Editorial | Wednesday, 15 July 2009

Cold comfort

So here we are again: COLA has caught up with us again. Aimed at compensating workers for any loss of ground due to inflation, the mechanism has long been condemned as being itself inflationary. The unions blame employers, employers blame government and government blames the world economy. Everybody is right but still the end result is almost inevitably a mess.
Employers being impacted by the effects of the global financial crisis are appalled at the figures which predicate a €7 per week rise due to workers on the basis of the rise in the cost of living computed for 2008. Employers with empty order books or defaulting foreign buyers feel pushed to the wire. Unions suspect that some of their colleagues not under such pressure could take the current general gloom for an opportunity to suppress any increase in their wages bill.
The truth is that these are hard times indeed and we can reasonably expect them to bite deeper before they ease off. Only months ago employers and government were stressing productivity and competitiveness. In happier times we bemoaned the fact that national holidays tended to cause havoc when they fell close to a weekend and a device was found to avoid the worst of it. Employers wanted more productivity to justify any increase in wages and that seemed fair enough.
Increased productivity from workers reduced to a four day week with the blessing of their unions would not cut it at this point. Increasing unsold stocks is simply not an option in these days of just in time production and business systems designed to pare off time and money lost on goods in storage and transit.
Only a policy aimed at lowering costs could address the situation. In fact there are countries such as Germany where keeping costs down is a perennial policy. Such a policy combined with a COLA mechanism would provide a good measure of the success or failure of government in implementing its policy. A nil or next to nil COLA increase would be the target.
If such it has been for 2008, a €7 per week increase registers dismal failure. The chaos that accompanied the steep upward revision of energy tariffs since September was worse than failure. It increased costs and worse it sowed uncertainty for an extended period.
This is clearly a crisis and it will have to be managed but a good part of it was easy to be foretold.
Nobody could have guessed when the price of oil would begin to fall nor that it would plummet the way it did when it did. Anybody could have foretold that a steep increase in energy costs would set off the COLA mechanism. This crisis was looming even as the government engaged KPMG to draft its tariff revision in May 2008. What has been done to keep costs down since? With that much of an advanced notice even a government that has never publicly embraced a policy of keeping costs down, could have gone into emergency mode in this dramatic case.
We have always muddled through somehow and we will muddle through this time also, or so the thinking seems to be. Not the greatest of comforts in a crisis.
We seem to have been caught out in more ways than one: a government that fails or refuses to anticipate change and social partners that so far have failed to develop a culture of sharing the economy and sharing responsibility for its fate. In times of crisis, long habit, common goals and a reasonable level of trust could prove to be invaluable. Realising that we share a common fate and that we must work together could be a lifesaver. So far, the structures available to labour and capital simply do not admit of such an admission. We have muddled through without all this so far, somehow. That too is cold comfort in the face of the magnitude of our present challenge.


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15 July 2009


Malta Today


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