Salaries becoming uncompetitive for employers, low for employees – Malta Employers’ DG

Salaries are becoming unsustainable for employers, the Director General of Malta Employers Association Kevin J. Borg told BusinessNow.mt, highlighting the need for “strong economic transformation.”

Through this transformation, he explains that the economy needs to increase its value added.

“Salaries are becoming unsustainable for employers because profits are squeezing and squeezing. Salaries are also becoming on the low side for employees. So both sides are feeling the pinch.”

This, he said, came through clearly in an EY Attractiveness survey a few years ago.

“The only way to solve that is by increasing value added.”

To better explain this, he likened the economy to a restaurant as an example.

“If you are today serving pizza, and your profit margins are squeezed due to many factors incuding competition, and you cannot afford to pay employees a higher salary, then you have to increase your value. You would need to, for instance, offer fine dining instead, so that instead of charging €20 a head, you charge €100.”

You’d be serving fewer meals but upping the quality, he explains.

By doing this, “you earn more and can afford to pay more. This is what we need to do to the economy.”

This can only be achieved through investing in technology, skills and reorganisation, he says. “You have to invest in university, and you have to invest with a long term picture in mind.”

It’s about having a jump in quality and rising up the value chain, he adds.

Unfortunately, Mr Borg says, the country has been growing the economy by increasing quantity, “the same of what we have but more,” and gave the example of rising tourist numbers. He speaks of the need to attract fewer tourists who spend more, and improving the experience for them.

“If we’re just going to remain at the same level, but push for more and more, we’re just going to continue heating up, bringing more people, whether they are workers, visitors, whatever, and it’s creating frustration. It’s creating negative effects on our environment, negative effects on the morale of our people,” he says, noting that the best people will start leaving.

In its proposals to the political parties for the next legislature, the association mentions economic transformation. Among other things, it said that AI needs to be looked at as an ally, not a threat, and that with proper planning, AI could be a means of generating value added in line with the Islands’ plans for economic transformation and reduce demand for unskilled labour.

It also said that any discussion on a shorter working week must be preceded by economic transformation to drive smart economic growth through capital investment, digitalisation, business process re-engineering, all of which contribute towards higher productivity at equal or reduced inputs of labour.

Increasing skills

Asked specifically about the PN’s skills wallet proposal, he says that the association welcomes any proposal for increasing skills being made by the political parties.

Mr Borg says that it was reported to the association that there is an increasing trend by employees who are reluctant to undertake training unless their employer offers some kind of promotion or wage increase tied to it. “This is very short-term minded,” he adds, arguing that learning skills is permanent.

He also stressed the need for better career guidance to be offered.

“We don’t want people to get stuck in careers just because they don’t know about other opportunities that might be available to them.”

He said that, for instance, youths who are not so predisposed to academic teaching might be told: why don’t you go into catering, hairdressing etc. “But they don’t tell them, because they don’t know, that they can earn a lot more doing these same jobs at sea (in the maritime sector).”