Employers have ‘serious reservations’ over tapering of social benefits

The Malta Employers Association has “serious reservations” about the tapering of social benefits for beneficiaries returning to work.

In an address to the International Labour Organisation, Farrugia said the MEA supported the concept of ‘making work pay’, as long as this meant paying a fair remuneration for productive work.

But he said the MEA had serious reservations about the idea of tapering social benefits over a number of years to those unemployed for more than two years. “In a country which boasts a union membership in excess of 55%, this is achieved in most cases through the collective bargaining mechanism. Yet, an emerging view of this concept is that a decent wage is one that enables people to afford their aspirations, or a level of income that makes it worthwhile to abandon a lifestyle of living off social benefits… Taking up employment should never be considered as an opportunity cost to living on social benefits.”

Farrugia urged caution against tampering with Malta’s cost of living allowance, which raises wages according to the inflationary index. “It is already more generous compared to many other countries [and carries a serious risk of disturbing labour market relativities and cause wage inflation at a time when international competitiveness in many industries depends on a fragile balance.”

Farrugia said that in recent years, some EU countries had frozen and even reduced the minimum wage to maintain international competitiveness. “The best strategy to reduce the incidence of working poor is to have as few people as possible on the minimum wage through upgrading of skills and being sufficiently competitive to generate higher quality jobs,” Farrugia said.

The MEA director complained that the increase in employment in the public sector over the past two years, was draining labour from the private sector and causing persons on the unemployment register to refuse productive job opportunities in the private sector. “This phenomenon has contributed to the increase in foreign workers in recent years to address skills shortages in many areas in the private sector.”

Farrugia also supported the call from the International Labour Organisation for awareness of the impact of global migration.

Farrugia said 9% of Malta’s labour force was foreign, consisting of European Union citizens and Third Country Nationals from all parts of the world. “We fully support the principle that labour legislation should apply equally to all employees irrespective of nationality,” Farrugia said.

“In Malta, we are currently facing a situation of creeping unemployment. Yet, throughout the recession we have managed to maintain unemployment levels that still rank among the lowest in Europe. For an open economy with no natural resources, this is a great accomplishment which has been possible because of the strength of our social dialogue structures.”

But he said employers were very concerned of being drawn into territorial disputes between unions.

“Our position is that union recognition has to be based exclusively on tangible proof of membership by a majority of employees in one trade union. Fiddling with this fundamental principle will risk negative repercussions on investment and job creation.”