Employers propose axing 12,000 jobs in civil service

The Malta Employers' Association yesterday made its proposals for a tripartite social pact, presented during the association's annual general conference.

These include a proposal to cut the public sector by 12,000 workers by 2008, to give wage increases as bonuses linked to GDP growth and to rule out early retirement in favour of late retirement incentives. They also acknowledge that it would be unrealistic to expect the government to commit to not raising taxes.

The proposals are founded on the principle of using labour in a productive manner - defined as a job that creates wealth - in both the private and the public sector.

"The recent arrangement for drydocks workers to be employed by the private sector at subsidised rates by the government is a step in the right direction," the MEA document says.

The document recognises the considerable discussion already underway but says that more attention has to be paid to the demand side of the labour market equation.

"Increasing the participation rate will be counterproductive unless there is a corresponding increase in the demand for labour. The factors that are deterring employers, as the buyers of labour, to absorb the labour supply are not given sufficient attention.

"This is why the association contends that the notion of work as a 'right' can be misleading and taken to mean that any person has a right to be employed, irrespective of whether there is a demand for his/her services. There must be a clear distinction between what is productive employment and a social service."

It identifies the growth of the private sector as the only solution to the country's economic problems.

"Only by addressing these economic problems can the country generate sufficient wealth and growth to increase the standard of living of its citizens. Social partners have to acknowledge this as the basis of a social pact."

The generous welfare benefits for the unemployed were identified as a disincentive. Employers report that many persons sent to them for interviews are not interested in giving up their welfare benefits. "This situation results in abuse of the welfare system and lack of tax revenue due to tax evasion."

Two areas of concern with regard to participation in the labour force are female participation, which, at 30 per cent, is one of the lowest in the EU, and a drastically low average age of retirement of 52 years.The MEA identifies a number of aims, ranging from increasing the ratio of employment in the private sector to that in the public sector, to restructuring the country's welfare system.

One of its most controversial targets is to reduce the number of persons employed with the public sector by 12,000 by the end of 2008, cutting the public sector percentage of the workforce from over 34 to 27 per cent. This could reduce wage outlay by about Lm50 million.

As around 2,000 people retire from the public sector every year, much of the reduction could occur through natural wastage.

The MEA says that incentives should be offered to surplus public sector employees to join the private sector but was adamant that early retirement should not be an option.

It suggests up to three years' notice for those who were to be made redundant, backed up with training and guidance services to ease the transition.

It also looks at competitiveness and says that wage increases in the public sector should be in the form of bonuses linked to employment levels, the fiscal situation and GDP growth.

Apart from ruling out early retirement as having any place in the social pact, the MEA also said its proposals for pension reform included introducing incentives, in the form of enhanced pensions, for later retirement.

"There is no question that the country cannot sustain an average retirement age of 52 years, as is the case at present. Persons who have been boarded out have to be reviewed periodically to check whether they can return to work. "The figure of 8,000 persons currently boarded out is a clear indication that there is abuse of the system."

Getting the unemployed back to the workforce is another priority. It suggests that the registered unemployed should be available for training for two days a week. They would also have to accept employment opportunities related to their line of work or be struck off the register.

There are also a number of proposals aimed at increased female participation, including the setting up of child-care day centres at subsidised rates and giving tax rebates.

It proposes a one-year tax break to women who stopped working for family reasons and who return to employment between four and six years after they stopped.

The document says that overtime in manufacturing and the hotel industry should be paid at a flat rate but taxed at a maximum of 15 per cent. It also suggests a reduction in corporate tax rate from 35 to 20 per cent.

It resurrects the argument that public holidays falling on weekends should not be added to the annual leave entitlement and proposes that in the case of absences, due to sick leave and injury, longer than three months vacation leave accumulated during the period of absence would be forfeited.

The government's financial situation also features in the proposals. The MEA says the deficit problem should not be tackled through reductions in capital expenditure.

"It is also not foreseeable that the government can in any realistic manner commit itself not to raise taxation."

It queries the affordabilty of running the new hospital and of student stipends.

"If, as has been stated, the number of tertiary students needs to double to reach European standards, can the expenditure on stipends increase from the current Lm6 million to Lm12 million?"