Issue link: https://maltatoday.uberflip.com/i/1505128
9 INTERVIEW economic direction To put that another way: some companies can absorb CO- LA without any problems. You mentioned the i-Gaming sector, for example. What's a €13 week- ly wage increase to them? Not 'nothing', perhaps – it's always an added expense - but let's face it: for that sort of company, it is not really much of an issue. But for a company operating in, for example, low value-added manufacturing... an automatic increase of €13 – possibly, on top of other increases that are linked to collective agreements – will force those companies to rethink their pricing-policies. They might even end up having to rethink their entire operation- al organisation, as well... On that note: the MEA is current- ly calling on the government to "provide a sense of direction and economic vision in light of challenges facing employers". What does that actually mean in practice, though? Short of government interference in private salary-structures; or the imposition of some kind of 'price-control' system – both of which, as far as I am aware, are illegal – what can government actually do, to avoid this 'dan- ger'? Well: let me throw out a few ideas. Last year, employers were asked to issue an extra €9 a week, in the form of COLA. Now: I stress that it is the EMPLOYERS who pay COLA; because many people still think that it is paid by government. Not true at all. Government gives out nothing; it is the employer who pays the cost-of-living adjustments. This is something we need to make people understand. But in any case: those extra €9 are issued with the express aim of compensating for inflation. But out of those €9, 10%-plus- tax are taken by the exchequer, by way of national insurance and taxation. So in reality, the employer pays €9 to the employee; but between €3 and €4 go to the exchequer. Here, I think, should be our starting point. As of next year, the COLA adjustments should be exempt from all tax and NI deductions. Because if the employer is be- ing asked, as part of the COLA agreement, to compensate em- ployees for inflation... then that compensation should be pure- ly for inflation; and entirely for the employee. It is not fair to have part of that compensation passed onto government, by way of taxation. This year, for instance, it's been calculated that around 50 million went into government's coffers, from COLA alone. I, for one, don't think that makes any sense. I see your point; but I don't re- ally understand how it would help the employers. Let us, for argument's sake, assume that next year's COLA will indeed be tax-exempt, as you suggest. What difference will that make, to an employer who still has to pay out the full €13 anyway? It would help reduce further claims for wages. Because if an employee's purchasing power goes down by, say, €13 a week... but in his pocket, he is ending up with only €9... what's going to happen? The employee will probably make further demands to be compensated; or else, will shop around to find alternative employment. Therefore, giving out the full COLA compensation – without tax deductions -- would be a good start, to prevent further wage claims in future. But it's only a start. Part of those €13 could also be given out in the form of tax credits. You could have a fiscal intervention to assist those who are worse off; because even if the government gives tax credits, there is a section of low wage-earners that do not pay any tax. It wouldn't really elevate their situation; so there could be fo- cused fiscal interventions, to help those who are more in need. There is also the stability mech- anism we suggested last year. That proposal is still on the ta- ble... even though I think we should commit ourselves that, for 2024, everything should stay the same. Because it wouldn't be very fair on the employee, to in- troduce a stabilizing mechanism now: when we already know the COLA amount will be higher than the proposed maximum. I understand that; and I want to be fair with all parties. But in principle, there should be this kind of stabilization element... These proposals may relieve some of the pressures faced by employers. But there is one as- pect of the MEA's criticism that cannot be so easily resolved: Malta's dependence on foreign labour. Once again, the MEA is calling on government to 'do something' about this situation; but – even if it were possible (which it isn't) to just 'kick all those foreigners out' – what can be done about the DEMAND for those workers? Number one: we are not sug- gesting 'kicking people out'. Sec- ondly, we're not talking about 'turning the clock back', either. The reality is that you cannot turn back; we are, where we are. Thirdly, we need to dispel the myth that many companies pre- fer to engage foreign employees, over Maltese. That is nonsense. The cost of employing foreign employees, far outweighs the benefits. There are permits, which take a long time to be is- sued; you need resources and ad- min; and generally, foreign em- ployees don't stay for a long time with one company. So it's not as simple as saying that: 'foreign em- ployees are cheaper than Maltese; get me someone from Nepal.' It doesn't really work like that, in practice. Perhaps. But there is another 'myth' about foreign workers in Malta: namely, that they are hired to do the sort of work that most Maltese employees no longer want to do... Is that really a myth, though? I was about to ask you that very question myself... I would say it's mostly true. Un- fortunately, the public sector has absorbed a significant number of unskilled/semi-skilled people, on the basis that – given a a choice between a job in the public sector (where maybe you can clock out at 11am), or else, a private-sec- tor job washing dishes for more or less the same remuneration... what are most people going to choose? They will aspire for the easy life. That is what is happen- ing to us now; and it has been happening for ages. Also, bear in mind that in some sectors – especially, health - the demand for certain services is ballooning, is step with our pop- ulation. As the population grows, there is higher demand for nurs- es, care workers, doctors, and so on... and the local labour supply cannot keep up with the demand. Now: if the population contin- ues to expand, a higher percent- age of Maltese will be absorbed into these essential, public-sector services. So we could end up in a situation where the public sector would employ 25% of the total labour force... but because of the sheer amount of foreign labour, the public sector would effective- ly be employing more than 50% of the MALTESE [emphasised] labour force. And this also means that in the private sector, we will end up with most employees being of non-Maltese origin. Now: to be clear, I am not bringing this up out of any 'xenophobic' con- cerns. Quite frankly, xenophobia doesn't concern me, at all. What employers are concerned about, however, is whether they will have people to actually employ. And it is for this reason, that we need to have a discussion about the direction this country is tak- ing. We need to ask ourselves: 'Listen: what are we really aspir- ing to, here?' Because even when one mentions that the population is going to keep on expanding.... what message does that give to the construction sector? If you are a contractor, what does that tell you? 'There's a market; keep on building!' Whereas if we say: 'Listen, we are going to hit the brakes; we are going to rationalise the Maltese labour force; we are going to try to reduce the dependency on for- eign labour'... once again, I'm not saying 'kick them out'. But if there is a turnover for each labourer, every one or two years: it means that you don't need to replace every single employee that leaves. That way, we can control the population of foreign employees in Malta. But for that to happen, the country needs to be given a clear economic vision, and a sense of direction. And this, ultimately, is what we are calling on govern- ment to do. maltatoday | SUNDAY • 6 AUGUST 2023