The Malta Independent 25 September 2018, Tuesday

The cost of labour

Alfred Sant Monday, 16 April 2018, 07:52 Last update: about 6 months ago

Data recently issued by Eurostat regarding labour costs in the EU show that in Malta, spending on workers and employees (excluding those in agriculture and public administration) is less than half the euro zone average. On the basis of hourly labour costs, the average for 2017 in the euro zone stood at 30.3 euros. In Malta it “only” reached 14 euros.

The outlay includes those payments made by enteprises that do not go directly to employees: mostly social security and similar contributions. In Malta the share of such contributions in total labour costs is less than anywhere else in Europe: 6.7 percent of total costs. The share is highest in France: 32.8 percent of labour costs are accounted for by social outlays.

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Some interesting questions follow. 

What explanation is there for the fact that though we are experiencing such a strong rate of economic growth, compared to European rates, our labour costs have stayed so low?

How can local entrepreneurs continue to resist increases in their social contributions when on this account, it appears that compared to their counterparts in the rest of Europe,  they carry the least burdens?

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Curious compromises

Given a social climate where it appears that an enormous majority of people in the country is against abortion, the compromises which are resorted to in order to avoid being labelled as pro-abortion can become quite curious (or perhaps comic).

Take the government, for instance. It is proposing to amend the IVF law to allow the freezing of embryos (something the law should have permitted right from the start). However the government also did not want to be accused of failing to defend those embryos which would not be “used” – a failure that would be projected as a step towards abortion.  So it is proposing that “excess” embryos should be allocated to couples prepared to adopt them.

Then we had the genial suggestion by an esteemed right wing pundit who lives in a country where the practice of abortion was accepted ages ago. What should be done, he said, is to wait till science has advanced enough to create and sustain an artificial womb, and then when the demand for abortion arises, to remove the unwanted fertilised embryo and place it in an artificial womb, thereby allowing it to attain its destiny of becoming a person. 

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VAT

The truth is that VAT as a tax is neither simple, nor so suited to the operations of smes. The reason why it has taken such a firm root in Europe is political. It was considered as the best way by which to tax trade flows such that there would greater cohesion in the management of the single European market.

Meanwhile, in the main, trade is still substantially run by smes, which are precisely those units that are penalised by the VAT system.

Morover, digital technology has invaded practically all economic sectors. Yet trade conducted on its basis runs outside the parameters set for the application of VAT.

The time has come for reforms in the way by which VAT is operated.

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