In its latest attempt to enhance the level of competitiveness in the eurozone, the European Commission is proposing to establish National Competitiveness Boards (NCBs) the aim of which is to increase the effectiveness of economic policy governance by reducing policy differences across member states.
Though competitiveness cannot be seen as an end in itself, it is quite obvious that in the globalised world economy, the eurozone can ill afford to lag behind emerging economies and the US in the competitiveness race. The strategy adopted so far has focused largely on attempts to reduce labour costs via labour market reform. This has produced mixed results at best.
Trade unions’ influence has waned and union representation has been hit by falling numbers of members. And yet, competitiveness still remains an issue for the eurozone. There are several reasons for this and one could reasonably argue that focusing on wage competitiveness alone is too narrow a view. What competitiveness needs is a multifaceted approach. Most employers, I suspect, would also agree with this view.
At a recent European Economic and Social Committee meeting, a representative of Business Europe (representing business across Europe) argued strongly in favour of NCBs as institutions responsible for evaluating competitiveness in the eurozone. At no point, however, did he state that competitiveness strategy should focus exclusively on wage competitiveness. He also emphasised that NCBs need to have institutional independence.
In my view, this is critical for the success of NCBs but can anyone really guarantee the independent thinking and analysis of these NCBs? Also, whereas I can see the merit of NCBs as institutions engaged in research and policy recommendations, do we really need another institution when we already have the Malta Council for Economic and Social Development (MCESD)? Perhaps it may make more sense for existing academic institutions to take the lead and direct research in the area of competitiveness and competitiveness strategies.
Do we really need another institution when we already have the Malta Council for Economic and Social Development?
Granted, we need more quality research – but that can be achieved by engaging teams of researchers from related disciplines. If there is agreement on NCBs, however, these institutions need to engage expertise mirroring the diversity of opinions, as one would find in the MCESD. A ‘winner takes all’ situation needs to be avoided at all costs. The interests of trade unions need to be fully respected and be involved in macroeconomic dialogue. The economic objectives cannot be allowed to sideline the achievements of the European Social Model.
The NCBs can prove useful if they monitor economic performance and policies against the background of global competiveness, propose effective strategies and identify new investment opportunities in the medium and long term. If this were to be the case, this would not overlap with the role of MCESD and Malta’s NCB would actually engage with social partners at MCESD. The NCB’s technical assessments and proposals would feed into MCESD’s agenda, raising the level of debate at MCESD.
Whereas wage dynamics is well within the remit of the NCBs, they should refrain from engaging in wage-setting. This ought to be left to the trade unions and the collective bargaining process. That said, trade unions cannot behave like ostriches and bury their heads in the sand. They cannot ignore the many changes taking place in the eurozone’s labour market.
Malta’s labour market landscape is also changing rapidly with inward migration (EU and non-EU workers) becoming ever important in its contribution to economic growth. Trade union representation among migrant workers remains low and trade unions need to do more to interact with increasing numbers of EU and third country nationals working in Malta.
We also need further research into the economic and social impact of migrant workers. As an institute capable of carrying out research, Malta’s NCB would be well placed to do this.
In general, research would serve to enhance macroeconomic dialogue between social partners and shape government policy, keeping in mind national fiscal targets as well as ECB’s target inflation rate. Anything short of this and we would be right to argue that NCBs would be more of the same.
Philip von Brockdorff is the head of the Economics Department at the University of Malta.