Workers' participation specialist shuns FOI claims

The appeal made by the Federation of Industry to the government to reconsider the compulsory cost of living allowance increase awarded every year is only a thinly veiled attempt at eroding local conditions of employment, Godfrey Baldacchino, director of the Workers' Participation Development Centre at the University of Malta, said yesterday.

Prof. Baldacchino noted that it was quite ironic that the FOI's comments were published on the very same day that the National Statistics Office revealed insightful data on the extent and character of local poverty.

Malta's statutory minimum wage, he pointed out, was introduced almost 30 years ago, as a measure intended to secure a decent standard of living for wage earners, avoid excessive speculation with workers' wages as well as penalise non-competitive firms which could not afford the going rates of pay.

Increases to the national minimum wage since 1975 have basically kept pace with inflation.

Not all the workforce was unionised and, therefore, it was not an automatic beneficiary of wage revisions that may be secured through collective agreements, he said.

Only 45 per cent of private sector employees are covered by collective agreements. For the remaining 55 per cent, the statutory minimum wage may prove to be their only formal safeguard.

The principle of a floor in wages has worked well, not just for workers but also for employers, who both know that they operate in an environment where real, and not nominal, labour productivity should increase per year in order to improve profitability and competitiveness.

The FOI has claimed that the local situation is of concern because Malta's minimum wage ranks higher than those of the other nine EU accession states, as well as those of EU members Greece, Portugal and Spain, Prof. Baldacchino said.

To put these figures into a broader context, one could quote figures released by Eurostat last March comparing labour costs in EU member states and acceding states.

Malta's average gross labour cost per hour in industry and services of about seven euros is higher than that of Lithuania (€2.71) and Latvia (€2.42) but lower than that in Slovenia (€8.98) and Cyprus (€10.74). It is also much lower than that of all EU member states: the hourly cost of labour in the EU is lowest in Portugal (€8.13), Greece (€10.40) and Spain (€14.22) while it is highest in Germany (€26.54), Denmark (€27.10) and Sweden (€28.56).

There is no reason for concern in this. Rather than claiming that Malta's competitiveness can be secured by lowering Malta's minimum wage, or doing away with statutory cost of living increases, the FOI would do well to explore the nature of niche export demand which is not sensitive so much to low-cost but to high quality, high skill, delivery time and special feature considerations in which Maltese industry can compete at the going wage rates.

Eroding local incomes will also affect purchasing power, dealing a blow to consumption trends which would impact negatively on business turnover.

Furthermore, Prof. Baldacchino said, employers had other means at their disposal to secure labour when and if they felt that existing terms of remuneration were not suitable.

This explained the proliferation of part-time, piece-work, casual and sub-contracting arrangements that avoided the obligations associated with full-time employment, including the payment of minimum wages.

Since the extent of such atypical work practices in Malta, while increasing, was still not very significant in the Maltese labour market it was indicative that employers were, by and large, not unduly distressed by the existing remunerative regime.

Malta's steady increase in the going rate of payment and statutory minimum wage was largely indicative of a track record of economic success and value creation, particularly when negotiated between management and labour via collective bargaining in the private sector.

It was statutory increases to public sector employees, which by their very nature were not related to productivity gains, that tended to exert strong and artificial upward pressures on wages in the local private sector.

This has been stated by the Central Bank and will be confirmed by a Workers' Development Centre research project on trends in collective bargaining that will be published later on this month.