Comment | Wednesday, 21 October 2009

COLA: the greatest of challenges

The Cost of Living Allowance (COLA) mechanism which is currently the subject of controversy due to the rise in the cost of living in 2008 principally due to higher energy costs lies at the heart of our political as well as of our economic existence.
The mechanism comes into play whenever inflation devalues wages. Because it works with a one-year delay, employees always lose out. If the increase is granted in the following year they will have achieved inflation proofing for the immediate future but as far as the year in which the discrepancy is detected is concerned, that passes unattended under the bridge.
Employers who are complaining bitterly about the significant rise due to employees in 2009 have always had a built in advantage in the mechanism. Whatever it is that raises the cost of living they and their bottom lines are immune from it in any given year.
This year the rise due is significant, a serious bump in the road and employers and industrialists are raising the spectre of mass unemployment if it is granted.
What do they expect employees to do? As things stand the energy crisis has taken a huge bite out of their earnings. Do employers expect their workforce to absorb it all as though economic trouble of whatever source is just their problem?
If that were to happen, it would set a precedent and a course for progressive impoverishment of every employee. There are no two ways about it: that and a future of industrial strife in which the relative strengths and weaknesses of employers and employees are tested at regular intervals. That may be a scenario we should all religiously avoid.
As things stand, we are unable to avoid a head-on collision. Rather than a standard industrial relations failure which will eventually be resolved in one way or another, we have before us a fight for the system, to end it or to preserve it. The fact that major layoffs may be the consequence of success for employees only adds to the complications.
The government comes into it because it determines the budget and effectively controls lawmaking. It could change or dismantle the COLA system. However it has other means at its disposal to compensate for employees’ losses and to prevent them.
Only too late the government has discovered the threats to us all from climate change and the need to find less crucifying sources of energy. Had this been our governments’ quest for the past few decades we would not be facing this employer/employee stand-off.
Keeping energy costs low is only part of the solution. Keeping costs low in general should be the aim of every government in order to avoid upward pressures on wages and keep us all competititve. How much do we all spend on transport that we can avoid? What if we had a state-of-the-art transport system to remove the burden of car ownership from all our bottom lines? How much more productive would we all be if the government took the trouble to streamline its interface with business and with the public?
In order to apply for children’s allowance every wage-earner in the family must file an updated history sheet from ETC with the Social Services Department. Why should that be necessary? Even if the computers of the two government entities are not linked why not have the form include a waiver for the SSD to access the ETC data and have done with it? Every employee wasting time to chase bureaucratic errands is losing rest or work time in both cases affecting his or her productivity. The instances of failure or defect in the system are myriad.
The point is that it is not employers and employees alone who have to face the crisis brought on by the sudden rise in oil prices followed by a drop in demand because of the financial crisis. This is far from being an industrial relations crisis or an economic crisis alone. It is a crisis which government faces because it was unable to anticipate it; because not enough has been done to set up mechanisms to reduce the coat of living at every turn.
In the event something will have to be done about it and everybody will have to give something up. Nobody will enjoy the process nor delight in the result.
It would be a great help if we could be imaginative: how about compensating for COLA losses through a major investment on alternative energy granting greater subsidies to those who invest in photovoltaics and better rates for all who produce their own electricity?


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21 October 2009


Malta Today


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