Thursday, 29th October 2009 - 10:18CET
COLA wage increase 'could cost 1,000 jobs'
Employers are expecting the next budget to give a strong economic stimulus even at the expense of the deficit, Malta Employers Association Director-General Joe Farrugia said this morning.
Addressing a Malta Business Weekly business breakfast, Mr Farrugia said that the problem was not next year, since everyone expected the deficit to go up in 2010, but in the following years when it would be difficult for the government to reduce the deficit and sustain certain system such as stipends, free health care and public sector wages.
He called for a price stabilisation guarantee including a freeze on all government tariffs.
Mr Farrugia emphasised that the cost of living adjustment (COLA) would burden many employers and he feared that 1,000 low skill employees could lose their job because of the difficulty it could create for certain companies.
Mr Farrugia said he was perplexed by a Union Ħaddiem Maghqudin proposal for the lowering of income tax from 35 percent to 25 percent.
Although the proposal in itself was positive, its impact needed to be studied carefully, especially in a recessionary year. Such a move would not help the most vulnerable while the MEA proposal for the government to subsidise part of the COLA increase would help companies not go bust, protecting the most vulnerable employees.
Mr Farrugia backed calls for a social pact but urged the political parties not to offer false hopes and make unrealistic promises. These undoubtedly trickled down to the social partners and had an impact on industrial relations.
“We have to become a nation of producers rather than a nation of welfare shoppers,” he said.
UĦM secretary general Gejtu Vella reiterated the importance of COLA and although he acknowledged it could create difficulties for some companies, he pointed out that Malta ranked at the bottom of an EU list on purchasing power for the past two years.
He insisted that wages were not the only cost component affecting competitiveness and one needed to start discussing stronger industrial democracy, improving workers rights and profit sharing for employees.
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Comments
Up to recently I have managed a Company with some 240 employees and was responsible to oversee the closure of the said Company for operational reasons.
While I fully agree with you that the additional cost of energy has been the final push or downfall of many businesses who consumed high amounts of Electricity, on the other hand an operator always envisage the cost of living increase as part of the annual costs increases, which in Malta Cola is accepted as factual and which averages out within a Euro or two increase year after year.
Again again when you take the normal annual Cola increase and compare it to this year’s, one is left with the balance between the normal average increase and this year’s six Euro increase. So why do we make it sound as if it is something out of the ordinary!
@Paul L Falzon
You must have been living on Mars, because MEA did voice its opinion VERY loudly when new electricity tarrifs were introduced. The rise in the cost of living affected employers probably more drastically than families.
@Charles Micallef
Most businesses in Malta are micro-businesses employing between 1 and 5 people. So it is unlikely that most are very well-off. The increase in energy tarrifs, decrease in sales and COLA will only decrease profit in those making loads and loads of money, however those just making just a decent profit, or making ends meet will go into a loss. Therefore they might decide not to employ new workers, decrease workers, or worse still close shop. If you ask anyone working at a bank they will tell you about the forclosures that happen every year to business people....not everyone is making a profit.
Just like you would not accept your employer not paying you for a year just because you had a handsome pay cheque in the past 5 years, you can't expect someone to make a loss just because he made good profits in past years!!
Strangely enough I can’t think of one occasion where the employers associations have ever forwarded such suggestion. Maybe I am wrong.
We have reached a point where the difference between low paid labour and the people living on benefits is so thin then it is difficult to distinguish who has the best standard of living. On the other hand, many professionals are leaving the island because their current salary is a pittance compared to the salaries in Europe. We have a cost of living which is sky high countered by an average salary which is ridiculous.
So do you expect workers to continue facing ever-increasing prices and a constant lowering of their standard of living? Do you expect them to say thank you if they are only given a bowl of rice as happens in some countries instead of their wages? Perhaps the ETC will soon start issuing calls for slave drivers.
"See you in the first quarter of 2010." For an early election?
Well said.
Lower the highest rate of income tax by all means but put it at 30% instead of 35% and readjust the other tax bands upwards . More people will benefit this way.
This kind of reasoning will get the sacked workers nowhere. I am sure that both the big unions will not make good for the lost wages if this planned high COLA is eventually granted and redundances take place. Perhaps time will help us become more mature. See you in the first quarter of 2010.
Also maybe if the government started cracking down on the freeloaders in this country things wouldnt be so bad.
