A living wage that provides sufficient income to secure an adequate living standard is commendable but is likely to have a negative impact on the economy, according to economist Karm Farrugia.
“The concept is positive, desirable and commendable but it will have an impact on competitiveness, especially at a time when Europe is struggling to remain competitive on the world stage,” Mr Farrugia said.
Economists have to be convinced that at least 50 per cent of the arguments in favour of the living wage have to be economically beneficial and sound, he said, insisting the arguments at this stage were more social than economic.
“It will take time and lengthy discussions before it can be introduced, maybe even decades,” Mr Farrugia said.
The living wage concept was floated on Sunday by Labour leader Joseph Muscat when quizzed about the adequacy of the minimum wage.
A living wage is calculated by taking into account basic living expenses for an average family and works out at a higher income than the minimum wage.
Dr Muscat said the living wage could be introduced on a voluntary basis and employers who agreed to pay it instead of the minimum wage could be given some form of assistance.
The proposal, still in embryonic form, was welcomed by the two major trade union leaders, who spoke to The Times yesterday.
“It is a positive concept because those who earn the minimum wage today are literally living from hand to mouth,” Union Ħaddiema Magħqudin general secretary Gejtu Vella said.
The UĦM will be exploring the concept in its forthcoming document People’s Social Vision 2015, which the union will launch later this month, according to Mr Vella.
General Workers’ Union general secretary Tony Zarb said the proposal was positive, especially if linked to collective agreements, but the union would want to know how it would be implemented.
Although Dr Muscat was the first to propose a living wage, Caritas Malta director Mgr Victor Grech had during a seminar on poverty in June spoken about the inadequacy of the minimum wage and made the case in favour of a higher minimum wage to cater for basic requirements.
In an exercise undertaken by Caritas, the National Statistics Office and experts in the field, the Church organisation found that a basket of essential items and services necessary for a frugal lifestyle cost an average €314 a week for an average family. The minimum wage stands at €152 per week.
The novel concept was implemented in London on a voluntary basis with some renowned companies like Barclays and KPMG signing up to the proposal and ensuring their suppliers and subcontractors paid the living wage.
However, the economic implications of a living wage may be a source of concern for employers, with Malta Employers’ Association director general Joe Farrugia insisting the minimum wage guaranteed competitiveness and employment.
“The minimum wage is increased yearly in line with inflation and if it is doubled some companies could possibly close down or lay off workers,” Mr Farrugia said.
Describing the proposal as innovative, Mr Farrugia added it would have to be beefed up and possibly discussed at the Malta Council for Economic and Social Development.
His foreboding was shared by Mr Farrugia: “A living wage has to be defined and it would also have to cater for inflation. In Malta we already get employers complaining about our rudimentary wage adjustment mechanism based on inflation let alone the introduction of a living wage.”