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.