Regarding the vacation leave + holiday would you be so kind to check whether the holidays that fall in weekends where reduced from that survey or not? That would be interesting.
The truth is that we have the second highest inflation rate in the Eurozone, we have fallen behind belize in terms of gender equality and our salaries are the worst in all Western Europe. If a povero cristo is caught red handed then he is burnt on the stake but if a business man is caught red-handed then he will usually end up with a suspended sentence or (in the case of those employers who used to employ people illegally) a terrible 58 euros fine each.
Only this morning, a container of washing-up liquid shot up by 11 cents, when I asked the Rep why, his answer was, ask the boss. This is going on on daily basis.
€100 in Germany will buy you and extra one-third of what you will get over here in a supermarket. Why?
Good post. However I wouldn't take the minimum wage to gauge the Maltese workers' position vis a vis other EU countries. Take the national average NET wage after deducting all direct and indirect taxation. And that gives you the real gloomy picture that we're much worse off than any other country in the EU.
It is not the workers and their unions who should come up with ideas on how to increase production, but the employers who squeeze the workers dry like lemons and never give them bonuses when the going's good, but scream for pity when the going gets tough? Are these the entrepreneurs that the MEA is trying to protect? If they cannot come up with ideas themselves and are so unproductive, no wonder Malta is in such dire straits when compared to the rest of the world. Besides, the COLA is for the previous year's increases even though most people rightly believe that it is not enough and that the cost of living has gone up much more than that. How about medicines, cars, appliances, you name it where they cost a lot more in Malta than in other eu countries?
C.ZARB Excellent comments.
Ramon Casha Perhaps they expect to give them a bowl of rice as they do in certain countries instead of their wages.
While the proposed €6.06 COLA increase amounts to circa 4.57% (including 10% NI contribution paid by employers), the same nominal increase will progressively lose its impact in relation to the higher wages paid to the more skilled workforce, leading one to suggest that Maltese competitiveness cannot be based on suppressed wages, but on further investment in human resource development at all levels and in technological advancement. Regrettably the local employers lobby seems to be much less vociferous in this respect.
However, may I also query why in the circumstances the UHM proposed the lowering of income tax from 35% to 25%, instead of proposing the more socially equitable upward readjustment of tax bands so that more low and middle income earners pay less income tax and regain some of their lost purchasing power.
The PN is harping on how to get the money - not re: the proposals you mention but re the proposals to cut VAT on restaurants+hotels and the bed night tax.
They must run into millions.
Therefore part of the solution is in the hands of the sellers. All they have to do is LOWER THE PRICES. Normally when demand decreases prices go down.
I believe that if those who lament about their lack of business lower their prices their sales will increase and our recession will decrease.
1. freeze on all government tariffs
2. price stabilisation guarantee
3. capping on utility tariffs (vide maltatoday interview with joe farrugia)
Just when PN starting harping about deficit and how to finance Joseph Muscat's proposal, there you go, Joe Farrugia says: Employers are expecting the next budget to give a strong economic stimulus even at the expense of the deficit.
Eat your pants GonziPN.
On another note, it is better to have a thousand jobs less but have the existing jobs compensate for the cost of living than have tens of thousands of jobs that are not worth anything for those who go in for them on a daily basis.
The price stabilisation guarantee, on the other hand, is a good proposal if it can be ascertained that prices will not go up again before the guarantee comes into force.
With respect to the lowering of the income tax, lastly, I cannot but wonder why it will not help the most vulnerable. Doesn't Mr. Farrugia know that the most vulnerable today are those stuck in the so-called middle class who get hit progressively more by everything, have to work more to sustain others who do not work at all and to add_insult to_injury just miss means-tested_benefits?
by the same employers,
year after year
and before each and every Budget.
It is about time that they change the record as in year 2009 is totally worn out!
On this occasion you cannot blame a Union, so you turn on the Government of the day!
If they think that the few misery €’s paid to their employees to keep some out of the poverty line is such a detriment to their annual budget forecast, they should wake up and stop being so short sighted !
Perhaps one less new car or another brand new yacht which will amply make up for the COLA increase this year!
The employers association should first take a look at who is threatening these jobs, their business situation and their prices!
A lot of "businesses" shot themselves in the foot by trying to get rich in a day, and now are blaming the government! Most of these "employers" are the ones employing staff at minimum wage already!!