Social partners cannot agree on whether the cost-of-living-adjustment system needs to be reformed, with employers insisting on change and the unions saying it is untouchable.
Most employers believe that revising the system would make the country more competitive, especially if pegged to productivity rather than solely to inflation.
However, trade unions are adamant that workers should always receive compensation for inflation.
The social partners were asked to comment after Finance Minister Edward Scicluna on Friday suggested that the Government was planning to propose changes to the COLA system.
Although a day later he denied that this was the Government’s intention and said he had misunderstood the question in a recorded interview, Prof. Scicluna had spoken about the European Commission’s reservations on Malta’s COLA system and an “escape clause” could do the trick.
The escape clause could be used when the economy is going through a rough period.
Contacted yesterday, the Chamber of Commerce, Industry and Enterprise and the Malta Employers’ Association agreed that COLA did need changing.
MEA director general Joe Farrugia said the association’s position was that it should not be automatic, irrelevant of how the economy was faring.
“It is very positive that we are finally talking about changing the system. The escape clause proposal should be discussed in more detail but we agree with it in principle. If there’s a situation where inflation is high and there’s a recession, this could endanger jobs so this escape clause sounds like a step in the right direction,” he said.
Chamber director general Kevin Borg said an opt-out clause like that mentioned by Prof. Scicluna on Friday had been discussed at the working group set up by the Malta Council for Economic and Social Development.
A study showed that Malta would have fallen in circumstances prompting the use of the opt-out clause three times in the last 10 years.
“The escape clause could be one of the solutions (to please the European Commission) but we can also tweak the formula to reflect productivity. Setting it at 75 per cent inflation and 25 per cent productivity could be an idea, or a combination of both.
“Whatever the case, it has to be discussed in detail,” he said.
But for the unions, the COLA is untouchable.
General Workers’ Union general secretary Tony Zarb said the working group reached its conclusions and drew up its report but this was never discussed at MCESD plenary level.
“Let us discuss this report but the COLA should remain and there’s no playing around with it,” he said.
Paul Pace, the president of the Forum grouping of trade unions, echoed this sentiment, saying that removing COLA would effectively result in a wage-freeze that for his organisation was “never acceptable”.
He said he had reservations about the escape clause proposal and had many questions he would like to ask about it.
For Union Ħaddiema Magħqudin general secretary, Josef Vella, a reform of the COLA was a non-issue because the Active Labour Market Policy, through the Jobs Plus plan, which was being introduced this week, showed the country was taking productivity seriously, he said.