Will the proposal by Caritas to increase the minimum wage to €180 lead to definitive action by the powers that be? And if it does, aside from its positive social impact, what will be the economic consequences? Caritas opens its study on living conditions by recommending that the latest study commissioned by it is a follow-up to a previous report on poverty issued in April 2010.

The institution is making another attempt to show that low-income earnings could lead to poverty- Lino Spiteri

The institution is making another attempt to show that low-income earnings could lead to poverty. There are pockets of households in Malta whose income is insufficient for a decent living, it says. The study intends to stimulate a national debate and encourage policy makers to establish a minimum benchmark for a decent standard of living and implement it.

The study is as objective as can be, compiled by experts who have no axe to grind. They carried out the onerous task of creating a tool, on the basis of social statistics and other real criteria identified through extensive research, to enable Caritas to make its point according to its belief that it is the responsibility of everyone to improve the conditions of low-income earners.

The research exercise was carried out over a period of one year to establish a minimum budget for a decent living based on a Basket of Essential Items. In a nutshell, the findings of the study show that an effort is required to make a decisive impact on ensuring that all people in Malta have the resources necessary to lead a life in human dignity.

The research underlying the study focuses on low-income households represented by three categories entitled to relevant state assistance: (i) Two adults and two dependent children; (ii) A lone-parent and two dependent children; and (iii) An elderly couple.

It assumes that the subject household types are entitled to a pink card – in receipt of free food provision under the food aid scheme; residing in a government-owned subsidised rent, and in receipt of energy vouchers.

The resulting report presents the minimum estimated cost of the selected items put together for the three household types. The basket includes eight basic items: (1) food, (2) clothing, (3) personal care, (4) health, (5) household goods, maintenance and services, (6) education and leisure, (7) transport and (8) housing.

In a sense the study parallels and draws upon the National Statistics Survey on income and living conditions.

The study, says the Caritas report, does not seek to show how much a family should earn. Rather it goes out to describe a basic minimum standard, which it should be unacceptable for any household not to attain.

The minimum essential budget per annum for the subject households is estimated at €10,634 for two adults and two children, €8,581 for a lone parent with two dependent children and €6,328 for an elderly couple.

The report emphasises that these figures do not reflect the minimum essential budget for all the Maltese. Families which do not benefit from financial assistance on housing, medicine, energy and foodstuffs incur higher costs.

It remains to be seen whether Caritas will have a better reaction to its initiative than it had two years ago. The government, before considering raising the minimum wage, will want to assess the impact that will have on those sectors of the economy which pay their employees no more than the minimum wage.

I am not aware that any attempt was made to measure the impact in the wake of the proposal by Caritas two years ago.

With an election looming and the government’s awareness that it is disconnected from the people, it might be that it will announce that action will soon be taken to assess the impact of a somewhat higher minimum wage.

With one more Budget to go before an election must be held as the government’s natural life runs out in a little more than a year ago, I wouldn’t be surprised if some action is taken. It should, and not out of cynical political consideration.

Those earning the minimum wage represent around 10 per cent of the gainfully occupied. Raising the wage should not put the smaller operators out of business since the cost would be uniform and so will not give a competitive disadvantage in the sector. Also, the cost could be in part compensated for by higher efficiency resulting from higher motivation and commitment.

A broader consideration suggests that an increase in the minimum wage would all be spent, thereby stimulating higher consumption and increased government revenue.

These are first considerations. There are no doubt more to take into account. Point is, the account should be opened. The Caritas report is persuasive. It does not use controversial language. Yet it is evident that more must be done to address those who live at margin of poverty or outside it.

Raising the minimum wage meaningfully would be enough. But it would be a start.