Every so often, it is good to step back from the commentary of the latest economic statistics in order to place the numbers in their perspective. When analysing the latest labour market developments, one realises that developments are not as good as one would hope for.
During the five-year period, starting from the first quarter of 2008 to the first quarter of 2013, the average gross annual salary in Malta increased from €13,299 to €15,940. The average annual increase throughout this period amounted to €528.
This is a great certificate in economic management for the previous government. Economic well-being is directly related to employees’ earnings.
During the first year of the Labour government, the average gross annual salary only increased to €16,036, up by merely €96 compared to a year ago. Average people’s incomes have increased at a much slower pace than the average of the previous five years. It is not enough for the government to ensure that the unemployment rate remains low.
There is need for sound economic management and initiatives to create the best type of jobs possible.
The best way to sustain salary increases without undermining the country’s competitiveness is by creating high value-added jobs within the private sector. Wage increases awarded to low valued-added jobs would otherwise backfire and create unemployment. Likewise, strong wage increases in the public sector without a commensurate increase in productivity would undermine public finances.
The previous government’s success in pushing up salaries was based on a relentless search for niche sectors with the potential to create high value-added jobs. The successes obtained in the financial sector and the remote gaming sector are there for everyone to see.
What is the government doing to identify and sustain new niche sectors?
Ultimately, the private sector is the source of high-quality job creation. What is the government doing to identify and sustain new niche sectors?
So far, government’s policies have been mainly focused on quick wins, reducing utility bills even though the cost of energy generation has not changed, and selling Malta’s citizenship.
Will such policies create high value-added jobs in Malta? Or is the government’s labour market vision resigned to attract low-quality jobs and employing people with the public sector? The only win-win situation is if the government focuses on long-term economic planning and not just policies that yield short-term popularity.
Similarly, the government’s fiscal situation remains less positive than is hoped for. The Minister of Finance splashes many reassurances, but it remains hard to believe that the fiscal situation is indeed under control; in the first half of the year, the fiscal deficit widened by €24 million. Despite the fact that revenue generation remained healthy, expenditure kept rising.
The truth is that electoral promises are not for free. They are costing taxpayers’ money and making it more difficult for the country to move towards a balanced budget situation. Can the minister enlighten us on what will contribute to the revenue boost or expenditure cuts during the second half of the year in order to achieve the deficit target?
Meanwhile, the stock of public debt increased by almost €439 million compared to a year earlier. It seems that the government’s appetite for borrowing has remained strong. Given the stance of the European Central Bank, the interest rate scenario is likely to remain low for quite a prolonged period, so the excuse that the government is trying to borrow as much as it can to lock in low interest rates is not so convincing.
Rather, it is giving the negative message that the government does not seem to believe so much in the importance of fiscal consolidation.
While the Prime Minister and his spin doctors continuously try to highlight positive economic developments, not all that glitters is gold. The labour market and public finances are two such examples.
• Lino Spiteri’s column is not appearing this week.
Kristy Debono is the Nationalist Party’s spokeswoman for competitiveness and economic growth.