17 – 23 January 2001

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The employers' context within EU membership

By Lawrence Gonzi

Social Policy Minister and Deputy Prime Minister, Lawrence Gonzi, recently addressed the Malta Employers Association's annual conference titled "Rising to the EU Social Challenge – an Employer's Perspective. Following are extracts from his speech, in which he shares his views on the challenges that lie ahead for the social partners, and in particular, employers, as Malta prepares itself for EU membership.

The social challenges which face us - the Maltese people - are not and should not be viewed as an exclusive domain residing within the concept of EU membership. I think it is demeaning for us to argue in favour of important changes, simply because these form an integral part of the acquis communautaire. I believe this type of approach - which is so evident in Euro sceptics argumentation - diminishes the intrinsic value of the changes we need to undergo and undermines the potential (and indeed the obligation) which our country has, to improve the quality of life of its citizens.
Let me give you some examples. The EU provides us with a long list of directives related to the Health and Safety sector. Everyone in Malta accepts the fact that we lag behind in this area and that we need to introduce some very important innovations which can only take place if accompanied by a cultural change in our mentality and in our work ethics.
Yes, these changes are an integral part of the acquis communautaire, and yes we must implement them in order to qualify for membership. But does this make these important changes less important? Does EU membership make these changes controversial? No, it does not. And yet I have heard EU sceptics argue that we are being forced to implement a long list of directives in the Health and Safety sector simply to please the EU bureaucrats.
The same can be said of the urgent need to update our employment laws and to guarantee equal opportunities. Yes these are two other requirements of EU membership. But again, does this mean that we should not proceed with the necessary changes, simply because they form part of the EU acquis?
The truth is that the changes which we need to implement are important challenges which we cannot continue to postpone. Naturally, they are requirements for EU membership. But, more importantly, they are requirements for our society to adapt itself to a changing world in order to be able to compete in a globalised economy and to provide a better quality of life for every single person living in our community.
EU membership presents us with a plethora of challenges, not least in the social field. Social Security, free movement of persons, health and safety, labour laws and equal opportunities are perhaps typical central themes which can be mentioned. In all of these cases, however, the issue is not whether or not we should face the challenge, but rather how are we going to do so.
Allow me to clarify this point by stating what should be obvious to everyone. We are living in interesting times. Times of vast and fast changes. The phenomenon of globalisation reflects a bundle of developments which include trade liberalisation, the emergence of a world market for capital, the growth and pervasiveness of multinational companies and the widespread diffusion of information and communication technologies. These have triggered a process of restructuring of unprecedented magnitude across all of the world's economies including Malta. Capital and market deregulation, strategic management thinking, technology and demography have been the main driving forces behind this remarkable change.
Now, let me offer you a few hard facts. First technology. We know that 80% of our technology will be replaced in ten years time with new and better technologies. In itself this is not a problem. New and better technologies mean higher productivity and more prosperity. But only, if we are equipped to create this higher productivity and to draw on this greater prosperity. At this moment we are not yet adequately geared to achieve this objective!
Second is our labour force. 80% or more of those who will be part of the labour force by 2010 are already in the workplace. But they left school 10, 20 or 25 years ago, before the new technologies were introduced in their curricula. So, we have 80% turnover in new technologies and 80% of the workforce with education and training from the past. That means a huge skills gap.
Both these facts represent a significant challenge for enterprises, trade unions and governments. A challenge that can only be met with a new productive partnership, a new approach to workforce investment, by both employers and employees.
There is a third hard fact which demands that partnership becomes a weapon of choice in modernising working life. This is demography and the fact that the structure of the working age population is changing dramatically. Within the next 20 years or so it is envisaged that the pool of workers with technological skills supply will be less than the demand. We will have more people with experience but less with new skills. This means a bigger skill supply deficit.
The combined effect of these demographic and technological trends is that the workforce is getting older while technologies and production processes are getting younger. Our welfare gap offers further evidence to confirm these new trends.
The implications for policy are enormous. First, more and more skills and competencies must be renewed several times across working life. We can no longer rely on "front end" one-time investment in the young to keep up with new processes and technologies. Secondly, we can no longer afford company and public policies which encourage early exit from the labour market, rather than life long learning and new opportunities. Human resource management and trade union policies will have to adjust to the new demographic and labour market trends.
Over the past two years, my government has acted in a determined manner in order to create an environment which will help the country rise to these inevitable challenges. We have invested heavily in the education sector particularly with the introduction of the new curriculum and with the substantial investment to bring information technology closer to our primary and secondary students; in the training services provided by ETC, in the incentives to business and industry to upgrade their human resources, in the creation of a national vocational network which will hopefully stimulate a quantum leap in this sector in which we are lacking so heavily. But we also realise that overall success will only happen if there is an equal response from all our employers as well as from our unions who must now react by maximising on these new opportunities.
Which brings me to the central theme of my address: the need for partnership.
We are facing a period of remarkable change. That is why we need a new partnership to manage change that is unequalled in its scale and speed.
We face, not only a new economy, but a new society. Here in Malta, we have moved from an inward-looking fortress economy to an open market-based economy, from manufacturing to services, from a souk-economy to the new knowledge-based economy. People live, work and run their lives in different ways than a generation ago. They therefore expect fresh, forward-looking approaches from governments, unions and enterprise. They expect the social partners to be capable of seizing new opportunities and of tackling difficulties as they arise.
This has been remarkably evident in the recent experiences which we have all shared as a result of the liberalisation in the communications sector in Malta. The doom and gloom statements which we all heard prior to the dismantling of the monopoly in communications have all been proved dramatically wrong. For the umpteenth time those who fear change are now faced we the stark truth. Change, if wisely and properly implemented, will bring us important dividends. Fear, on the other hand, will keep us stagnated into a defensive position which is untenable in the short term.
But this change needs to be the offspring of dialogue and social partnership - both of which have been experienced locally in the past twenty four months.
Specifically on the EU issue, trade unions and employers have been intimately associated with Malta's EU membership bid. Hand in hand with Government they have been playing a major role in the process of examining, implementing and adapting to the acquis, particularly the social acquis of the European Union. The process has made each partner more conscious of what to expect and how best to adjust to the changes that lie ahead within the European Union, which is itself beginning to grapple with globalisation, in terms of opportunities and challenges.
Of course, there have been and there will be differences. This is hardly unexpected given that the role of each partner is that of safeguarding divergent interests. Yet, along the way, there has been a growing realisation amongst us that we are all pursuing the same objective: that of striking the right balance between economic and social prosperity. We have understood our common responsibility to manage effectively the core relationship between economic and social progress and not to allow social policy to become simply a by-product of economic exigencies.
That is why my Government continues to emphasise the need to replace the battles of the past between regulation and deregulation, with a new and productive partnership that accepts the need of enterprises to be more flexible and the need for workers to have security in change.
This is a very demanding agenda - but do we have a choice? Is there anyone out there who believes that the social challenges that we are facing today can be avoided? That we can simply sit through this change, oblivious to what is happening around us? Of course these are rhetorical questions because all of you employers know a lot more than I do, that to remain competitive you need to invest into modern technology, that your traditional market sectors can no longer be guaranteed by anachronistic monopolies which hide inefficiencies, that your workforce needs to have the skills to operate your equipment and to deliver the high quality services which you are expected to deliver, that proper health and safety measures at your place of work could make or break your enterprise, that modern employment conditions such as parental and maternity leave are perhaps the only way you can continue to benefit from the financial investment you have made into the training of your workforce.
Let me be clear about this. The purpose is not to substitute our existing social systems with some other weaker or diluted one. On the contrary, our purpose is to respond to the realities that face us all, knowing that unless we do so, we risk being left behind. Our purpose is to transform and maintain a productive and inclusive society and a value-added economy that can meet new needs, respond to new conditions and stimulate innovation. And in this process of change, we are all partners - in that we are co-responsible to manage change through co-operation rather than confrontation.
What challenges therefore does Malta's EU membership have to offer to the social partners? How should our social partners prepare themselves to play their part in the process?
The challenge is two-fold: social partners must try not only to reinforce their bargaining influence on domestic issues, and to improve their coverage and representativeness, but they must also be prepared to participate in the various structures of the European social dialogue with its ever-growing demands. Both on the European and national fronts our social partners must assert their key role in:
• building new economic and social strategies, in particular, employment policies;
• modernising labour law, as well as implementing and enforcing health and safety at work, to meet social standards and to respond to technological developments;
• capacity-building and organisation to be able to strike a balance between flexibility and security;
• implementing and adopting EU law on social affairs on the national, sectoral and enterprise levels;
• shaping public policies, from the macro-economic framework to tax- and benefit systems.

