STMicroelectronics employees resist austerity measures

Austerity measures proposed by the management of STMicroelectronics were overwhelmingly rejected by employees through a postal vote organised by the General Workers’ Union. Following negotiations with the union, management agreed to minimise pay cuts and held a second vote, in which the employees agreed with the watered-down measures. Pressure exercised by the Maltese government, which had pledged to give the company financial aid, helped influence the employees’ decision.

Company background

The Maltese economic and political scene tends to be highly sensitive to developments in STMicroelectronics, a multinational company that set up a semi-conductor facility in the country in 1981. The company is one of the largest private sector employers in Malta, employing about 1,500 workers, and a major contributor to gross national product.

Government support and company austerity measures

In 2008 and 2009, the company had already laid off 1,000 workers and was planning further redundancies for 2010. In response to this, in June 2010, the Malta’s Prime Minister, Lawrence Gonzi, announced that the government was offering a package of financial aid to help the company invest in new technology and thus avoid planned redundancies. The package included a subsidy for retraining workers who would be employed on a new line. The General Workers’ Union (GWU), representing STMicroelectronics employees, welcomed the aid package but expressed its disappointment with austerity measures that the company wanted to introduce. These measures included a two-year wage freeze as well as a cut in employee allowances, which would save the company around €3 million. Following management–union negotiations, it was agreed to reduce the austerity measures to around €600,000, leading to an annual cut in employees’ wages of about €355 rather than the previous much higher estimate of about €1,800.

Employees reject reduced austerity measures

The employees did not seem impressed by these reductions, and in a postal vote conducted by the union, 94% of those who cast their vote rejected the proposals. Their union representative said that once the workers had learned of the government financial aid, they may have thought there was no longer any need for the company to cut their salaries. It was thought that the workers may have also become suspicious that part of the investment was being financed out of their pockets.

Settlement of the issue

Following this rejection, Prime Minister Gonzi and Minister of Finance Tonio Fenech stepped in, warning the employees about the consequences of their actions. The Prime Minister called on the workers and the union not to ‘sabotage’ the investment agreement reached between the government and ST, as this would lead to collective redundancies. For its part, the union said it was willing to be part of the solution and called for further talks with management in order to propose changes to the austerity measures.

The meetings between GWU and company management were held in the third week of July, and were described by the union as being very positive with both parties showing readiness to compromise. Following these negotiations, employees were presented with a new proposal entailing an annual cut of about €250 to €300 in their pay packets. According to the union, this was lower than the reduction envisaged in the previous agreement. A second postal vote was held in the last week of July in which there was a substantial ‘yes’ vote (620 out of 860 cast votes). The number of ‘no’ votes was 231, while there were five abstentions and four invalid votes. The overwhelming ‘yes’ vote was welcomed by all social partners who expressed their satisfaction at the settlement of the dispute.

Commentary

This issue clearly exposed the vulnerability of Malta’s small economy. Over the years, the Maltese government has had to live with the fear of STMicroelectronics closing its operations on the island and relocating abroad. Such fears have increased in recent times due to company statements about the high operating costs in Malta and the restructuring exercises it has conducted in several other countries. The closure of ST operations in Malta would mean job losses for 1% of the Maltese labour force and a substantial reduction in export revenue. The dispute also exposed the lack of power exerted by employees when faced with the challenges of the globalised economy.

Saviour Rizzo, Centre for Labour Studies

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