Background information

The Cost of Living Adjustment (COLA) is a result of a National Agreement on Industrial Relations signed on 10 December 1990 between the government, trade unions and employers' organisations in the Malta Council for Economic Development (MCESD). The COLA mechanism allows for yearly automatic adjustment to workers' income to protect individuals' living standards against inflation.

The COLA mechanism has been subject to criticism. It is argued that this mechanism does not do enough to protect the most economically vulnerable individuals. In response to this criticism, the government announced an additional annual COLA payment that targets vulnerable workers.

Content of measure

During the 2023 budget, it was announced that as of December 2022 an additional annual COLA mechanism targeting vulnerable individuals would be implemented. Financed by the state, the payment will target those earning less than the average wage and will vary depending on individuals’ income and number of individuals within their household. It was reported that families will receive an average of €643, with the lowest amount being €100.

This additional measure will be revised if the inflation rate surpasses 2% and when inflation in any of three of these five categories – food, housing, utilities, household maintenance and health – is higher than the average of the past five years.

Use of measure

Finance Minister Clyde Caruana and Family Minister Michael Falzon who announced the measure stated that a total of €16.2 million will be distributed among 45,000 households, or 86,500 low-income persons.

An April 2023 a National Statistics Office (NSO) report noted that in 2022 €242.5 million was spent on non-contributory benefits. This amount was 14.1% higher than the amount in 2021. Within this figure, an increase of €17.7 million was recorded under Total Supplementary Allowance, primarily due to the additional COLA payment measure.

During an August 2023 press conference, Social Affairs Minister Michael Falzon stated that the additional COLA payment for 2023 would be distributed during the same month at a cost of €2.7 million.

During a December 2023 press conference, it was announced that 95,000 families, totalling 194,000 individuals had begun receiving the first of the two additional payments. The first payment which covers the first six months of the year cost the country €14.7 million.

Target groups

Workers	Businesses	Citizens
Applies to all workers	Does not apply to businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Consulted	Consulted
Form	Unknown	Unknown

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: Peak or cross-sectoral level

Involvement

Family Minister Michael Falzon stated that the measure was drawn up following consultations and negotiations between the government, trade unions and employer associations. It was also stated that NGOs that have been vocal about the rising cost of living and the insufficiency of the COLA mechanism. Other aspect,s such as the minimum wage, have also been involved in consultations. These included the Alliance Against Poverty, Caritas Malta, and the Pensioners' Alliance.

Views and reactions

The measure was announced during the 2023 budget. While social partners commented on the budget more generally, few specifically referenced the new additional COLA payment. One exception was the ADPD, Malta's green party, which referred to it as “a misguided attempt to create an alternative mechanism to one that already exists”, despite highlighting that its introduction indicated that the government acknowledged that the current COLA system was not working. On the other hand, the General Workers Union (GWU) praised the introduction of this measure.

Sources

• 24 October 2022: Malta Today - First reactions to Budget 2023: unions and employers with nuanced views (www.maltatoday.com.mt)
• 07 December 2022: Malta Independent - 86,500 vulnerable persons to benefit from extra COLA cheques starting next week (www.independent.com.mt)
• 05 April 2023: NSO - Government Expenditure on Social Security Benefits: January-December 2022 (nso.gov.mt)
• 30 October 2023: Times of Malta - Budget 2024: Additional COLA payments to be issued in December (timesofmalta.com)
• 06 December 2023: Malta Independent - 194,000 individuals to receive the first additional COLA payments (www.independent.com.mt)