The cost of living adjustment for 2024 will be €12.81 - an increase of nearly 30 per cent over the €9.90 given in 2023, Finance Minister Clyde Caruana has confirmed.

Each year, an increase in the weekly salary of all employees is announced during the Budget, referred to as the Cost of Living Adjustment (COLA) mechanism.

COLA is awarded annually to compensate for inflation over the previous year. It is worked out on a fixed formula based on the cost of a basket of products and the minimum wage.

In April, Times of Malta reported that the steady increase in the prices of consumer products had sent the adjustment through the roof, with the wage rise that would have to be awarded next year forecast at a whopping €13 per week.

Since then, employers have expressed concern over the projected increase, and at the end of September, the Malta Chamber proposed making COLA non-taxable. Currently, workers are taxed on all their income, including their COLA supplement.  

Speaking at a Times of Malta event on Tuesday, a week ahead of his Budget speech in parliament, Caruana revealed next year's COLA figure as €12.81 and confirmed COLA will "remain on the high side" for the upcoming years and be "nowhere near" the €1.75, or €2.33 increases of recent years.

Finance Minister Clyde Caruana fielding questions from Times of Malta editor Herman Grech. Video: Karl Andrew Micallef

Asked whether COLA was still the best formula to cope with the cost of living, following concern that a high adjustment would continue fuelling inflation, the minister said it was the best way to compensate for the erosion of purchasing power.

He brushed off concerns that it could fuel further inflation, arguing that there was no evidence of a wage-price spiral developing.

"I expect a significant part of the increase in labour costs, which some businesses are going to experience, to be absorbed by their profit. 

"So while prices and profits have increased over the past few years, as wages start to increase including as a result of COLA and further labour tightening, I would expect that the wage bills of companies to start increasing and employers to make up for that by lowering their profit margins," he said.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.