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Good preparation, strong co-operation and real implementation of the various measures and action will underpin Malta's economic and social success both at home and at the European level. At home, the modernisation of the social dimension demands the tripartite process, with government. But the two-way dialogue, suited to our social and industrial relations culture, between the independent representatives of employers and of workers is also axiomatic.
In this context, my government is committed to enhance the national forum which provides the single most important focal point where social partners can come together and discuss national issues. Indeed, discussions between government and the MCED are now at an advanced stage and I hope to be able to conclude the consultation process within the next few days. This will then be followed by the publication of a Bill which will, for the first time, provide a legislative instrument recognising the Council's role and function; it will widen the Council's scope to include social development issues, and hopefully it will also provide for a wider consultative process which will include civil society.
Whether or not we are prepared to take on the challenges that prospective EU membership holds for us largely depends on how far we have managed to nurture and sustain a culture of partnership between us. The key to managing change successfully is through co-operation rather than confrontation - social partnership, which is in turn based on social dialogue.
Confrontation in the social sphere, with all the missed opportunities and costs it entails, can still be described as recent history in Malta. We can no longer afford to waste our energies in this manner. The EU accession process has already taught us some useful lessons in this regard.
My government is also committed to manage change through co-operation, through structured dialogue and partnership. Looking back over the past year, we firmly believe that this policy option has paid some important dividends.
And we have gone beyond words. We have been consciously striving to make it come alive at every available opportunity. There is today some hard and fast evidence to prove that with a sufficient degree of goodwill from all sides, this formula can work with Malta's social partners too. I have already mentioned the new Malta Council for Economic and Social Development, but I can also mention by way of concrete examples the formulation of the Year 2001 Budget, the ongoing review of industrial and labour legislation (CERA, IRA), the Social Security review to ensure welfare sustainability, as well as the preparatory process for Malta's EU membership bid. These, and others, are all encouraging signs that prove that we do have the capacity to rise to the challenges that our country's modernisation agenda presents to us.
In conclusion, allow me to state that there still is much more room to cultivate further this fertile ground. Particularly so if we want to secure our economic and social success as members of the European Union. I am convinced that we will achieve this objective but only if we continue to develop strategies, policies, innovative approaches - on the basis of co-operation between government, unions and business.
Partnership is therefore the key issue. A partnership which does not necessarily mean total and constant agreement on all issues and at all times, but which must always and inevitably be based on open and unhindered dialogue which allows each one of the partners to understand and embrace the wider national perspective.

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt