Perfect recipe for economic disaster

The recently announ­ced price hike of fuels at the pumping station is of grave concern to both unions and employers. Unfortunately, when these prices go down, consumers only benefit from the decreases in fuel prices because the prices of essential items and services remain the same.

It is certainly unjustified that the government puts the blame of this hike on what is happening in Libya and on the market price of crude oil because the purchasing price for the present consignment of fuels would have been concluded months ago. Furthermore, the government must clarify why it hedges for fuel for the generation of electricity and not also for fuels at the pump.

The recent fuel increases seem to be just a corrective measure for the government to keep on track in reducing the deficit to below the three per cent benchmark of the GDP and perhaps have some additional revenue by the end of March 2011 to compensate families for the fuel and gas price rises that occurred just after the New Year.

The government seems to have abandoned the concept that one can raise more revenue with taxing less as the economy expands and grows. In fact, the government seems to be going exactly in the opposite direction. By increasing the prices of fuels and, at the same time, collecting more revenue through VAT, the government is fuelling inflation, eroding the purchasing power of wages and salaries and affecting the industry’s competitiveness, a perfect recipe for torpedoing Malta’s fragile economic recovery.

Inflation too will have a domino effect on the cost of living adjustment. This mechanism, however, as of late, failed to protect workers and pensioners in safeguarding their standard of living. The main cause of this failure is the government’s induced costs, which have been insensitively implemented at once and timed exactly so that their full impact was not gauged fully through the present economic instruments. This is the main reason why the GWU is arguing we have to rethink the COLA mechanism.

While the GWU understands the preoccupation of employers to maintain competitiveness, they however need to be more concerned with what is causing prices to rise rather than the COLA mechanism, which is directly related to inflation. Linking the COLA mechanism to productivity is not the solution because this is a cost of living adjustment, a mechanism to protect the purchasing power of wages and salaries against inflation. Productivity wage increases are more suited to be negotiated at enterprise level, taking into account the performance of the individual and that of the enterprise in the market. Most collective agreements in place today already provide for this.

On the other hand, non-unionised workers and pensioners are only entitled to the COLA increase and, unfortunately, they are seeing their standard of living falling year after year. This is not to say employers are being generous, on the contrary, employers are finding it difficult to increase wages because government-induced costs are eating away much of their profits.

It is therefore no wonder that more and more people are falling below the poverty line. Today, even those considered to constitute the middle class are finding it hard to make ends meet.

However, it seems the government is only interested in numbers and keeps on boasting that its main priority is to generate jobs. But what about the quality of jobs being generated? A job that does not offer decent work can hardly be called a job. Good jobs are those that offer adequate wages, safe working conditions, security, reasonable career prospects and worker rights.

People’s livelihood and sense of dignity are bound up tightly with their jobs. A job that is exploitative, harmful, fails to pay a living wage and, thus, condemns workers to a life of poverty can hardly be called a job.

Mr Carachi is president of the General Workers’ Union.