Christian Welz, the research director at the European Foundation for the Improvement in Living and Working Conditions, was addressing the annual general conference of the Malta Employers’ Association which had the theme Generating Productive Employment – A National Priority.
He explained that experiences in other countries have shown that social pacts had a positive impact on the country that introduced them.
He said his presentation was based on the analysis of the social pacts in the 15 EU member states and Norway. Social pacts, or pacts for employment and competitiveness, can be best described as innovative collective agreements which use social dialogue as their primary tool. Mr Welz said social pacts in the EU15 were “quite successful”. Social pacts had been established in practically all EU15 except for the United Kingdom, which is the only country that does not have a social pact for the national and sectoral levels.
Mentioning Finland as an example, Mr Welz said this country decided to sign and adopt a social pact in the early 1990s, when its employment level stood at a staggeringly low 22 per cent. After adopting the social pact, the country flourished.
He said the social pacts in the EU15 concentrated on four specific issues: re-distributing work, cutting costs, giving the required boost to productivity and improving the employability prospects of redundant workers. On the motives behind the introduction of social pacts, Mr Welz said the government tried to encourage social partners to take greater responsibility for employment issues. The individual governments also encouraged social dialogue.
“Social pacts worked best where the government acted as an honest broker. Maybe your Malta Council for Economic and Social Development could fit in as an honest broker but that is up to you to evaluate,” Mr Welz told the employers.
Mr Welz also spoke about three prerequisites to concluding a social pact. These were: a consensus about the need for change, mutual recognition and a trust relationship between all signatories of the social pact and the “give and take attitude” whereby one is prepared to give up something in return for something else. He said the right approach is one of communication, involvement and the importance of finding joint solutions.
He concluded his presentation with a final thought: “Prevention is much better than cure. If you don’t act now, it might be too late and the problems will then overcome you.”
Productive employment
Inevitably, the president of the Malta Employers’ Association Arthur Muscat spoke about the need to generate more productive employment and more productive economic activity. The real solutions will only come from the coordinated effort of all social partners to face the difficult issues and take tough decisions, he said.
He obviously spoke from the point of view of an employer and did not mince his words: “The least we expect from parliamentarians, politicians and legislators is to stop burdening employers with unnecessary, complicated legislation, inevitably dished out in the guise of social advancement. Employers are not helped by legislators who do not seem to understand what goes on in the real world of work. Laws, rules and regulations are approved with hardly any consideration of implementation costs or how much these costs will affect the business.”
He continued: “There seems to be no realisation that an additional marginal cost can mean viability or non-viability of a business. Stop telling employers to generate employment while, at the same time, adding burdens and obstacles which makes life more difficult.”
Mr Muscat said that the generation of productive employment calls for the opportunity to achieve a social pact – an opportunity to bring together unions, employers and the government in a tri-partite exercise of dialogue.
“It is not going to be easy to achieve this goal. It will have to be a social pact with valid incentives for real economic growth. There is no better venue than the MCESD for such a task. Other EU countries have made it and there is no reason why Malta should not. Care must be exercised to avoid a flawed and patched up social pact. It has to be a holistic agreement which makes economic sense – all the parties must accept that, in the long run, only the affordable is feasible,” he said.
MEA’s proposals for a social pact for Malta
During yesterday’s conference, the MEA presented its proposals for a social pact for Malta which are also the MEA’s proposals for a national strategy to generate productive employment.
The document is based on the principle that only growth of the private sector can offer a solution to the country’s economic problems, and only by addressing these economic problems can the country generate sufficient wealth and growth to increase the standard of living of its citizens.
“The MEA supports the setting up of a social pact that will consist of a tripartite effort to address the major economic issues. However, the social pact is a tool and not an end in itself. Even if a social pact does not materialise, the problems still have to be faced,” the report says.
The report mentions problems the country was facing, such as the low level of foreign direct investment, the rising level of unemployment, unsustainable welfare systems, the public fiscal deficit, the low labour participation rate and the country’s overall competitiveness.
