The government would be shouldering almost half of the cost-of-living compensation next year if a proposal by employers to share the burden is taken up in the next budget.
The proposal was made yesterday by the Malta Employers' Association when presenting the findings of a survey indicating, among other things, that about 20 per cent of companies expect to cut jobs if the cost-of-living adjustment (COLA) ranges between €5 and €7 weekly in 2010.
The survey was conducted among the association's members and dealt with the impact of COLA on businesses during a recession. The MEA received 90 replies covering 120 companies. "Numerous companies will find it difficult to absorb a COLA increase of €5.80 for 2010 and many jobs may be in peril if they are constrained to do so," the MEA said.
Shocking as this may be, not everybody is taken in by the findings. Economist Joe Vella Bonnici said the issue of job losses due to COLA increases contained elements both of "scaremongering" and "reality".
He insisted that the impact of the wage increase on the business community had to be analysed sector by sector because not all would be affected in the same way.
The fear that it would lead to job losses was partially true for the export and tourism sectors because companies in this category were price-takers. "Any additional burden can render the export sector uncompetitive internationally. However, if we were to speak about companies that carry out business domestically, I would be a bit more cautious in saying that COLA would lead to job losses."
A business consultant, who spoke on condition of anonymity, was more scathing in his criticism of the survey's findings.
"There is a strong element of scaremongering by employers on the prospect of job losses because of COLA. Obviously, nobody is jumping for joy because it is an added burden in a scenario where costs for business have gone up but not all companies should be put into the same basket," he said.
The consultant echoed the words of Finance Minister Tonio Fenech who told The Times Business yesterday that the COLA mechanism brought industrial stability. "What employers have to do is not give in to demands by unions for wage increases over and above COLA during negotiations on collective agreements," he said.
Economist Lawrence Zammit was more cautious, insisting that the data presented by the MEA had to be taken into consideration when decisions were taken.
However, he said any change to the COLA mechanism had to be agreed by all parties because it was made law through consensus between the government, unions and employers.
"I don't think I can judge businesses but safeguarding jobs has to be our number one priority. Change has to come about through consensus and my hope is that trade unions recognise this as well," Mr Zammit said. The MEA's proposal would see the government forking out almost half of the expected COLA increase in the form of a bonus. The arrangement would be limited to 2010 and the part paid by the government would be added to COLA for 2011 if the economy grows by the second and third quarter of next year.
The association said the arrangement would provide a "slight breather" to companies and help them retain jobs until the upturn in the economy materialises.
However, the MEA reiterated it was against the current mechanism that linked wage increases to inflation and was only proposing the arrangement to tackle what it described as the "destabilising effect" of COLA in times of recession.
ksansone@timesofmalta.com