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Rental prices pressure employers to raise wages

Labour shortages persist despite the influx of foreign workers

Towering property prices are pulling up wages.

Towering property prices are pulling up wages.

The rocketing prices of property and rent are putting employers under extreme pressure to upgrade the wages for their staff, who are complaining that they cannot make ends meet.

According to Malta Employers’ Association director general Joe Farrugia, property and rent costs are among the main drivers of wage inflation. So far, the authorities have always looked at ways of controlling rent prices rather than building them into wage inflation.

Mr Farrugia told the Times of Malta that this was not the only problem employers were facing: labour shortages were persisting, despite the heavy influx of foreign employees.

“Currently, about 30 per cent of the labour force in the private sector is non-Maltese, up from less than 10 per cent a decade ago,” he said.

“Ironically, while this may be creating a stabilising element on labour costs due to increased labour supply, it is generating strong cost push factors as they are the main cause of the property inflation that the country is experiencing.” 

Mr Farrugia was contacted after the Eurostat released statistics last week saying that Malta’s labour costs increased by three per cent between April and June.

“There is a misconception that wages only increase when government announces the cost of living adjustment or through collective agreements,” Mr Farrugia said.

“The truth is that shortages are leading to a heating of the labour market, and there is also pressure to increase wages to match the increases in rent and property prices.”

He said the increase of three per cent was not registered in all sectors or occupations. In some sectors, the increase may well be below three per cent whereas in others it could even be in the region of six per cent.

This, he said, created rising income disparities which, on one hand, incentivised labour mobility into higher value-added sectors. However, on the downside, some sectors of the population may end up worse off because of a deterioration in their disposable income after taxes and accommodation.

“Wage inflation is indeed a reality. In many cases the increases are not being matched by productivity increases and this can erode competitiveness in some sectors, such as manufacturing and tourism, in the medium term,” Mr Farrugia noted.

He said there was a relatively high percentage of people in Malta with low educational achievement who were pushing a segment of the working population into low value-added jobs where wage increases may be well below the average three per cent.

“This segment is struggling to make ends meet and these include pensioners and many single-income families,” he said.

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