Social dialogue, economic performance and governance
Address by Joseph Farrugia Employers’ Delegate at the ILO conference in Geneva.
In the report on Social dialogue and tripartism presented for this year’s conference, social dialogue is ‘regarded as a means to achieve social equity, economic efficiency and democratic participation’. Malta is a good example of how strong tripartite social dialogue structures have contributed to economic growth. The social partners were key players in the debate to join the
European Union in 2004. Their role was essential in identifying and recommending policies to mitigate the negative impact of the international recession a few years later, and these policies were successful in keeping the country out of recession and minimising unemployment. In 2012, a Jobs Plus agreement was signed by social partners which focused on intensifying active labour market policies to increase the labour participation rate. In 2017, a historic agreement was signed which guarantees that any employee will not remain for more than one year on the minimum wage if employed with the same employer.
Malta also has an inclusive working environment, with significant progress made over the years in the rate of employment of minorities. I am optimistic that the current heated debate on the Equality Bills in Malta will result in a positive outcome for all parties concerned.
All these initiatives have yielded positive results. Since joining the EU, average GDP per capita has increased from less than 75% of the EU average to 95%. Malta has one of the lowest unemployment rates in the EU. There has been a healthy increase in female participation rate – driven both by positive incentives and economic necessities – and yet the increase in domestic labour supply could not keep up with the rate of job generation. The shortfall in labour supply in the private sector – which is partly being caused by an increase in employment in the public sector - is being matched by an influx of foreign labour, both from inside and outside of the EU, to the extent that in the private sector, 30% of employees are nonMaltese. This momentum of real GDP growth in excess of 5% in 2017 has improved the state of the country’s finances, with a fall in public debt to 51% of GDP from a high of 70% in 2011.
In spite of these positive indicators, the country still faces serious challenges, some which are a consequence of its economic successes, others which are self created. The Malta Employers’ Association believes that an essential imperative is that the current level and types of activity should not come at a cost of placing at risk the country’s economic sustainability.
Malta is undergoing a period of rapid demographic change, mostly brought about through the influx of foreign workers, and, given Malta’s geographical limitations, this is resulting in an overheating of the property market, which, in turn is becoming a major cause of wage inflation which is not backed by productivity. Employers are calling for a long-term strategic approach to such a radical social and economic transformation, to have a managed transition that will address the pressure that this expansion in population has on the social and physical infrastructure, our education and health services and natural environment.
Our main growth sectors – gaming and financial services - are inherently volatile and heavily dependent on our international reputation and rigorous corporate governance. Unfortunately, recent events involving financial institutions of ill repute and high ranking politicians are placing our reputation, and economic future, at risk. The brutal assassination of Daphne Caruana Galizia, Malta’s foremost investigative journalist, has left an indelible mark on the country’s social fabric. Our governance is also being undermined by having members of parliament occupying executive positions in public entities, thus creating a serious conflict of interest between their legislative and executive roles.
The changing nature of jobs is also an issue which calls for the involvement of the social partners. Malta still has a worrying incidence of early school leavers which threatens to make us ill prepared for the demands of an increasingly digitised economy in the coming years. In the EU, it is estimated that between 25% and 45% of employees are either overqualified or underqualified for their jobs, which underscores the importance of educational policies that calibrate as much as possible educational attainment with the needs of an ever changing industrial environment.
A pre-condition for successful tripartism is a bottom up approach to socio-economic matters that involves all social partners, at national, regional, and global levels. It is regretful that during the ILO conference this year, a bad example has been set as the ILO office has openly expressed support for the Swedish Global Deal without seeking, let alone obtaining, the approval of its constituents. Clearly, this goes contrary to good governance and also contradicts one of the four strategic objectives of the ILO – that of social dialogue and tripartism. The Office should explain why and how such an instrument has been developed without any involvement of employer organisations. Employers worldwide, Maltese employers included, cannot be obliged to accept commandments coming from a Swedish Moses! This top down approach is uncharacteristic of the ILO, particularly coming on the eve of its hundredth anniversary, which is a landmark of numerous positive achievements that have, through social dialogue, shaped the world of work world-wide.