Employers’ proposa

It is customary to present government with a set of short-term measures, as part of the usual consultation process with the social partners, for consideration in the national budget. The Malta Employers’ Association believes that, in as much as this consultation is important, more than ever before such proposals have to fit within the wider context of a longer term vision for the economy and our society. We urge government to consult the position papers issued by MEA, which included numerous proposals, to have a sustainable business environment which also generates the well-being of Maltese citizens. Among others, we refer to the: • Memorandum to Political Par

ties 2012

• Memorandum to Political Par

ties 2017

• Malta’s Demographic Chal

lenges 2017

• Survey on Wage Inflation 2019

Malta is scoring positively on the major macro-economic indicators: relatively low inflation; quasi fullemployment; the highest economic growth rate – at 5.4% in the eurozone; a falling public debt which currently stands at 46% of GDP. Rating agencies hold us in high esteem and confirm that Malta has a growing and robust economy.

There is a stronger push by academicians and practicing economists that these economic indicators on their own do not portray the full picture of economic and social well-being, and new models are being proposed that factor in other important dimensions. Even employers are being faced with such challenges, as the nature of the workplace and the employer/employee relationship is being extended to include factors such as work life balance, minimisation of work-related stress, health and a better work environment, among others. Many employers are rising to this challenge through the introduction of flexible working times and other benefits and measures that address these issues.

These are important as ultimately, the whole objective of an upbeat economic performance is the improvement of the quality of life of citizens and the sustainability of enterprises. Government cannot ignore the strain that economic expansion is creating on economic, social and environmental sustainability.

We believe that the underlying fundamental issue from which many of these issues emerge is the rapid demographic transformation of our country. MEA’s appeal to conduct a comprehensive study to look into the implications of a rapidly expanding population in Malta has thus far been ignored, and it is incredible that, over a period of two years, since we issued our paper, the negative consequences in many areas that were indicated in that document are already being felt. It is visible in traffic congestion, in emerging social tensions, in bottlenecks in many public services such as education, health and others.

It is having an impact on business as well. The boost in domestic aggregate demand is, of course, having a beneficial effect on many enterprises. Initially, businesses were managing to cater for increased demand by utilising spare capacity – following the international recession and increasing efficiencies. However, in recent years many have been building productive capacity, which is one reason for the labour shortages being experienced in practically all economic sectors. We emphasise the need for a longer term strategy that quantifies the expected population increase with a view to design the appropriate economic and social infrastructure to minimise any negative impact of such demographic expansion.

One area where this is certainly necessary is in the construction sector. The exponential increase in building permits and construction activity is and will continue to result in an expansion in the number of housing units and commercial space. This number needs to be quantified and compared to projected population increases. This will safeguard the interests of developers against an oversupply of properties and productive capacity, and will also assess the environmental impact of projected development holistically. As things stand, it appears that there is a strong speculative attitude which believes that any supply of building will create its own demand. In a country where the environmental cost of development is much higher than that in other countries due to its land limitation, this is misguided and dangerous.

While it may be forgivable that individual operators in this sector set short-term private gains as their main objective, government cannot have the same mind-set. It is duty bound to act to safeguard the common good, especially where short-term gains for a few carry long-term, at times irreversible, negative consequences for everyone. The lack of national planning is evident in the lack of space to dispose of construction waste. This should have been planned far before the explosion in construction permits.

Tourism is another critical industry that is feeling the brunt of this situation. The sheer volume of people – not only tourists, as our incoming figures include all travellers, including working foreigners – is affecting the quality of the experience of visiting Malta. Hoteliers attest that the emphasis on quantity, as against quality of visitors is deterring high value tourists from Malta. Unbridled construction activity, noise pollution, crowded beaches and others are all factors that are affecting the tourism product negatively. This welcome-to-all approach may well be attracting segments that are actually not profitable to service, and that may end up deterring other higher value added segments from visiting our country.

The financial services sector is suffering from reputational damage and there is also the added threat of tax harmonisation which may negatively impact this sector in the near or more distant future.

Malta is facing emerging competition in the iGaming sector. Recent legislation in Sweden is intended to attract Swedish gaming companies to operate in their home country. The larger operators complain of escalating costs of labour, office rent and rental costs of employees. The survey on wage inflation conducted recently by MEA reveals that 74% of respondents claim that increases in labour costs are affecting competitiveness and that labour cost increases are outpacing productivity. For companies in the manufacturing sector, this figure increases to 84%. Employers are also concerned at the increasing rate of labour turnover in many sectors, which is also partially fuelled by wage inflation.

The increase in wages is not spread evenly across all economic areas and occupations. Changing wage relativities are resulting in wider income disparities and creating poverty pockets especially in low-skilled occupations in some sectors, occupied mostly by third country nationals.

The following are some of the recommendations resulting from the Wage inflation survey which can be considered as part of the National Budget exercise:

1. A National demographic strategy