This week the National Statistics Office issued the data for the gainfully occupied population for the month of January. The number of persons in full-time employment increased by just under 3,300 when compared to January 2007, while the number of registered unemployed dropped by 845.

During the same 12-month period, the total number of persons in part-time employment increased by 2,919, while the number of persons whose main employment is on a part-time basis increased by 1,912. In terms of economic and social sustainability this is indeed excellent news, as an increase in employment does not only mean that more wealth is being created in this country, but also that there is more social cohesion.

Moreover, one also needs to keep in mind that most of this growth in employment happened in the private sector and not in the public sector. Thus from an economic perspective, we certainly do not have a situation where people are being employed even though there may not be an economic justification for it. Instead this growth in employment has as its cause a good performance of our economy, and is therefore not artificial and, consequently, is more sustainable.

However, this issue should not be seen in isolation. What makes employment more sustainable is an increase in productivity and a decrease in the unit cost of labour. The Central Bank of Malta has claimed that five years ago we had an increase in the unit cost of labour, as wages increased while there was no corresponding increase in productivity. These weeks we also had experts from the International Monetary Fund advising the government to do away with what we call in Malta as the Cost-Of-Living Adjustment, which they see as a contributor to inflation.

The claim of the Central Bank of Malta and the advice of the IMF experts need to be kept separate as they are not the same thing at all, but they can both be linked to the issue of sustainability in employment. The government has made it clear that it does not agree with the IMF's criticism of the cost-of-living adjustment mechanism. I tend to agree with the government's position because the implementation of this mechanism has brought about industrial peace, the lack of which can be much more costly than any COLA. The COLA mechanism has shown us, irrespective of what has happened in other countries, that it is not a cause of inflation and that it is sustainable from an economic perspective.

In fact, it has not hindered employment growth, as historical data amply show. Instead it has ensured that, at least, wages keep up with inflation, thereby contributing to more social cohesion and a more solid balance between social and economic considerations. I believe that the cost-of-living adjustment may not have contributed directly to employment growth, but it has definitely contributed to a more stable environment, which in turn has encouraged investment, and it has definitely not had a negative impact on the creation of employment opportunities.

This does not in any way imply that increases in wages beyond the COLA should not be tied to productivity increases. In this context one needs to assess the data published by Eurostat last month on the labour cost index in the 27 member states of the European Union. This index is based on the total cost for employers of labour on an hourly basis, inclusive of salary, the employer's share of social contributions and any employment taxes net of subsidies. The index for Malta shows that between the fourth quarter of 2005 and the fourth quarter of 2007 (hence two years) there was an increase of just under four per cent.

The index of the EU 25 (that is, excluding Bulgaria and Rumania) shows an increase of 5.9 per cent, while the index of the whole of the eurozone shows an increase of 4.9 per cent. Thus the increase of the Malta index has been below EU averages. This would imply that the increase in Malta's labour costs should prove itself to be sustainable. This is even more evident when one compares the end of 2007 index with that of the base year (2000). The labour cost index of Malta grew slower than in any other country in the EU with the exception of Denmark, Germany and Austria.

This is a track record that evidences not only the resilience of our economy, but also the ability to ensure in a collective way that we do not lose out on employment opportunities in the long term, just to make some short-term wins. These data explain why we have managed over the years to sustain increases in employment, which have contributed to greater economic and social well-being.