Employment: a win-win situation
The Labour Force Survey published two days ago by the National Statistics Office provides a very good indication of the state of our economy.
It needs to be remembered that employment has for decades been the fundamental indicator on which to gauge the performance of the Maltese economy. Successive governments led by different parties and personalities have always given top priority to the creation of employment in our economy.
There have been other issues to which more or less priority may have been attached, such as the fiscal deficit, investment in the infrastructure and the taxation system; but employment has always maintained its top priority status.
During the second quarter of this year, the number of people employment rose by 3,600 , that is just over two per cent, over the second quarter of 2010.
Unemployment dropped marginally to 6.5 per cent from the level of 6.7 per cent of a year before.
There is no doubt that other countries would envy our employment performance, as it is a reflection of a resilient economy that has withstood the negative impact of the extremely difficult international economic climate, in particular the eurozone crisis and the problems in a number of industries such as the automotive sector.
However, these data raise question marks in relation to a number of issues.
Over the last weekend we have had public pronouncements on the minimum wage – whether it should be raised or not. We have a system whereby the wage adjustment for the cost of living is guaranteed for the employee and, on top of that, the employee would get a salary increase.
Is this an acceptable formula? Is this employment performance sustainable? How can we maintain the competitiveness of businesses operating in Malta, thereby ensuring that our economy continues to create new jobs?
Starting with competitiveness, we need to appreciate the complexity of this issue. A company’s competitive advantage arises out of a number of factors which all boil down to the cost of producing a good or service at a level of quality that the customer expects.
Thus it is not just a case of cost-efficiency, that is the level of wages, the cost of raw materials and the cost of land. It has to do with customer relations, the level of skills of the labour force, legislation, access to finance, timeliness, certainty on public policies, a country’s lifestyle, productivity and quality of the infrastructure.
This leads to how sustainable our employment performance is. If we keep paying due attention to the elements that make up the competitive advantage of a business, then our employment performance becomes sustainable. To this one needs to add the high level of diversity of our economy.
Many foreign analysts who visit Malta are baffled with the way Malta has managed its economy over the last years. They wonder at how we have managed to sustain our employment levels. Then they recognise that although Malta’s economy is a very open one, given its high dependence on exports and foreign investment, it is not exceedingly vulnerable to any single sector. This diversity has given a balance to our economy that is quite enviable.
The next question must be about wages. Higher wages lead to a higher standard of living as long as the level of productivity reflects that higher wage. I do not like the idea of not increasing the minimum wage at least by the cost-of-living adjustment. But this is not what irks employers.
What irks employers is that in Malta we are used to a dual increase in wages. Their expectation is that there should be one increase which is inclusive of the cost-of-living adjustment. This provides employers with certainty.
What also upsets employers is when they hear their employees referring to a government increase and a company increase, as if it is the government that pays the cost-of-living adjustment.
Any increase in wages in the private sector is paid for by the employer and this is why we have to speak of one global increase, as this would need to be factored into budgets and business plans.
It is always a fine line to determine the role and impact of the government and the role and impact of the private sector when discussing employment.
I strongly believe that our good employment performance is due to the synergies that have been created between the public sector and the private sector. The Government has invested heavily in a number of areas that have created opportunities for the private sector to exploit.
We cannot take this overall balance for granted; it needs to be maintained through constant dialogue and effort. Past history has taught us that in the employment area there cannot be a win-lose situation but either a win-win situation or a lose-lose situation.
Today it is a win-win situation – let us make sure we keep it that way.