Employers are set to confront government over Malta’s diminishing competitive edge, particularly in the manufacturing industry, as Central Bank statistics have revealed that the country’s unit labour costs accelerated during the first quarter of 2009, increasing with the annual rate of 4.7 per cent, compared with annual growth of 3.5 per cent during the previous quarter.
Speaking to Business Today, Malta Employers Association (MEA) director general Joe Farrugia warned that should the current trend persist, “then a lot of trouble is around the corner and many jobs are set to be lost.”
Employers are to meet Prime Minister Lawrence Gonzi and Finance Minister Tonio Fenech together with other social partners next week for another MCESD meeting that is scheduled to discuss the Pre-Budget Document for 2010.
Joe Farrugia stressed that the figures released by the Central Bank continue to confirm employers’ preoccupations that this trend has become unsustainable and is leading to many manufacturing firms to close, lay off workers, and shift their operations to other countries with cheaper labour costs and higher productivity levels.
“Unfortunately government is not understanding the implications of the situation that in real terms is continuing to erode Malta’s competitiveness, and the prospected Cost of Living Adjustment (COLA) estimated to be in the region of €5 to €6 per week to make good for last year’s inflation rate will continue to generate further complications to an already difficult situation,” Joe Farrugia said.
He explained that the Employers Association has been constantly warning government of the implications connected to the further increase in labour costs against a diminishing rate in productivity, adding that the COLA issue “confirms the distorted economic scenario.”
During next Tuesday’s MCESD meeting, the social partners are expected to hold a discussion on the contents to government’s strategic plan that aims to safeguard jobs and competitiveness.
“At this rate, any effort to protect jobs will all go to waste,” Joe Farrugia said.
According to the Central Bank of Malta Quarterly Review, “the deterioration in labour market conditions appears to have exerted downward pressure on compensation growth, which eased slightly from the 3.6 per cent annual growth rate registered in the previous quarter, while the decline in labour productivity reflected the abrupt slowdown in economic activity,” the Central Bank said
The statistics sound an alarm bell to the general Maltese economic scenario, as the rise in Malta’s unit labour costs was more pronounced than that in the euro area as a whole, where an increase of 3.9 per cent was registered, the result of an increase in compensation per employee of 2.8 per cent and a decline in labour productivity of 1.1 per cent.