GWU, UHM open for COLA mechanism review, but only after 2023 budget

Two major trade unions said they are open to discussions on a review of the Cost of Living Adjustment (COLA) mechanism, but only after the 2023 Budget is presented.

As a result of a high inflation, the COLA for 2023 is expected to be between €8 and €10 per week, a situation that could have repercussions on businesses. The Malta Chamber of Commerce has proposed that employers should not be obliged to pay the full COLA to workers who were already given a raise this year, but only pay the difference between the COLA and any increases already given.

The secretary general of the General Workers Union (GWU) Josef Bugeja and the CEO of UHM – Voice of the Workers Josef Vella, both came out against the proposal when speaking to The Malta Independent on Sunday, arguing that the COLA is owed to the workers for what they already lost due to inflation.

Government has already said that it will not be touching the COLA mechanism this year. However Finance Minister Clyde Caruana left a small opening. He said that when he reads the COLA rate in the budget speech, it must be given in full to employees, but added: “If the employers want to achieve some changes, they have to discuss those changes even at perhaps shop-floor level with the unions, but otherwise, as the minister of Finance, the COLA I will read in the Budget speech has to be given in full.”

But both Bugeja and Vella are adamant that there will not be any changes to the COLA this time round. However, they said that they are open for discussions to be held about the mechanism for future years.

UĦM Voice of the Workers CEO Josef Vella wants the upcoming Budget to include a set of measures aimed at strengthening the middle class.

In an interview with The Malta Independent on Sunday, Vella was asked about the government’s plan to introduce a second mechanism that would work alongside the COLA, aimed at helping lowincome groups.

“This year, we only had one meeting on this. The finance minister had called us, met with us and told us the government wanted to move in this direction. We had no problem discussing add-on mechanisms, but since that day, at least as the UĦM, we have not had any other meeting (on this issue with government).”

“Government has a clear idea of what it wants to do in the Budget. It is already pledging to help families who are on low income through an add-on mechanism. This means that the government created this formula on its own. We are not saying whether it is good or bad as we don’t even know what this formula is. Here, we are seeing a social dialogue problem.” He questioned when the Union can give its feedback given that the Budget is around six weeks away

Vella added that the middle class must not be forgotten. “The middle class is making big sacrifices and many-a-time we are encountering situations where they are not being left with money in their pockets. The moment we erode the strength of the middle class, it would be devastating for society.”

“Helping those with low income is always something that we agree with and we have always promoted it, but let us also ensure that this Budget provides a set of measures to take care of the middle class.”

The country must ensure that it doesn’t allow the middle-class to start collapsing, he said “as we could end up in a situation where helping people on low income would mean helping nearly everyone“.

In its Budget proposals, the Chamber of Commerce had recommended that employers should not be obliged to pay the full COLA increment to employees who were already given a raise this year, but only pay the difference between the COLA increment and any increments already given during the year.

The UĦM Voice of the Workers does not agree with the Chamber’s proposal, Vella said.

He said that the COLA agreement was a national agreement, “and when there is such an agreement, we cannot just change it because the COLA is higher. When the COLA was lower, we as a Union never said ‘let us depart from the agreed mechanism’ and when the COLA was around 50c for instance, there were many workers complaining, saying that this did not reflect the outside realities. But the COLA wasn’t changed and we remained with 50c”.

“Today, to speak as though you have a right not to give the COLA… for us it shouldn’t even be on the table.

He spoke about collective agreements that are inclusive of the COLA. “According to the COLA national agreement, when you sign a collective agreement that is inclusive of COLA, then government is meant to send forecast statistics regarding the cost of living increase for three years, so that negotiators would know how much of the wage increase would be dedicated to the COLA. We understand employers, as when they tell us to sign agreements inclusive of COLA they would want to see the overall financial package, and would have a way to control the situation and plan for the coming years.”

“But then don’t use this against us. When we signed COLA inclusive agreements, due to the failure of this information (COLA forecasts) being sent (by the government), we always had to base collective agreements on the average of the COLA from previous years, and so I don’t think there were COLA inclusive collective agreements that considered the COLA to be more than €2.50.”

Asked what he envisages the impact to be over the next year or so, he said there will be a monetary impact.

“We are not telling employers that, when they pay a €10 COLA, it won’t have an impact. But we cannot focus on the idea of not giving it. When we were on the other side of the situation and the COLA was €0.50, employers never said that they made more profit than expected, that the €0.50 COLA was low and so they would increase the COLA.”

Asked whether a high COLA would lead to an even higher increase in prices, Vella said there is no scientific theory showing that if the COLA isn’t given, then prices will start going down, he said.

“If that was a mechanism to control inflation in the economy, then we would have an easy solution – that when inflation would hit 2% for example, we would stop the COLA to help prices regulate themselves. But it doesn’t work like that,” Vella added.

If employers decide to raise the prices of their products or services due to the €10 COLA, that is a decision they have to take, he said. “It is a free and competitive market and consumers will then decide where they buy from, and what to buy. When in precarious situations like these, consumers have a right to decide that some products and services are secondary and can live without them.”

Speaking about economic policy, he said that sometimes inflation takes its course and doesn’t think there is an economic policy that, on its own in Malta, will be effective in stopping it, as inflation is not just being generated by Malta, but is international.

Discussions should be held in the MCESD

He was asked about Finance minister Clyde Caruana’s statement that, if employers want to consider making a change, employers should meet with the Unions at shop floor level and discuss it, and whether the Union would be open to discussions to change the mechanism, not now, but in the future.

The UĦM CEO said that, if anything, discussions should take place in the Malta Council for Economic and Social Development (MCESD). “I don’t expect to start discussing this situation in every workplace. We cannot agree with workplace A one way and workplace B another. We would have mayhem if we do that.”

“If we were to find an agreement it has to be in the MCESD, as we did over the pandemic. The general agreements are made in the MCESD, then you can go to individual workplace level to tweak according to the realities that there are, but the general direction comes out of the MCESD.”

Pressed as to whether the UĦM Voice of the Workers is willing to hold discussions amending the COLA mechanism in, for example, three or four years down the line, he said that the Union has no problem holding discussions.

“We are always open to discussions and we never close the door. But does anybody remember 2014 and 2015, how much the UĦM had spoken about the need to revisit the COLA mechanism, when we used to say that the COLA being given was nothing when compared to actual prices. Nobody paid attention to us and nobody came to negotiate with us. Nobody asked for a discussion.”

“We should not give the idea that inflation only affects employers. Wages are not phenomenal, are not exceptional. When compared to other EU countries, our wages are still low.” He added that with the policy of bringing in third-country nationals as workers, the country is not helping the financial packages of Maltese families “as we are bringing people from countries where they would sometimes be paid $2 for 12 hours of work. So if they are paid the minimum wage, it would be a big rise in terms of their income, but in addition with this cheap labour, we are not helping the cause of Maltese families”.

Asked about the Union’s other main proposals for the upcoming Budget, Vella said the Union has a set of proposals related to inflation, proposals for pensioners who opt to continue working and reducing their taxes, as well as ones aimed at tackling precarious work, among others.

“Helping those with low income is always something that we agree with and we have always promoted it, but let us also ensure that this Budget provides a set of measures to take care of the middle class” – Josef Vella