Issue link: https://maltatoday.uberflip.com/i/1481355
14 OPINION maltatoday | SUNDAY • 9 OCTOBER 2022 Jerome Caruana Cilia Living in Malta (the cost of…) WE have heard a lot and will still hear more about the mechanism for compensation for the in- crease in the cost of living, or, as it is called, COLA (Cost of Living Adjustment). This term imme- diately raises several questions amongst which are – is COLA a just mechanism as compensation for the increase in the cost of liv- ing? Can we have a decent wage with COLA? Even after receiv- ing COLA, can we lead a better life when essential products are constantly increasing in price? In essence does today's COLA com- pensate for the cost-of-living in- crease as it is supposed to? The PN is clear and precise; it is essential to talk about the COLA mechanism so that workers and professionals can live better fi- nancially, but as importantly, we need to drive the need for invest- ment in new economic sectors which create growth. In this way, not only will we be creating high- er quality jobs, but value-added ones which pay better. In turn, many workers will progress their careers and social mobility in our country will increase. We have seen this happen in the past, when new and exciting sectors were created: the finan- cial services sector, gaming, mar- itime, aviation and pharmaceu- tical sectors, among others. All these sectors still employ thou- sands of well salaried and re- spected workers and profession- als. There was a process, which lasted years, to introduce each sector, but there was a clear eco- nomic vision. This process led to a strong, diversified, and resilient economy. This economic vision, together with the hard work of the labour force and the courage and wisdom of entrepreneurs re- sulted in our country being able to grow as a nation and weather the several crises we faced. There is still much more to be done in this regard. The Government must not hold back from creat- ing new economic sectors in our economy. This is critical to our surviving this round of crises. Every year, when budget day come around, there is always the same question: how much is COLA going to be? If we look, at how much COLA amounted to from 2000 till today, we find that the highest COLA per week was €5.82 in 2010, with the low- est one being €0.58 per week in 2015. As expected, this year the dis- cussion has become sharper. At a time when there is a record rate of inflation, the squeeze is being felt by most individuals, whatev- er their role and responsibilities and industries, not matter the line of business. According to the data released by the National Statistics Office (NSO), the rate of inflation in Malta in August of this year reached 7%. What we must note is the fact that prices which increased the most were those of essential food products. This higher cost of living affects everybody but particularly more those who are vulnerable and have less spend- ing power. During the Government pre- budget document presentation, the Minister of Finance con- firmed that the compensation for the increase in the cost of liv- ing is going to be between €9 and €10. These figures have been do- ing the rounds for several weeks. Everyone has an opinion. There are those who argue that this amount is not high enough and does not compensate. On the other hand, employers insist that they cannot afford to pay employees these increases. It also seems that there is a clear and present fear that increases in operating costs will be passed on to and carried by consumers, thereby causing inflation to grow further. A survey conducted by the Mal- ta Employers Association (MEA) clearly shows that about 72% of businesses intend to pass on part or all the increases related to operations, to the consumers. When asked, "How are you going to handle the increases in oper- ating costs?", 50% of the busi- nesses replied that they are going to pass on part of these costs to their clients. 22% of the compa- nies replied that they are going to pass on all the increases in op- erating costs to their clients and consumers. Only 28% of com- panies taking part in the study said that they themselves would absorb all the increases related to operations. It is worth looking at some of the challenges that employers are going to face in these circum- stances. According to a study conducted by the Malta Cham- ber of SMEs earlier this year, employers are facing many chal- lenges, mainly an increase in op- erating costs: cost of overheads, imports cost and cost of supplies, inflation in general and wage in- flation among others. According to the latest pre- budget survey of the Malta Chamber of SMEs, the greatest challenge faced by businesses (a little less than 45%) is related to the shortage of workers on the market or of workers who do not have the required skills - labour shortage and low skills. The latter issue can lead to a different chal- lenge related to talent retention in certain sectors, which general- ly leads to an increase in salary in these same sectors creating fur- ther pressure on employers apart from the annual COLA increase. This increase, coupled with other expenses, could easily re- sult in the subsequent decrease in competitivity of companies to the detriment not only of the Maltese entrepreneurs but of the country itself. This decrease in competitivity has already been flagged on many an occasion as it also places our potential to at- tract Foreign Direct Investment (FDI) which is one of our econo- my's major bloodlines. These circumstances have caused many to ask whether the mechanism of COLA, which was agreed to about 32 years ago, is still valid and if the process still makes sense today. I want to make it clear that I have insisted that the existing mechanism should be used in this budget and there should not be any ad-hoc changes a few weeks before the budget pres- entation. But it is necessary, that in a serious and mature way we should be forward looking to make sure that any compensa- tion mechanism to combat the increase in the cost of living is both just and correct in today's circumstances. In these exceptional circum- stances, the Forum of Maltese Unions, the General Workers Union, the Confederation of Maltese Trade Unions and the UHM Voice of the Workers have also issued a joint statement ask- ing the Government to discuss a new cost-of-living increase mechanism. In a united front they are presenting a proposal through which the COLA mech- anism can target situations like these, ensuring justice for work- ers as well as employers. These representatives of thousands of workers insist that they are pre- senting this proposal with re- sponsibility towards their mem- bers and also to safeguard the sustainability of jobs. Therefore, the PN is recom- mending and also supporting all parties within the Malta Council for Economic and Social Devel- opment (MCESD), in the follow- ing: • The existing COLA mech- anism should be used for Jerome Caruana Cilia Opposition spokesperson for Finance