The cost of living adjustment, estimated to be in the region of €5 to €6 per week, is set to cost employers a staggering €38 million at a time of economic crisis, while jobs are at risk in strategic sectors such as tourism and manufacturing.
As finance minister Tonio Fenech announced last week that government is not intent on making any changes to the mechanism that triggers a cost of living increase for workers to compensate for inflation during the previous year, employers have issued yet another stark warning that hundreds of jobs are at risk as from October.
“It is absurd to see that the good efforts made to safeguard jobs during this last difficult year will be literally thrown out of the window,” said Joe Farrugia, Director General of the Employers Association.
Speaking to Business Today, Farrugia explained that the worst part of the situation is that many countries in Europe are starting to exit the crisis, while Malta will be driving itself straight into a bigger crisis.
“I just cannot understand how government is not seeing that companies cannot afford to increase their wage bills to pay out such high compensation, and worse, for government induced inflation.” Farrugia explained that the Employers Association is currently preparing a study on the severe impact on jobs should next years budget include the projected €5 to €6 per week compensation for each employee.
“The figures are difficult to tell, but we know for sure that many companies who have struggled throughout this year, will definitely make hundreds redundant before Christmas,” he said.
“Factories have no orders, exports are down, production is down, everything is practically at a standstill, and government insists that the cost of living adjustment should not be touched. It’s absurd!”
He explained that companies are cash-strapped and credit from banks is difficult to obtain, while employers are trying to keep their companies afloat by re-mortgaging their assets and adding to their over-stretched overdrafts.
“We will face mass unemployment if government and unions are not careful,” he warned.
Meanwhile trade unions are adamant on keeping the current cost of living adjustment mechanism, especially the forecasted weekly compensation for 2010.
While the finance minister explained that there will be no talk of changes to the current COLA system unless there is unanimity between all social partners, this possibility appears all so bleak, given that unions are insisting that workers have suffered the brunt of inflation during 2009 and therefore they should be compensated.
General Workers Union secretary general Tony Zarb insists that should the employers find it difficult to accept the prospected COLA increase, “they should complain with government, and not with the unions.” “Our members have worked hard, and survived hard through 2009, so now its time they get compensated,” Tony Zarb said.
Social partners are set for a showdown in the next scheduled meeting of the Malta Council for Economic and Social Development (MCESD) on August 21, when employers and unions will react to the government’s pre-budget document.