The cost-of-living adjustment mechanism brought about stability in wages, according to a recent study, which also confirmed that Malta’s average hourly rate is half that across all EU member states.

The study on pay, carried out by the university’s Centre for Labour Studies, undermines the EU’s concerns over Malta’s mechanism, saying the mandatory annual wage increase based on an indexation mechanism has not caused a surge in Malta compared to other European countries.

The report quotes Eurostat figures which show that Malta’s average hourly wage increased by 9.3 per cent in the past four years, reaching €12.30. However, this is far less than the €23 average hourly rate in the EU and even worse compared to the €28 per hour average in eurozone countries.

The study’s conclusion, that COLA has contributed to wage stability, vindicates the position taken by successive governments in their resistance to changing the mechanism introduced in 1991.

Mandatory annual wage increase has not caused a surge compared to other European countries

Finance Minister Edward Scicluna followed in the footsteps of his predecessor, Tonio Fenech, in defending the mechanism and its formula.

Prof. Scicluna told Times of Malta that the government had no plans to change the formula used to calculate the annual adjustment.

He said this was an automatic mechanism which has been used since 1991 and has “worked”, adding that no changes were envisaged unless there was consensus among social partners sitting on the Malta Council for Economic and Social Development.

But employers and trade unions have never seen eye to eye on this issue.

While the Malta Employers’ Association and the Chamber of Commerce, Enterprise and Industry have been insisting that COLA should be pegged to productivity rather than inflation, unions not only want to retain the formula but have also requested the allowance to be paid twice a year. The report refers to these two opposing positions and comments that the government played a balancing act by retaining COLA “to maintain industrial peace” and at the same time showed flexibility in adjusting the salaries of civil service employees.

The report also notes that despite the relatively high percentage of unionised workers in Malta, a substantial number of workers do not benefit from wage increases, apart from the annual COLA.

This is due to the lack of collective agreements that are binding on entire industry sectors, it says.

Commenting on the stability of wages in the public sector, the report says this may be attributed to the policy of wage moderation “tacitly adopted by the trade unions” in their collective bargaining.

The report states that wage growth in the public sector in 2009 and 2010 was higher than in the private sector.

However, wage growth in the public sector in 2011 and 2012 slowed down to such an extent that the difference between the two sectors became minimal.

Wage growth in the public sector overtook the private sector again in 2013 due to a collective agreement signed in October 2012, covering a period of six years, giving civil service employees a 2.5 per cent annual salary increase.

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