So­cial di­a­logue, eco­nomic per­for­mance and gov­er­nance

Ad­dress by Joseph Far­ru­gia Em­ploy­ers’ Del­e­gate at the ILO con­fer­ence in Geneva.

The Malta Business Weekly - - FRONT PAGE -

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.

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