Proposal 24 - Revise the collective agreement model

This weekend saw Labour Leader, Joseph Muscat, pull off another political coup.

The very fact that the Finance minister, Tonio Fenech, attended Labour's national conference on the cost of living itself gave more and more credibility to Labour's stand on the issue. Over and above this, Dr Muscat scored more political points by not just ranting about the problem but by making a number, of concrete proposals, 23 to be precise. One may agree or disagree with all or none of these 23 proposals but the fact remains that they are a very sound basis for discussion and action.

Leaving all this aside, however, there is one issue that the national conference and its speakers did not address. And this is the need to rethink and revise the way collective agreements between employers and unions are drawn up in this country. I say this because when the Director General of the Malta Employers' Association, Joe Farrugia, addressed a business breakfast recently and then wrote an opinion piece in The Times about the issue of the cost of living his main bone of contention - and, presumably, that of the employers' bodies - was that in this dire international economic climate it is just not possible to stick to the Cost of Living Adjustment (COLA) because businesses would be hit hard and would not be able to afford it. About the latter part Mr Farrugia and the employers are dead right.

What they are not right about is the solution that they are suggesting, namely to stop giving the COLA automatically across the board. This is something that the employers have been pushing for quite sometime now but which, I submit, does not really solve their problems.

The reason for this is simple. They are simply barking up the wrong tree.

In my view, the MEA and the Chamber of Commerce, Industry and Enterprise should be engaging the unions in something more fundamental: namely, to revise the collective agreement model, especially the part of it which deals with yearly increments.

This model has been in operation practically unchanged since 1968. It has served us well but now, 40 years on, it needs urgent and fundamental rethinking. The juice of all collective agreements, which all have a three-year duration, is in the section which deals with wages and annual increments. This means that every time a collective agreement is renegotiated the firm commits itself in advance to give an annual wage rise to its employees no matter what over the agreement's time span.

It is, thus, understandable that, when the Government jacks up the costs of utilities and other services, then slaps on the COLA over and above this, that employers complain and ask for restraint.

The reality is, however, that things do not need to remain like this. In this day and age, employers need not enter into agreements which are a blind date and commit them to giving increments which they then find very difficult to honour. What they need to do is to convince the unions to agree to a new mechanism which will calculate on a yearly, firm-by-firm basis how much that increment will be. This mechanism should be based on each particular firm's performance, profits, productivity and affordability in a way that satisfies the criteria of transparency and reliable information given to the unions.

In this way, apart from the COLA, firms will have practically total control on how much their wage bill is going to increase by and may, thus, be able to plan ahead accordingly.

I see no reason why this cannot be done. Employers and unions abroad have been using such mechanisms for years and it is high time that they do the same in Malta as well.