05 October 2005

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Business Today

Malta’s projected 2006 salaries to dip below inflation

Matthew Vella

Maltese salaries will increase the least over 2006, a worldwide pay survey by Mercer Human Resource Consulting has revealed, with average salaries increasing below the inflation rate.
Malta topped the list of countries which in 2006 are expected to have the lowest increase in average pay – just 1.7 per cent.
It represents a dip of 0.2 percentage points below the inflation rate, projected at 1.9 per cent for 2006, which means prices will be increasing faster than Maltese salaries, the survey predicts.
The findings appear to confirm a falling disposable income for the Maltese, a phenomenon which economist Edward Scicluna says has been occurring over the last couple of years, “obviously reflecting the local economic slump.”
“Assuming a reasonable reliability of the privately conducted wage survey in question, one may draw a number of observations,” Scicluna said, who believes the indicator might also mean the island’s productivity is increasing.
“Ultimately it is labour unit costs which count for competitiveness. These may only fall if real wage increases are within average productivity rates. Eastern European countries for example are reaping much higher wage increases without any increase in their unit labour costs due to their significantly higher economic growth and productivity rates.”
Malta featured amongst 31 European countries, including 24 in the European Union, in the Mercer survey which shows Western European salary increases are likely to remain stable, while those in the East will be higher due to greater economic growth in these countries.
But high wage inflation in Eastern Europe has still left its competitive edge on wage prices intact, with labour costs being amongst the most competitive, attracting more western multinationals to their countries.
“The lesson is obvious,” Scicluna says. “We need to see significant economic growth. Otherwise we will continue to face an economic crunch of falling incomes without necessarily any increase in competitiveness. A truly vicious
Malta’s low increase in salaries was followed by Nicaragua, whose average pay increase will equal its 2006 inflation rate at 6.8 per cent, and by Turkey, Poland and Israel.
According to Mercer, the employee benefits consultants, the average pay rise worldwide is expected to be 2.4 percentage points above inflation compared to 1.9 percentage points this year. In the European Union, pay is likely to rise by 2 percentage points over inflation.
Mercer’s Global Compensation Planning Report examines employment, economic and pay trends in some 70 countries worldwide. Data on projected pay is taken from a survey of multinational companies and inflation data is primarily taken from the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development.
The highest average rises are expected to be in Greece, for the third consecutive year, where employees can expect their salaries to increase by around 4.9 per cent, over a projected inflation of three per cent. Workers in Ireland, Spain and Italy are also expected to have substantial pay rises of 4.2 per cent, four per cent and 3.8 per cent respectively, while inflation is forecast to be 2.4 per cent, 3.2 per cent and 1.8 per cent.
Pay increases in Eastern EU countries are also likely to be among the highest in the world, with Lithuania at 11th place in the global rankings with a projected increase of 8.5 per cent, with inflation at three per cent. Following closely in its footsteps are Latvia and Estonia with large pay rises of 8.3 per cent and 7.5 per cent respectively, while inflation is likely to be 5.3 per cent and 2.5 per cent.


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