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Government’s economic plan

A mantra that seems to be adopted by most trade unions is to ‘make hay while the sun shines’. GDP growth figures leave no doubt that the sun is shining on the Maltese economy. So who is to blame unions for trying to reap the fruit of this ideal economic climate for the benefit of their members?

Following the publication of a wish list by the General Workers’ Union, the Union Ħaddiema Magħqudin, the Malta Confederation of Trade Unions, the Malta Police Association and the Malta Chamber of SMEs (GRTU) published their own list of benefits they would like to see the government introducing in a few weeks’ time when it announces its Budget for 2017. There are many similarities in what they are proposing but there also some refreshing new thinking.

The UĦM has once again raised the concept of the living wage, which has been introduced in some US states and in Britain. This measure is not without its risks and it is understandable that employers fear that it could cause more unemployment rather than lift those living on the minimum wage. It is less obvious why the government will not open a debate on this issue now that the economy is going through a good phase.

A more debatable proposal of the UĦM is a wage increase that exceeds the inflation protection provided by the present existing mechanism that the unions are now labelling as ‘outdated’. Wage increases that are not tied to improvement in productivity are the seed of future economic troubles.

No one should be deluded into thinking that economic growth at the present rate is guaranteed for any length of time. Rating agencies in the past appealed to the government to eliminate the inflation protection mechanism as it endangered Malta’s competitiveness. Making this mechanism even more generous could lead to rating agencies changing their outlook on Malta’s future economic prospects.

The proposal by the UĦM for the introduction of the second pillar pension scheme is quite unique because the other unions are not keen on supporting pension schemes that involve a deduction in the take-home pay of their members. Those who see beyond the short term believe that there are strong arguments for the introduction of mandatory savings to build a pension pot.

The more this issue is postponed the more serious will be the problems that future pensioners will have to face on the eve of their retirement from work. The government needs to take the lead and, in consultation with stakeholders, come up with a scheme that guarantees an adequate sustainable pension for today’s workers. Enough time has been lost and saying the matter is now urgent is already an understatement.

CMTU president Martin Balzan was right when he called on the government to table in Parliament every major contract signed. However much the government will try to bury the thorny issue of bad corporate governance in the highest levels of the administration, the more sensible people will demand action on resolving this issue. The bonanza of benefits will be taken for granted a few months after the Budget. The reputation risk of bad governance will haunt the country for much longer.

The GRTU raises the perennial issue of energy prices and rightly wonders why they are still high. Less expensive power can mean lower production costs for industry and lower prices for consumers.

It is a frustrating reality that most people look at the annual Budget as an annual process that either delivers goodies or belt-tightening measures. Unions will do well to look at the long-term strategic direction that may be announced by the Finance Minister.

The sustainability of the government’s economic plan is one such strategic issue.

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