UHM ProposalsBudget 2014

UHM’s Proposals

• Making work pay• Tapering• Pensions• Co-operatives• Environment• Civil Society Fund

Employment Ratio by Level of Education

Malta’s employment ratio is inferior to the EU’s ratio because of fewer low skilled persons in employment.

The employment ratio among average and high skilled workers is higher in Malta than in the EU28.

Workforce Composition

Malta’s workforce is highly biased towards workers with low educational achievement – 46.4% vs the EU’s 19.9%.

Average and high educational achievers account for 80% of the EU28 workforce. In Malta these account for just 53.6%.

Female Employment by Level of Education

Malta’s low employment ratio relative to the EU28 arises because of the ‘low’ female employment ratio among those with low skills.

The employment ratio amongst female with average to high skills is almost at par with the EU28.

Female Employment 40+

Female employment in Malta is particularly low among females who are 40 years of age or more.

The biggest difference relative to the EU28 arises amongst those who have low skills.

Making Work Pay

• To reduce the inactivity trap, government should consider to make it possible for primary breadwinners to keep on paying taxes as per married schedule when the spouse enters into employment on part-time basis and earns a minimum wage.

• This measure would apply for those females aged 40 years or over. A time window should also apply.

Tapering (1)

• In the Jobs+ document, UĦM has already spelt out the need to start tapering social benefits.

• Tapering means that when social benefit beneficiaries take up a job, they won’t face a marginal effective tax rate of 110%. This is very discouraging.

Tapering (2)

• UĦM is of the opinion that tapering should be on a temporary basis such that the beneficiary would have enough time to re-integrate back in the labour market.

• Tapering can take the following form:75% benefit retention – 1st year50% benefit retention – 2nd year25% benefit retention – 3rd year

Tapering (3)• Needless to say, the introduction of tapering would necessitate measures

to prevent the ‘revolving door’ effect.

• To encourage the participation of single mothers – in line with the Jobs+ document – government should consider the introduction of in-work benefits too.

• UĦM is suggesting that parents on the minimum wage should receive an in-work benefit of Eur900 per annum. This measure would cost circa Eur1.8 million.

• This measure is intended to reduce the at-risk-of-poverty among low income earners and to encourage the take up of work.

UĦM’s Position on Pensions

• UĦM is in favour of the third pillar.

• However, UĦM has argued for long that first and foremost government should assure the sustainability and adequacy of the first pillar.

• Secondly, a serious commitment must be made on the introduction of second pillar pensions.

• Third pillar pension should be a supplement to the first and second pillar and not a substitute to the second pillar.

Third Pillar Pension

Affordability

The estimated consumption of a single person in 2014 is circa €16,000.

The average consumption

of a family is expected to be in the range of €27,000.

On the assumption of these figures, it transpires that only 40% manage to have enough savings to consider the third pillar.

Distribution by age

The Pensions Working Group Report suggests that a third pillar is only viable to those who are under 40 years of age.

This means that nearly 3 out of every 5 employees can be considered as potential third pillar contributors.

Share of Potential Beneficiaries

Assuming that income is normally distributed along all age cohorts, it results that at best only 1 worker out of every 4 can potentially contribute to a third pillar pension.

Other means must be studied to safeguard the interests of the rest of the workforce.

Pension Adequacy

• UĦM urges government to take serious action and recommend to social partners the necessary actions that ought to be taken. This country has for long postponed important reforms that should have been in place years ago. In the absence of any concrete actions, the sustainability of the first pillar is questionable. On the other hand if the second pillar is not legislated, there is the risk that for most pensioners complete retirement won’t be an option.

• It is thus why UĦM is in favour that any productivity gains that arise should be put aside to finance the second pillar rather than going into wage increases or higher profits.

Decent Income to Pensioners

• UĦM’s pensioners section is also recommending government to consider:

- introducing the 60% guaranteed minimum pensionable income

- granting gradually what remains of the service pension that is still retained- granting the full supplementary

allowance to those who qualify for it

Co-operativesUĦM acknowledges the relevance of co-operatives and their economic contribution. UĦM is of the opinion that much more can be done to strengthen the sector, hence it is recommending the following proposals to government:

• A revision of the rules that govern the co-operatives fund. • It is common practice among European Member States to permit the setting of co-

operatives with just 3 members. The Maltese government should thus consider lowering the threshold from 5 to 3 members. This move would facilitate the setting up of new co-operatives.

• Government should consider improving the co-operatives’ legislation. The ‘new’ legislation should explore the concept of social enterprise. Social enterprise embraces the interests of disadvantaged people. Through social enterprise, government can promote better work environment to those who currently may be experiencing exploitation.

Environment • UĦM reconfirms its commitment to a cleaner environment. It is well

known that energy consumption is Malta’s main pollution cause. Smarter energy consumption together with an increased supply of green energy would positively contribute to curb pollution.

• UĦM recommends to government the extension of subsidies on

photovoltaic panels, solar water heaters and building insulation material.

• In addition, UĦM would like to recommend the introduction of a

rebate on energy efficient appliances. The energy reduction brought about by such incentive can be considerable. An energy efficient fridge-freezer of 500 litres can consume 1,000 units less of electricity per annum. This would translate into cost savings of circa €121 per annum.

Civil Society Fund

• UĦM commends government for honouring its commitment to disburse the money from the civil society fund. These funds are of utmost importance to social partners in order to fulfill their duties. UĦM urges government to commit itself in the budget that these funds would still be available in the years to come. An earmarked vote should be budgeted under MCESD.

Thank You