Wages in Malta and EU - gap widens

Two months ago Eurostat published a report on nominal hourly labour costs in the EU. It showed that Maltese workers are giving more than their fair share towards improving the country’s international competitiveness.  In Malta the nominal hourly labour costs rose by just 1.2 percent annually in the first quarter of the year to the Eurozone’s 2.0 percent and the EU27’s 1.7 percent.

Inflation has been rising faster than wages. Wages themselves rose by 1.1 percent.  It was non-wage costs, such as employers’ social contributions and other employment taxes (less subsidies) that increased by twice as much.

The annual increase in the wages component of working-day adjusted nominal labour costs has been falling for the last year, from 1.6 percent in the first quarter of last year, through 1.5 percent, 1.4 percent, and 1.3 percent to 1.1 per cent now.  This has helped mitigate the annual increase in hourly labour costs from 1.8 percent in the first quarter of last year to 1.2 percent in the beginning of 2012.  By comparison, Eurozone labour cost increases have been running 52 per cent higher than Maltese cost increases, whereas EU27 hourly cost increases have been 44 percent higher.

The most restrained have been workers in the construction sector, where cost increases averaged 0.5 percent in 2011 and went down to 0.1 percent in the first quarter of 2012 (the Eurozone average being 2.5 percent in 2011 and reduced to 1.9 percent).  Labour costs in services have also moderated, with nominal labour cost increases going down from 1.7 percent a year ago to 0.6 percent, compared to increases which have swung from 2.6 percent in 2011 to 1.8 percent this year in the Eurozone. 

Industry labour costs have been more stable and closer to the Eurozone figures.  In fact, the average increase last year was 3.0 percent (Eurozone: 3.1 percent reduced to 2.5 percent this year so far).

With annual inflation running at 2.5 percent last year, and increasing to 4.2 percent in July when compared to a year earlier, this means that real wages have been negatively affected.  This explains the reluctance of households to spend beyond what is strictly necessary.

Workers have been tightening their belt but the Nationalist Government continues to spend like crazy.