COLA back on the back burner

When will the long-running controversy over the cost-of-living wage adjustment (COLA) be settled? The controversy usually erupts at budget time, but the Finance Minister has added a new dimension to the issue through comments he made to this newspaper a few days ago, which were later denied.

In truth, it seems to have hardly been a matter of the Finance Minister not understanding the question put to him, as he claimed, for Edward Scicluna went beyond giving a simple “yes” for an answer to the question of whether or not the Government planned to reform COLA.

The comments he made suggest the matter must have been very much in the forefront of his thinking. It is not politically unreasonable to conclude that for the minister to backtrack on what he said in such a short time indicates that he might have been promptly checked by Castille. However, giving the minister the benefit of the doubt, the whole thing can be put down to a muddle, rather than a misunderstanding.

The Government of Joseph Muscat is no different to that of Lawrence Gonzi when it comes to their policy over the cost-of-living wage adjustment.

They are both against reforming the annual adjustment mechanism, to reflect also productivity, as it has been so often suggested by the European Commission, credit rating agencies and other organisations. The two parties and the trade unions believe the system is socially just and that, very importantly, it has also helped avoid unnecessary industrial conflict.

However, employers have for long forcefully argued for reform as they believe that not all firms are able to sustain for long the annual cost-of-living wage adjustments. One argument is that the mechanism ought to cover those on the minimum wage and unionised labour.

In the Finance Minister’s original comments, he mentioned the possibility of resorting to what he called an escape clause in times when the economy is passing through a rough period.

He recalled he had already proposed an exit clause when he was a consultant to the employers. He did say, though, that this was just a proposal and, for such clause to be resorted to, agreement had to be reached with the social partners.

In any case, the Government has made it clear it has no intention of proposing any changes. The issue has therefore been put back on the back-burner. However, irrespective of whether this was simply a misunderstanding, a blunder on the minister’s part or a muddle, there still remains the need for the Government and the social partners to thrash out the matter to ensure Malta remains competitive.

If it does not, it will be even more difficult than it already is to improve the rhythm of economic growth and generate new jobs. A very serious eye-opener to all was the latest set of labour cost figures released by Eurostat, the EU statistical agency, showing that labour cost rises in Malta between 2008 and 2012 were higher than those in the European Union. They rose by 9.3 per cent compared with the EU’s 8.3 per cent.

Malta is still considered as having low labour costs, but unless future rises are well matched by productivity, the challenge to step up growth will become harder. Whatever system is adopted to ensure the worker gets his due, no sector of the economy can afford to ignore the harsh realities of the market.