Last Updated on Friday, 4 October, 2024 at 8:06 am by Andre Camilleri
The latest Mario Draghi report entitled, The future of European competitiveness, clearly outlined the below:
The EU has set out a range of ambitions – such as achieving high levels of social inclusion, delivering carbon neutrality and increasing geopolitical relevance – which depend on maintaining solid rates of economic growth. However, EU economic growth has been persistently slower than in the US over the past two decades, while China has been rapidly catching up… The main driver of these diverging developments has been productivity. Around 70% of the gap in per capita GDP with the US at PPP is explained by lower productivity in the EU. Slower productivity growth has in turn been associated with slower income growth and weaker domestic demand in Europe: on a per capita basis, real disposable income has grown almost twice as much in the US as in the EU since 2000… The core focus of a competitiveness agenda should be to raise productivity growth, which is the most important driver of long-term growth which leads to rising standards of living over time.
This shows the huge importance for Europe, and Malta, to increase their productivity growth. So, we must make sure that any decision taken in Malta helps to increase productivity rather than hinder it. The ongoing talk on mandatory unionisation is a case in point.
There are various international studies on the effect of collective bargaining on productivity. Many of such research articles are inconclusive. One such research article is titled What do unions do to productivity? A meta-analysis byChristos Doucouliagos and Patrice Laroche (2003), which concludes that the results from meta-analysis indicate a near-zero association between unions and productivity. However, there exist country- and industry-specific associations between unions and productivity. A negative association appears for the United Kingdom and Japan, whereas a positive one exists for the United States in general and for US manufacturing in particular. This clearly indicates the need to study the effect on productivity that mandatory collective bargaining could have in Malta and I dare say per economic sector.
The 2023 National Productivity report sheds some light on this matter when it says: The current trajectory of labour productivity and wages in Malta stands in contrast to the prevailing trends observed in other European Union (EU) countries as indicated by a lower relationship between productivity increase and wage increase in Malta when compared to the EU average… However, in a comparative context with other EU nations, Malta’s high degree of centralised collective bargaining presents certain obstacles, potentially hindering the ideal wage-productivity correlation. Many collective bargaining agreements in Malta may lack the flexibility required to adapt to firm-specific needs and changing economic landscapes. Nonetheless, the path forward offers promising opportunities for restructuring collective bargaining to align it more harmoniously with productivity objectives. Instead of being an obstacle, it can be turned into a supportive mechanism that promotes self-regulation and enhances stability within the complex relationship between workers and employers. This shift towards more flexible and adaptable collective bargaining structures holds the potential to usher in a new era of labour relations characterised by stability, industrial peace and an efficient allocation of resources. This, in turn, augments motivation among the workforce and, ultimately, productivity.
This means that deciding on rolling out mandatory union membership without carefully studying its possible effect on productivity in Malta and its various economic sectors would be a critical mistake we must avoid. Malta cannot afford to get this wrong.
