Malta: Social partners and government discuss impact of wage indexation mechanism

The issue of Malta’s Cost of Living Allowance (COLA) has been in the spotlight again.

COLA is an annual wage increase given to every worker based on the inflation rate. It often becomes the subject of discussion when the government starts its consultation sessions for the setting of the country’s financial budget, which is normally presented in November. 

The Malta Chamber of Commerce, Enterprise and Industry in its publication, Economic Vision for Malta 2014–2020, says COLA is ‘contributing to a steady erosion of Malta’s labour cost competitiveness’ and is ‘undermining Malta’s ability to compete unsustainably’. It urges the government and the trade unions to reform COLA so that it reflects productivity as well as inflation.

Meanwhile the Malta Employers’ Association (MEA) in its memorandum, Curtailing a culture of entitlement: Proposals for National Budget 2015, states that it has always been critical of COLA as a wage indexation system which does not reflect productivity. For 2015, MEA is insisting that there should be ‘no tampering with this mechanism given the low inflation during the reference period of September 2013 to September 2014’.

Low inflation will mean a low annual rise for workers.

MEA added: ‘When COLA was calculated at €5.82 in 2010, employers still paid the full amount, even though many firms were being negatively affected by the international recession’.

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