Poverty on national agenda
Thanks to Caritas, poverty is once again on the national agenda. Some two years ago, the Church institution had publicly stated that ever-rising costs were pushing Maltese families into real poverty and proposed an increase in the statutory minimum wage. Caritas’ proposition was lightly put aside.
Caritas was not disheartened and asked a multi-disciplinary team of experts to prepare a detailed report on the matter. This time round, probably because our policymakers are more disposed to listen, the Caritas’ report was discussed at Cabinet, the Malta Council for Economic and Social Development and Parliament’s Standing Committee on Family Affairs.
The report confirms that poverty in our country is on the increase, indicating the level of incomes that are necessary for various classes of vulnerable families to have a “no frills” standard of living. The report contains a number of recommendations but what caught most the attention of the media was the proposal to have the statutory minimum weekly wage raised from €158 to €180.
At the MCESD, the social partners decided to commission an economic impact assessment on implementing such a measure. In the present state of our economy, the request for more information is understandable and the preparation of such a study should not be seen as mere procrastination.
Some commentators have questioned the need of having a minimum wage while others have insisted that it be linked with productivity. Gone are the days when our society placed great emphasis on social cohesion.
The introduction of the minimum wage in 1974 had sent a clear message that our society would not tolerate any “working poor”. The minimum wage acknowledges that some employees are in a weak bargaining position on the labour market and seeks to protect them by providing a basic floor for wage determination. Given the increase in precarious work, we now need to have a decent minimum wage more than ever before.
Social cohesion, especially in a small state, is essential for economic progress. Economic and social policies are but two sides of the same coin. An economy is only as successful as its ability to raise the standard of living of its people. Not affording to raise the minimum wage says a lot about the real state of our economy.
For long years, successive governments sought to protect minimum wage earners through the cost-of living adjustment (COLA) mechanism and to supplement their income by a number of social measures ranging from children’s allowances to subsidised housing.
However, the way that COLA is worked out (especially it being based on “average” national expenditure patterns and given in arrears) has not helped protect the purchasing power of lower income employees. This segment of our society has come under further pressure through the introduction of VAT, the removal of subsidies on essential commodities (such as bread, energy and public transport) as well as widening wage disparity. This last point was also made by Saviour Rizzo, acting director of the Centre for Labour Studies at the University of Malta, who added that Malta has “a growing proportion of low-paid workers” (March, 29).
It is unfortunate that, over the last decade or so, society has fallen in the grip of neo-liberal policymakers who seem to believe that an economy has a life of its own. If poverty is on the increase it is primarily due to their misguided policies. Despite all the empty talk about being “smart” and a “centres of excellence” in all economic spheres, the reality is that the competitiveness of our enterprises is still unduly dependent on low costs (and low wages).
Admittedly, in making such arguments one runs the risk of over-generalising. There are employers who can afford and are happy to remunerate their employees far above the minimum wage but we also have a growing number of enterprises that are losing money and which are holding back from making employees redundant, in the hope that their business will pick up in the near future. There is a limit as to how long these enterprises can keep eating into past savings or living on borrowed money.
This was the gist of Moody’s warning that our economy will have great difficulties in coping with another recession in the eurozone.
The key question remains: Why is it that our enterprises cannot afford a higher minimum wage when the local cost of living is fast converging to the European average?
It is about time that our politicians get back not only into the kitchens of our families but also into the boardrooms of our enterprises.
It would also be a mistake to consider the “war against poverty” as just a matter of raising the minimum wage. A broader and more holistic approach is necessary. In this age of information technology, there exist the tools to identify poor families and offer them assistance on a case-by-case basis.
We need further concrete proposals of how to fight poverty. What is for sure is that if our country is to meet its full economic potential we need to review and consolidate our education and training systems to cater for the needs of non-academic students.