Unions and employers stand on opposite sides of a divide on a proposal to raise the minimum wage while the government and opposition emphasise other measures to alleviate poverty. Kurt Sansone reports.

Caritas, a Church organisation, hardly expected universal acclaim for its proposal to increase the minimum wage but its study to establish the minimum expense for a decent living has refocused attention on poverty.

We need to think more about wealth generation before... contemplating wealth redistribution- Tancred Tabone

At the least, the year-long exercise conducted by a team of experts has kick-started a debate that sees opinion divided on how best to tackle poverty.

One of the more contentious proposals is to increase the minimum wage to €180 per week from the current €158. It is deemed essential to improve living standards for vulnerable families with children, such as single parent households.

When asked if the government planned to heed Caritas’ recommendations, the Finance Ministry was non-committal, saying it will be discussing the matter within Cabinet and at the Malta Council for Economic and Social Development.

It noted, however, that the government had improved social benefits, especially for the vulnerable, in measures ranging from rental subsidies to higher children’s allowance and training to help them get a foot into the labour market.

Unfortunately, a scheme providing free courses for minimum wage earners only saw eight people apply. The government is looking at ways to upgrade this initiative to be able to provide minimum wage workers with the skills to progress further.

“I do consider Caritas’ contribution to be a very valid one, and look forward to consult further with it to sustain its assistance to those in need,” Finance Minister Tonio Fenech said.

The Labour Party agreed the minimum wage, first introduced by a Labour government to set minimum standards and increase the standard of living, had been eroded.

“The minimum wage has become increasingly closer to the average wage, which means more people are being employed on a minimum wage as living standards deteriorate, even for the middle class,” a spokesman said, adding the situation was made worse by the “proliferation” of abusive practices to circumvent employment laws.

The Caritas report says the minimum wage, which increases yearly by the cost-of-living-adjustment, still reflects the concept of a decent living acceptable 40 years ago when it was first introduced.

But while Labour “naturally views the idea of raising the minimum wage positively”, the spokesman insisted that any such action would have to be preceded by a series of other measures.

The priority of a new Labour administration would be to cut costs for families and the private sector, he added. “This is why we consider our pledge to reduce electricity bills to be a policy of major economic and social importance.”

The Opposition believes this course of action will reduce cost pressures on the private sector, water down inflation and allow families to better cope with the cost of living.

The plan, as the spokesman put it, would include a government policy not to resort to work practices that undermine employment conditions, such as when engaging contractors that employ workers on a self-employed basis.

This holistic approach to the issue of poverty, lack of income and precarious jobs is also advocated by the General Workers’ Union but its general secretary Tony Zarb has no qualms about Caritas’ proposal.

His union has for the past three years put forward a proposal during the pre-Budget discussions for the minimum wage to increase. Union delegates in October unanimously accepted a motion during a general meeting asking the GWU to continue working for a higher minimum wage.

“The union has never established by how much it should go up because that would be subject to a study, however, we are assessing the Caritas report to see how they arrived at their figure,” Mr Zarb said.

The GWU’s position is one to which Alternattiva Demokratika subscribes. “If the increase in minimum wage is coupled with an increase in productivity, it would not only improve workers’ standard of living but would not have inflationary effects on the economy,” AD chairman Michael Briguglio said.

On the other hand, Union Ħaddiema Magħqudin said it was more in favour of making work pay rather than impose “new” or “additional” mechanisms that could distort the labour market.

“UĦM believes that any financial help in the form of social services and assistance should not exceed the national limitations, otherwise we will be over-consuming and postponing the inevitable,” it said.

Employers too are less enthusiastic about the Caritas proposal. They worry this will erode Malta’s competitiveness as the country’s wage bill goes up.

Tancred Tabone, president of the Malta Chamber of Commerce, Enterprise and Industry, believes it is “very easy and populist” to suggest upping the minimum wage without considering where the money will come from. He urged “extreme care” when considering such a course of action so as not to endanger competitiveness.

“We need to think more about wealth generation before we can even start contemplating wealth redistribution,” he said.

“The increased expense must come either from profits, if the company has any, or by increasing the cost of products or services. If it comes from profits any businessman would ask whether the return on his investment is worthwhile.”

Economist Karm Farrugia, a member of the Caritas research team, said there was a clear economic case for increasing the minimum wage.

However, the proposal, he underlined, came with an important condition – increasing the minimum wage should not and must not lead to an escalation in overall wage levels which could erode competitiveness.

The report urges the government to even legislate to prohibit any wage increase demands based solely on relativity with the statutory minimum wage.

“This prohibition, which should exclude claims from pensioners, could persist for, say, a period of three years, unless eventually extended,” the report says.

Whether this condition will be enough to placate concerned employers is another matter altogether, as the debate rages on over raising living standards for the poor in an economic climate dictated by austerity.

ksansone@timesofmalta.com

Minimum essential budgets

The Caritas study, A Minimum Budget For A Decent Living, focused on three low-income household categories and established a minimum budget for a decent living based on a basket of essential items: food, clothing, personal care, health, household goods and maintenance, education and leisure, transport and housing.

The researchers found that the minimum essential budget required for a household of two adults and two children to have a decent life amounted to €10,634 per year.

A single parent household with two children needs a minimum yearly budget of €8,581.

An elderly couple would need €6,328.

The full study can be found on the Caritas website: http://www.caritasmalta.org/AMinimumBudgetforaDecentLiving_McKay_Sammut_Farrugia_Piscopo%28MinimumSize%29.pdf