How Malta survived the global recession

A new study by University's Centre of Labour Studies throws light on how Malta managed to avoid job losses during the crisis.

According to the report, employers seem to have adopted a "labour hoarding approach" by cutting non-labour related costs or through a reduction in overtime and natural wastage.

"This aspect along with the state aid to several relatively large manufacturing firms prevented mass redundancies".

The manufacturing and hospitality sectors (HORECA) were the worst affected by the recession.

Labour productivity and total employment in the manufacturing industry picked up in 2010, while the HORECA sector recovered a 15.9% labour productivity after a 4% reduction of its total workforce over 2009.

On the other hand, labour productivity in the financial services and banking sectors, have a high value added increased by 31.3% in 2009 and by 44.9% in 2010, while registering a 5% increase in total employment.

According to the report, the effort of the social partners to mitigate the crisis paid off.

"The government's intervention in helping manufacturing firms during the crises, assured that the workers could reclaim their full pay in a relatively short time without incurring mass redundancies".

The study refers to the trade-off between saving jobs on the one hand, and labour cost-cutting measures complemented by government financial aid for investment on the other.

One such case was the Swedish Trelleborg Group, which this year marked its 50^th anniversary of production in Malta.

The company, which produces O rings for the car industry, employed 562 employees in 2008. In 2008, the company experienced a significant decline in demand due to the downturn in international car sales. It cut down on overtime and changed from a three- to a two-shift work schedule. At a later stage the company decided to switch to a four-day week production and dismiss 25 workers, after negotiations with the GWU.

In early 2009 the company informed the GWU that it was planning to shed 102 employees and to switch to a three-day week again. These jobs were saved by the intervention of the Government Task Force, after which Trelleborg Malta decided to invest around €2 million in bringing new production lines to Malta.

The company in the meantime returned to a five-day week with the fifth day reserved for a 17-week employee training programme financed by government. The company's workforce has since then increased and it currently amounts to circa 600 persons.

A further recruitment of about 50-100 persons is expected if its research facilities are moved to Malta in the next year

Overall the nominal average annual wage maintained its slight increase in 2008 and 2009 mostly due to the COLA. However it decreased by 0.5% in 2010, which to a certain extent permits employers to recoup profits lost during recession, in time of economic upswing.

The report based on a questionnaire by the European Working Conditions Observatory (EWCO) and published on its website is authored by  Louis Grech and Anna Borg from the Centre for Labour Studies of the University of Malta.