The wish list: Social partners call for new economic model, workforce review, workplace pensions

A new economic model, enhanced infrastructure, and the efficient use of employees within the public sector are at the top of social partners’ wish lists for next year’s budget.

With the Finance Minister’s yearly budget speech only a few hours away, MaltaToday takes a look at what some of the country’s top lobby groups and unions would like to see in Budget 2025.

A new economic model

Once again, social partners are urging government to look ahead and change Malta’s economic model, as they emphasise a shift away from labour-intensive activities and a vision which doesn’t depend on population growth.

In their pre-budget document, the Malta Chamber called for a tangible transformation of the current economic model, urging government to set up a “well-being economy which benefits society at large.”

Likewise, the Malta Employer’s Association (MEA) matched the Chamber’s appeal in its urgency. The employers’ lobby believes that Malta’s economic transformation should keep the country’s physical and demographic realities in mind.

In their pre-budget document, the MEA noted that the construction industry employs roughly the same amount of people as the manufacturing sector. “This situation reveals a strong dependency of economic growth on construction,” the lobby group said, as they appealed for a shift towards higher value-added manufacturing and services industries that can achieve economic growth without compromising the environment.

Concerns over Malta’s current economic model and its strains on the quality of life were echoed by trade union, UĦM - Voice of the Workers. The union proposed a study to determine the capacity of the islands’ current infrastructure, and a long-term economic plan that takes into account demographic realities. In an interview with MaltaToday, UĦM’s boss, Josef Vella acknowledged that a shift in economic model cannot be achieved in one budget, noting however that the country’s next economic model should be quality-centred.

Labour market

Similarly, to worries about Malta’s economic model, social partners agree that challenges within the labour market are at the forefront of issues which need to be addressed.

Ahead of the budget, the MEA appealed for a “rationalisation of the labour force.” Among employers’ woes tied to the labour market is a public sector “riddled with underutilised personnel that can be more productively employed.” The employers’ lobby seems irked by increases in pay packages for public sector workers, as they called for measurable key performance indicators to justify such hikes.

Among the MEA’s most bold proposals for a stronger local workforce was the increase of the effective retirement age while discouraging early retirement. They also suggested tax-exempt pensions for those who are still in employment and the self-employed.

This proposal was shared by the UĦM, that called for pensioners who continue contributing to the labour market to receive an untaxed pension.

Meanwhile, the Malta Chamber proposed the elimination of “the disincentive for the second spouse (often the female) from taking up gainful employment by revising income tax categories such that working parents benefit from married tax rates irrespective of whether their spouse is in gainful employment or not.”

Similarly to the MEA, the Chamber also voiced its concern over the private sector’s unfair competition for labour with the public sector. To address this, the Chamber called for an independent study that reviews all job roles within the public sector, as well as removing half-day schedules for public sector employees, as the lobby noted businesses cannot compete with such conditions.

Mandatory union membership

Mandatory union membership was a key proposal put forward by the General Workers’ Union (GWU), something it has been harping on for years. The union believes this will ensure all workers are treated with dignity and could benefit from collective bargaining thus improving their incomes. However, while the government has consistently hinted it is in favour of mandatory union membership, employer organisations are opposed, insisting it will infringe on the individual’s right to free association. The UĦM on the other hand agrees with mandatory union membership for low-income earners only but is also proposing that non-unionised people in a workplace where a union enjoys recognition, should either join a union of their choice or else pay the equivalent of a union membership fee into a central fund.

Supplementary pensions

Supplementary pensions seem to be gaining traction in recent years.

In September, the Insurance Association Malta (IAM) had made headlines for calling on government to implement mandatory workplace pensions, with a voluntary opt-out, and introduce a transitory framework for employers to contribute towards their employees' pensions.

“With people living longer and not always managing to set aside sufficient money for their future, a mandatory workplace pension will help to smoothen the transition as they retire to maintain a good standard of living,” IAM said.

Similarly, the Malta Chamber proposed the encouragement of supplementary pensions through automatic enrolment with the option to opt-out, as the lobby said that employers who take up such initiatives should be granted more attractive tax incentives.

Gozo

Gozitan social partners, while having many of the same concerns as their counterparts in Malta, also grapple with unique challenges, such as connectivity between the islands and a different economic eco-system.

On connectivity, the Gozo Business Chamber (GBC) urged the government to address the sector’s long-term future. While acknowledging that a “permanent link” between the islands seems to have fallen out of public discourse, the GBC called for enhancing Gozo Channel’s ferries.

“A strategic decision needs to be taken on the replacement of these [current] ferries, and potentially also the introduction of a fifth ferry. In fact, when one of the present ferries is not in operation, the services between the two islands are significantly disrupted.”

The GBC highlighted that Mġarr Port’s heavy congestion, as it called for the port’s “potential expansion or the creation of an alternative port.”

The lobby spoke specifically of the island’s main town, Rabat, as it called for a complete regeneration of the locality which includes more green spaces, underground parking and a fix for traffic congestion.

Meanwhile, the need for enhanced Gozo Channel operations was echoed by the Gozo Tourism Association (GTA), as they called for a fourth ferry to replace Nikolaos. The Gozitan tourism lobby further suggested the equipping of landing places for cruise tenders in Xlendi, Marsalforn, and Ħondoq ir-Rummien.

The association also proposed new regional plans and policies designed to preserve Gozitan villages, as well as the introduction of fiscal incentives to encourage the restoration of existing traditional properties.