Industrialisation in Malta has always depended on foreign direct investment. The material aid through the packages offered by the Maltese governments to foreign companies has acted as a concrete incentive to foreign firms to set up their operations in Malta and in the process expand their globalised business.

Nevertheless, however effective these aid packages might have been in the industrialisation process of Malta, the real magnetic pull of foreign direct investment in Malta has been the relatively low labour cost of Maltese workers.

In a report commissioned in 1964 by the Malta Development Finance Corporation, set up by the Chamber of Commerce to assist Malta’s industrialisation, the low wage of the Maltese workers was listed as one of the attractions that could incentivise foreign direct investment in Malta. According to this report, wage rates in Malta were roughly 55 per cent of the UK equivalent and just 33 per cent in the case of women.

The economic diversification that was being vigorously pursued had to be attained by the implementation and persistence of a low wage policy.

This prior tacit agreement about wage-setting created a disparity in wages between the employees in the public services and the workers employed in the emergent manufacturing sector.

This disparity may have become more accentuated by the enormous increases in managerial income and the corresponding increasing gap between the higher and lower wage earners.

According to the statistics issued by Eurostat, the latter category of workers may still have to bear the brunt of this wage disparity. These comparable statistics indicate that this policy of low wages is still prevalent as they reveal that the wage of the Maltese worker is less than half of EU-wide average of €31.8 per hour. It looks as if the annual wage adjustment through the cost-of-living allowance has not had its desired effect.

What the policymaker might do to attenuate the adverse effects of this disparity in wages is to adopt the highest possible level of fairness in wage-setting. The implementation of such a policy may entail adopting a set of procedures and dimensions aimed at ensuring a seemingly high level of fairness in wages.

Some of the dimensions designed to attain the highest possible level of fairness in wages might include the following:

• A wage that is negotiated collectively through collective bargaining between employers and workers’ representatives.

• A wage that is comparable to wages in similar enterprises operating in the same sector. This ideal can be more attainable by collective bargaining at sectoral level.

• A wage that reflects different levels of education and skills and professional knowledge.

The annual wage adjustment through the cost-of-living allowance has not had its desired effect- Saviour Rizzo

• A system of equal pay for equal work that does not generate unjustified, too high and too rapidly growing wage differentials within the workplace. Studies and work experiences have shown that collective bargaining can improve wage outcomes and to some extent limit wage disparities.

• A wage that progresses along the changes in intensity at work-technological contents, and evolving skills and tasks of the labour force.

• The minimum wage is considered as a threshold above which every worker aspires to rise. A pay packet close to the minimum wage would not be considered as an ideal.

These dimensions are designed to provide principles and standards in wage-setting at enterprise level and hopefully provide a coherent approach in a wage-setting exercise. In a labour market dominated by global trade practices and accelerated mobility of capital and labour, and in which individual brands have become the leading actors, it is difficult to change wage structures and practices in depth. What globalisation demands is the development of a coherent and multidimensional approach that would lead to fundamental different wage costs aimed at continuing to improve the competitiveness of the business community.

Brands must show by concrete initiatives that behaviour and strategies are changing. Such a perspective calls for concrete steps that bring about improvements with regards to wages. It is within such a perspective that the business community must build a coherent vision that encompasses brands, suppliers and national government on wage developments.

Concrete action on wages is essential to strengthen the sustainability of the economic system in a more globalised environment. In the case of Malta, and maybe even in other countries, the main issue that has to be addressed is the disparity in wages which is showing signs of accelerating.

This disparity may give rise to, and indeed sustain the feeling of relative deprivation among a section of the Maltese population. Enjoying fair play and non-discrimination are important elements that may significantly contribute to a feeling of well-being among the workforce.

The Eurostat statistical comparisons in wages among EU members reveal that the imperatives influencing wage-setting in Malta that were adopted during the early phases of industrialisation process tends to have a residual effect.

This persistence may indeed be one of the fault lines in the bridges that have been built between Malta and the European mainland through Malta’s EU membership. The way out for the vulnerable workers is the compromising mood between capital and labour which seems to be the hallmark of social Europe.

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