elsewhere. The quality and cost of the public sector, I suggest, bears closer and more urgent scrutiny than COLA.