COLA: 25 years in operation

The cost-of-living allowance (COLA) has become an issue of confrontation between a section of the trade union movement and the government.

The mechanism of COLA plays a crucial role in the formulation of the income policy. Its aim is to ensure full consensus about the adjustment of wages at the end of each year. It came into being 25 years ago following a highly tense confrontation between the government and trade unions.

The cause of this confrontation was the Lm3 weekly wage increase announced in the budget for the year 1990 that the government embodied in a National Standing Order – Legal Notice 169 of 1989.

This ‘standard order’ obliged the employers to pay only the increase agreed in the collective agreement and the difference if any to make up a total Lm3 from January 1990.

The Confederation of Maltese Trade Unions (CMTU) and the General Workers’ Union (GWU) expressed their disapproval about this decision. They maintained that the Lm3 increase should be considered as a cost-of-living increase that is mandatory on all employers, irrespective of whether they have signed a collective agreement with a trade union.

The GWU insisted that the employers should endorse the Lm3 wage increase announced in the budget and over and above any other increase in a collective agreement.

In the first week of January 1990, the union registered a trade dispute with those enterprises that refused to accept this request. One of these companies that did not toe the union’s line was the Hotel Phoenicia, which eventually proved to be a major actor in this drama.

After what seemed to be an endless period of bickering, an amicable settlement was reached between the actors involved in the dispute.

However, this amicable sentiment leading to an agreement was not total as it failed to prevail at the Hotel Phoenicia, which, at that time, formed part of Forte Trust House chain.

A sit-in by kitchen staff and work-to-rule was ordered by the union in the first week of January 1990.

The case took a unique twist when Trust Forte decided to close down the hotel and dismiss all employees.

In this dispute, neither side seemed willing to budge as they both adopted a win/lose position.

The organisation representing the private sector of the labour market expressed its solidarity with the management of the Phoenicia.

The employers’ view was that they were in line with the collective agreement clause when they were providing for the award of the better of the two benefits.

The stand taken by the Phoenicia management was reinforced by the award of the Industrial Tribunal, which, in its decision, stated that the GWU action against the firm was in violation of the agreement.

The industrial relations system is not a game in which winners take all the spoils and the losers lick their wounds- Saviour Rizzo

In this conflict, the union found very few allies. It was denounced by various employers’ associations. The prime minister was quoted as saying that unions requesting increases larger than those established by the government had to shoulder the responsibilities.

The Malta Council for Economic and Social Development (MCESD) was not utilised as a forum for discussion of this issue. A section of the media was also scathing in its remarks about the stand taken by the union. According to an editorial of Times of Malta, the union has “emerged badly bruised from this conflict”.

However, the industrial relations system is not a game in which winners take all the spoils and the losers lick their wounds.

Though, in this dispute, the party that had greater weight in the locus of power seemed to have prevailed, the union’s strength and perseverance to sustain its cause and pursue its aims were equally acknowledged.

Thus, the general feeling that emerged from this dispute was that an approach on a general level was needed to solve issues in industrial relations 

In the midst of such an atmosphere, an agreement was formulated by the employers’ associations and the trade unions. This new approach gave rise to a formal agreement which stipulated that wage increases in the future were to be determined by an income index.

The role of the MCESD was recognised as being crucial in this new approach.

A special tripartite unit was set up to determine changes in the cost of living and to reach consensus on the income policy. When such an income policy came into effect, the cost-of-living increase was taken out of the area of contention.

Inflationary compensation in wages was no longer to be a surprise that springs out in the annual budget but discussed months ahead.

Thus, one unintended consequence of the dispute about the mechanism of wage increases was the initiation of a social dialogue that was supposed to bring about a more conciliatory style of industrial relations.

The lower number of industrial actions registered following this agreement can be taken as tangible evidence of the positive effects of social dialogue.

Saviour Rizzo is a former director of the Centre for Labour Studies at the University of Malta.