Proposals include an effort to reduce the size of the labour force in the public sector from the current 34 per cent to around 27 per cent, which means a decrease of around 12,000 jobs by 2008. If this target is reached, the wage outlay could possibly be reduced by approximately Lm50 million. This will contribute to the reduction of the fiscal deficit without the need to raise taxes.
The association also suggested that wage increases are to be given in the form of bonuses linked to the Gross Domestic Product. Other proposals include curbing unemployment benefit abuse, training those people who are registering for unemployment, introducing incentives to increase female participation as well as the setting up of child care centres at subsidised rates. The association also suggested that those registered unemployed will have to accept employment opportunities related to their line of work, otherwise they will be struck off the register.
The MEA also proposes that public holidays falling on weekends should not be added to the annual leave entitlement and also calls for a commitment by government to reform port charges which, the association said, are unnecessarily high.
The association also suggested the complete evaluation of government systems, in order to reduce bureaucracy and red tape, as well as the adoption of a pro-business mentality in all government departments. It also spoke about curbing recurrent expenditure, the reduction in corporate tax, the reform of rent laws and curbing tax evasion.
The report concluded that the recommendations do not imply that the country is at a standstill. “The success or otherwise of the economy will depend on the extent to which productive jobs can be created, a restructuring of the economy, the absorbing of surplus labour from the public sector and the provision of opportunities to new entrants in the market.
Three major issues
Addressing the conference, Employment and Education Minister Louis Galea said there were three fundamental issues which would bring the country closer to the creation of productive employment.
He said the first major issue was the need to accept the critical importance of knowledge and to harness its benefits. We must become learning organisations if we are to compete on quality, he said. Knowledge is becoming the main source of wealth and power and of difference between people, companies and nations.
“Innovation based on knowledge is the main competitive advantage today. Competitiveness means answering the personal needs of the customer, which requires sophisticated knowledge management. We need to actively develop the relationship between marketing, research and production,” he said.
The second major issue Dr Galea mentioned was the need for entrepreneurs to be able to exploit knowledge. “The business environment must be conducive to start-ups and the development of small- and medium-sized enterprises in both traditional and emerging sectors. This is critical for the vitality, productivity, and innovative capacity of our
economy,” he said.
The third and final major issue Dr Galea addressed was the importance of making the most of our labour supply in order to promote a better balance between work and family life. We have a solid infrastructure for labour law, he said, but it is within the employer’s power to go beyond the law and offer conditions of work that best meet the needs of both the organisation and its employees.
“These are but three of the many issues that bear upon the creation of productive employment. The employment situation can only improve if the private sector grows and prospers.
“Becoming more competitive and innovative will require us to not only accept the importance of knowledge but to act upon the need for lifelong learning at individual and corporate levels,” he concluded.
Employment target
In order to meet an employment rate target set for Malta by the European Union, Malta has to create a staggering 30,000 jobs by 2010. However, ETC Strategy Department general manager Sue Vella said the corporation was taking 10,000 as a “good enough target”.
In a very interesting presentation, Ms Vella stunned her listeners with a table which compared the average of the EU15 with Malta’s position so far. The average number of early school-leavers in the EU15 stood at 18 per cent. In Malta, this figure stands at an astounding 48.5 per cent. Another worrying statistic given concerned 22-year-olds who have achieved an A-level standard of education. Malta’s figure is 47.5 per cent while the average in the EU15 is 75.6 per cent.
Ms Vella said the EU had established a number of priorities for Malta with regard to employment. These include raising female employment to 60 per cent, increasing child-care facilities, reforms of tax and benefit systems for work incentives, raising the levels of education, addressing the skills mismatch, reducing early school-leavers and involving the social partners in the development of educational training schemes.
Ms Vella said that by the end of this month, Malta’s National Action Plan will be drafted and presented to unions and other social partners for discussion. By the beginning of October, this report is expected to be submitted to the European Commission.
During question time, Ms Vella said that a scientific study carried out among 1,000 inactive women revealed that the majority of people questioned said they would like to work but mentioned concerns such as tax and other issues.