In recent years, the start of autumn, which is the time when pre-budget consultations hot up, also finds the social partners taking conflicting positions on the subject of the payment of the Cost of Living Allowance, or COLA. Thus far, these discussions have always ended inconclusively. Never as much as this year has the payment of COLA generated so much ire among employers.

The protagonists in the ring

As doomsday approaches, the representatives of employer organisations paint scenarios. Their insistence is on a linkage between wage increases and productivity. The argument goes that unless COLA is linked to productivity, employers might have to lay off workers. Of course in a recession, with slowdown in demand, entrepreneurs cannot afford to forego even a marginally bigger portion of smaller profits.

On the other hand, unions insist that inflation cannot be permitted to bite off too big a chunk of low earnings. They claim, justifiably, that if anyone is to blame for inflation, it is certainly not those in employment. The fact is that COLA is compensation, at minimum wage level, for past inflations. The implicit argument is that COLA within the existing parameters is not harmful and a far cry from the old scala mobile in Italy.

Government: just a spectator?

In each yearly round, the government appears to be just a bystander. This is just not good enough. Governments are elected to promote the interests of society as a whole. Abdicating their responsibility to act as a catalyst between the opposing views of the social partners may be politically convenient in the short-term. It is hardly ever warranted in the long-term interests of the electorate as a whole, which expects governments to lead from the front. Doing nothing is never an option for politicians claiming a sense of mission.

Azzjoni Nazzjonali sees matters in a different light. It is not afraid to put forward ideas it deems to be in the interests of Maltese society as a whole. The budget announcement of a one-stop shop to cater for the needs of the commercial community is one that Azzjoni Nazzjonali had proposed in its electoral manifesto. Our COLA suggestions too may yet be adopted when the time is ripe.

In the party’s electoral manifesto for the 2008 general election, we proposed a palliative if not a solution. Because it is convenient for sections of the media to brand Azzjoni Nazzjonali as a far-right movement instead of appreciating, or at least correctly reporting, the right-of-centre stance it consistently takes, the proposal elicited no formal reaction, even from those who should be interested. What we had proposed then was that COLA should be linked both to the rate of inflation as well as productivity and would be paid only when the rate of inflation exceeded two per cent. When in any one year inflation was lower, it would be added to the following years rate and if the two per cent threshold were exceeded, then COLA would be paid.

The demise of the wages councils

People have to understand that in Malta we effectively have two categories of workers under a contract of service, whether written or implied. The minority of workers are unionised, the majority are not. Collective agreements that establish wages/salaries and other conditions of service are only in place in the larger enterprises and so cover only a part of the unionised minority. The demise of the tri-partite wages councils has removed an important element of protection to non-unionised workers and to those in small enterprises where unions are not very effective. In their absence only the law can give rights to, and protect, the majority of workers.

This is one reason why unions find it difficult to give up their insistence on the payment of COLA to all workers. They fear that otherwise many workers would go to the wall. Can their anxieties be assuaged? Certainly, but not by taking on board the employers’ present stance on productivity-linked wage increases only. Given the small size of the majority of enterprises, independent assessment of productivity would become a management nightmare.

Azzjoni Nazzjonali on COLA

This is the beauty of only paying COLA when inflation cumulatively exceeds a certain figure, say two per cent. Inflation of this order, other than at the minimum wage level, can be absorbed for short periods. This is what Azzjoni Nazzjonali had proposed. With some refining, the arrangement should satisfy the concerns of the social partners and ease the road towards a social pact.

We therefore suggest that:

a. when inflation exceeds one per cent but does not exceed two per cent, COLA will be paid only to minimum wage earners and to other workers who might otherwise fall below the new minimum wage;

b. Inflation not exceeding two per cent in any one year to be rolled over to the next following year and subsequent years until the two per cent inflation is exceeded, when COLA would be paid to all (less any amount already paid in the case of those in (a) and subject to the conditions in respect of those in (c);

c. Where conditions of work are regulated by a Collective Agreement, COLA or a portion thereof should only be paid so that at any one time the wage/salary increase receivable would never be less in the aggregate than the amount of COLA.

d. In the continued absence of a Guaranteed National Minimum Pension of at least 60 per cent of the average national median income, the existing arrangement for an annual increase of pensions should not be disturbed.

In the national interest, the government should initiate discussions with the social partners to obtain their acceptance of a formula on the lines of that outlined above. Amendment of the Employment and Industrial Relations Act should then follow. Hopefully, by September 2010, this problem would have been put to rest as far as workers are concerned.

Good ideas are independent of origin

The word honesty has been a feature of this budget debate. To the cynical, it is a mere ploy. To those who vaunt that they are giving a service to the nation, it should mean something else. I very much believe that Azzjoni Nazzjonali’s electoral manifesto contributed some very relevant ideas. They are there to be discussed and utilised. Ignoring them, simply because their origin may be inconvenient to some, is not in the interest of this tiny nation and its citizens.

Dr Muscat is Leader of Azzjoni Nazzjonali