A living wage could work in the interest of companies that depend on domestic demand but the price to the rest of the economy will outweigh the benefits, according to an employers’ organisation.

Dissecting the Labour Party’s living wage proposal, the Malta Employers’ Association said alternative policies that enabled people to move out of poverty or low income situations “would be more effective”.

The association yesterday presented a position paper on the living wage during a business breakfast where the key speakers were MEA director general Joseph Farrugia and Labour leader Joseph Muscat.

The event, which comes in the wake of the idea of a living wage floated by Dr Muscat two months ago, was the first of its kind whereby the MEA took on an issue championed by the PL.

The living wage is different from the minimum wage and is calculated on a basket of necessities for an employee to enjoy a basic standard of ­living.

Dr Muscat tried to allay fears that a Labour government would impose a living wage, insisting it would be a voluntary yardstick implemented through “social consensus”.

“The living wage is a means to an end and the end is that of raising living standards in the country,” Dr Muscat said, pointing out this was also the aim outlined by the employers’ association.

However, he acknowledged there could be different approaches to achieve this common aim and underlined the importance of a healthy debate on the living wage “or any other alternative”.

He defended the concept on the basis that it helped promote social mobility and increased purchasing power. People would not be simply living at subsistence level, he added.

“I am here with an idea and an open mind, asking you to join forces with me. I am ready to change my position as long as you are also prepared to shift yours. Ultimately, we have a common goal of raising living standards,” Dr Muscat said, adding he needed employers on board to implement the living wage concept.

His rallying call was a reaction to employers’ concerns that a living wage will erode competitiveness.

Earlier, Mr Farrugia outlined a number of issues that had to be taken into consideration when talking about the living wage.

He asked whether it would be calculated on the individual worker’s income or be based on the family income. Mr Farrugia said another parameter that had to be considered was whether a living wage would apply to particular sectors of the economy or across the board.

People on low salaries were of concern to the MEA, he said, but a balance had to be struck between ensuring the basic standard of living and competitiveness. Mr Farrugia said the minimum wage should be sufficient for an adequate standard of living.

“A distinction has to be made between a wage and social benefits. We should not create grey areas between what constituted a salary and what constituted social benefits. Employers do not pay social benefits,” Mr Farrugia said.

During question time, businessman Reginald Fava said he would favour the living wage concept if it were tied with stringent controls on welfare payments and if the political parties stopped promising free public services for everyone.

A similar appeal was made by former MEA president Arthur Muscat, who urged politicians to say how they would finance their promises for more benefits.

Labour MEP Edward Scicluna said that at the current GDP per capita levels the country could ensure a decent standard of living for everyone and it was all a question of priorities when allocating resources.

A study by Caritas earlier this year found that a weekly wage considered sufficient for a basic standard of living for a family of four was €314. The minimum wage now stands at €152.

Nationalist Party general secretary Paul Borg Olivier was among the audience but did not speak.

Later, the PN accused Dr Muscat of dishing out a wish list of policies that do not work.

“Joseph Muscat first proposed a living wage and tried to give the impression he knew what he wanted and how to implement it. He now retreated from it. The living wage is a wish because it will be voluntary and so depends entirely on whether an employer wants to pay his workers the established amount,” the PN said.

ksansone@timesofmalta.com