The Budget is fast approaching; what measures would you like to see included in it?

A lot of times, the Budget is something of a wish list of what everyone wants.  In our document though, we have emphasised more on policies; a national strategy.  These tie in with a memorandum of understanding which we had presented to political parties before the last election. 

The first of these is a reflection on the situation at work today. Today the number of foreigners working in Malta is always rising –last year in fact we published a document on Malta’s demographic challenges and from there the debate over Malta’s population reaching 700,000 people started.  The growth of the economy itself, together with the rise in foreign workers, is bringing with it certain challenges as well.  For instance, it is well known that there has been a drastic increase in the price of property and rent.  This especially is generating inflation in wages.

Now as MEA, in principle, we are never against an increase in wages.  However, to complement these increases, there must be a correlating increase in productivity.  For many companies, which aren’t in real estate or property, raising salaries because of these cost-push factors is resulting in wage inflation that is not being reflected in productivity; therefore the consequence is that a lot of them are seeing a drop in productivity.  There is a limit in how long this can go on for and how far salaries can rise, even though the situation on the workplace is currently positive.

Therefore one of the things we mention in the document is that labour costs should be linked to productivity and that they cannot be expected to compensate for inflation resultant from a property boom.  At the moment we are in the midst of a boom; the price is high.  But when the price falls, then what are we going to do?  Lower wages again? It doesn’t make sense.  So to have an automatic indexation between inflation and salaries – we already have the Cost of Living Adjustment (COLA) that calculates this distortion up to a point – is essential.

Another notable proposal focuses on governance. Our proposal states that when people are employed in positions of trust, they should have their work conditions out in the public domain.  This is to make sure that everything is above board, and with it people would be able to check from time to time what these persons of trust are earning.  Some of these figures have very generous packages, and it for the sake of transparency it would be good to know exactly what the conditions of these 1,000 or so persons of trust are and for what they are getting paid for.

A matter that the MEA had issue with from the last Budget and indeed from the Labour Party’s electoral manifest was on the matter of public holidays.  The government had proposed that if a public holiday falls on a weekend then it would count towards their optional leave.  As MEA you had argued against this, and in fact the measure is yet to come into force.  Have your views on the matter changed, a year or so later?

Discussions with the government in this regard are still ongoing. The government on one hand is committed to sticking to its electoral programme to implement this measure; but on the other hand we are working to see what can be implemented as compensatory measures if this is indeed implemented.  For instance, the government could reduce the costs incurred by employers themselves or even provide financial compensation straight away. 

The fact remains however that in a country which already has a high number of public holidays, and a high amount of optional leave as well – we are amongst the highest in Europe in these regards – was this measure really necessary? 

At least, if they wanted to add time-off for people wouldn’t it have been better to split this time off for those who really need it? A more focused approach applying to people who, for instance, are have to care for their parents or children or those who need other family-friendly measures could have been implemented instead. 

This is why we need to see exactly what the end goal is.  We can’t say that we want Swedish family-friendly measures, but then also Maltese public holidays and optional leave.  We cannot pick the best of each country and expect that we can implement all of it here.  If this does happen, there will naturally be a negative impact on productivity and competition.

One of the biggest phenomena that is on the lips of many Maltese in recent months is the explosion of rental prices and the construction bubble, and many people have said that they simply cannot make ends meet.  Should the government intervene to do anything about the rental situation?

One of our proposals in fact centres on this idea.  Even the government itself has recognised that actual intervention into the rental market is very difficult, as after all this is a question of market rates.  Rent is indeed rising; but one must take into consideration that rent is a return on an investment.  If someone bought an apartment for €200,000 and is renting it out for €800 a month, the annual return is eventually just 3%.  Trying to reduce that return could result in problems on the supply in the rental market.

In relation to this subject, it’s also pertinent to speak about social housing as well. The policy relating to this has to be changed from top to bottom.  It is well known that in the past social housing was given out as a political favour; not to those who really needed social housing. There were also cases where government property was sold to the inhabitants at a low price, which they then shifted on to make more money.  Some properties which were meant to be social housing are now actually more luxurious than what was being sold in the private sector.  There is also the matter of perpetual entitlement to note.  If I have taken residence in a government flat, my entitlement means that nobody can remove me from there.  Therefore if, in the meantime my income, has risen so much that on my doorstep I have a luxury car and a cabin cruiser; I can still remain living in social housing. These are crazy things.

We think that these things have to change.  The whole dynamic of social housing has to change in such a manner to clearly show that this is a step that could be temporary till the inhabitant can get back onto his or her feet and own their own property or rent from the private sector. 

Shifting to a society that relies on the rental market rather than buying property could also have vast repercussions.  An example of where these repercussions could be felt is with pensioners.  It is common to hear that today’s pensions aren’t adequate; and there is a big difference between a pensioner who owns his dwelling and a pensioner who must pay €700 a month in rent for that dwelling.  That €700 a month in rent will eat up his whole pension.  This is something that isn’t just happening in Malta; it’s happening abroad as well. This is why certain people are ending up homeless; because despite the fact that they’d have spent their lives working, they still wouldn’t have enough to keep up with rental fees when they retire.  These are matters that definitely need to be addressed.