Social partners in the Malta Council for Social and Economic Development have been speaking about the need to change the formula used for the computation of the annual cost-of-living adjustment for quite a long time, but they do not seem to be making any real headway.
It is not difficult to see why. The trade unions want the formula to continue to be based on inflation and are seeking to change the way it is used to include changes in the basket of products to reflect lifestyle changes, but employers insist it should be pegged to productivity.
An MCESD working group had drawn up a report on the issue but it seems this has yet to be discussed by each of the social partners. It is therefore unlikely that the matter is going to be resolved soon. Meanwhile, warnings by international agencies that Malta may have to pay a heavy price for keeping in place the current cost-of-living allowance mechanism are usually shrugged off by the Government, which argues that the system has enabled Malta to keep industrial stability. The argument sounds good on paper, but it is not strong enough.
Most employers are against COLA, arguing that the allowance should only be given to minimum wage earners.
In their view, and in that of the international agencies, the rise ought to be linked to productivity, not to inflation, and this ought to be negotiated at industry or plant level in collective agreements. Of course, there is the plight to be considered of those workers who are not members of any trade union and who in many cases are unlikely to get the rise unless they fight for it tooth and nail.
The employers’ strongest argument is that the allowance raises their unit costs and in times like the present this could make them uncompetitive. This is a well-justified fear that can only be ignored at our own peril.
The matter is a double-edged sword and the Government has to tread carefully if it wants to safeguard jobs, not just in the manufacturing industry but also in the financial sector and in tourism, which is a key component of the island’s economy, employing thousands of people.
It is only through greater economic growth that Malta can move ahead and raise living standards. Like other countries, the island had been living beyond its means and when the crunch came, it had to retrench a bit to bring down the deficit. The Government has been successful in doing this but the exercise is not over yet. It is doubly important now to keep to the right track so that Malta will not lose its competitive edge at a time when it needs it most to safeguard jobs.
Interestingly, the General Workers’ Union, which is the Labour Party’s strongest ally, is also calling for a rise in the minimum wage, a claim that has been forcefully made by Caritas but was shot down by the PL.
Concern over the inadequacy of the minimum wage is quite understandable, and both parties ought to look deeper into this.
However, it is unlikely that this and the issue over the annual allowance will be pushed to the top of the agenda if the party comes to power in the next election. Yet, if Malta is to remain competitive, the social partners would need to create a new allowance mechanism to strike the right balance between the interests of all sectors.