Weather watchers suggest this summer will not be as hot as usual. I doubt that the same will be said about the political and industrial climate. The heat is on, and will rise further during autumn and winter. Especially now that battle stations are being set up on the industrial front.
Malta's stubbornly high rate of inflation will translate, according to the established legal template, into a statutory cost-of-living increase of around €7 per week. That will jolt labour costs sharply, no doubt about it. Employers' representatives have already called the government's attention to the worrying forecast, which will be solidified once the September cost-of-living indices are published.
Employers are warning that giving the estimated Cola increase will bite into competitiveness and lead to hundreds, maybe thousands of job losses. They are arguing for a structural change which was proposed long ago. The change would consist of attempting to relate cost-of-living adjustments more to productivity increases by leaving Cola in place for minimum wage earners only.
The rest of the labour force would negotiate directly with employers in the context of productivity achievements. Employers point out that there are instances where Cola is given in addition to increases negotiated under collective agreements.
Employers do have a point. Automatic adjustments to wages without any reference to productivity tend to increase costs through a ratchet effect. Such increases at one and the same time are not adequate to compensate the bulk of the labour force for (past) inflation, since they are based on the minimum wage, while raising labour costs irrespective of productivity levels and what is being done by the competition.
The proposal to restrict Cola to minimum wage-earners should, in theory, be welcomed by trade unionists. Effectively, it is an encouragement to other workers to unite in trade unions to give them the strength to negotiate on their behalf. In this scenario, trade union membership should rise dramatically, pushing up union density, which has tended to drop with the reduction in the manufacturing base and the shift towards the services sectors.
Theory is one thing, reality quite another.
The unions will not hear of any tampering with Cola. The General Workers' Union and the Union Ħaddiema Magħqudin barely speak to each other nowadays. Yet their respective general secretaries both came out with a warning to the government not to dare mess about with Cola the moment an employers' representative flew a kite. The union's stance is more rigid since the relatively high rate of inflation is mainly attributed to the hike in water and electricity surcharges and, latterly, tariffs, decided upon by the government in the face of all-round charges that it was mishandling the issue.
The problem was created by the government - employers' should hold it to account, and not try to make workers accept a reduced standard of living, which even with the Cola adjustment will remain under pressure. So runs the rigid reasoning on the union front. Few workers will find fault with that logic.
What, then, is bound to happen? The government, through the authoritative voice of the Minister of Finance, has carefully pointed out that the issue is a matter for the Malta Council for Economic and Social Development (MCESD) to discuss. The council will meet about the matter, both the unions and the employers will see to that. But there will be no agreed outcome. Such a fundamental change cannot come about through crisis talks in a matter of weeks.
The unions will point out that they have not, and will not, be unreasonable. They are known to have foregone agreed collective agreement increases where stressed entities required breathing space. They probably will consider doing so again on a case-by-case basis, but will not countenance any change to the Cola mechanism, certainly not at this stage.
The most likely outcome at the MCESD seems to be that employers' and union representatives will, in the end, combine to request the government to bear part of the 2010 Cola increase. With the budget deficit already running high and the EU expecting it to be reduced to three per cent of GDP by the end of the coming year, the Finance Minister will not make joyful somersaults at the proposal.
His priority is to cut expenditure, not increase it. He has already made that clear, though he appeared to have ruled out new taxation. The PM implicitly clarified that, saying that the tax outcome will depend on how the tourist industry fares. We all know what the outlook in that area is. The PM can ask one of his backbenchers, Robert Arrigo, if he wants to be somewhat clearer about the prospects.
For all that, don't be surprised if the government capitulates in the end, and makes good for part of the Cola rise, though not to an extent that will satisfy the employers' side.