As part of its study ‘A Minimum Essential Budget for a Decent Living’, Caritas suggested a gradual, slight increase in the statutory minimum wage. But would it pay?
The argument for
In reaching its conclusion, the Church NGO said it never lost sight of the fact that, without economic sustainability, efforts to enhance social conditions would not be effective.
With the take-home pay (inclusive of statutory bonuses and after deducting social security contributions) of a full-time employee on minimum wage amounting to €8,375.44 per annum, there already exists a disincentive to seek employment as things stand, Caritas added.
An increase in the minimum wage would result in a higher income for the more deserving, whilst also enhancing spending power in the local economy.
The current concept of a statutory minimum wage still reflects the social concept of decency prevailing in 1971. Over the years, it has only been augmented by the cost-of-living adjustment (COLA).
“In other words, the various lifestyle components which translated to a decent living in 1971 have never been revised in order to take into account what these lifestyle components would be in the second decade of the 21st century – over 45 years later,” Caritas said.
The General Workers Union said that prior to the 2013 election, it had argued that the minimum wage was no longer fulfilling the aims for which it had been created – i.e. to shield workers from abuse.
Malta is currently enjoying an economic boom, making it an ideal time to raise the minimum wage, the union continued. This would help to give people the means to enhance their lifestyles while positively impacting the economy through an increase in consumption and by creating a disincentive in those cases where children are encouraged to quit school to work and help out in their families.
The wage raise would also help reduce the number of working poor and precarious workers.
The GWU believes the minimum wage should be raised through a one-time intervention following a scientific study on mitigating any impact on the country’s competitiveness and must be done in tandem with a pension reform so that all vulnerable social groups are targeted.
The argument against
Increasing the minimum wage would result in an escalation to Malta’s overall level of wages, the Malta Employment Association has argued.
The minimum wage must be low enough for emarginated people to be able to enter the workforce. An increase in the minimum wage would make it difficult for vulnerable people (such as former convicts) to be employed.
Moreover, a raise would also negatively affect some 1,000 elderly people who employ live-in carers.
The COLA mechanism provided protection against inflation and was periodically revised according to the family expenditure survey.
“There are many other measures to increase the welfare of vulnerable groups. An increase in the minimum wage would not target elderly people, who make up the largest portion of poor families”.
An increase in the minimum wage alone is not a viable solution to eliminate poverty in the long run and the economic effects of such a short-sighted approach would be short-lived, according to the Chamber of Commerce.
Wages, it continued, were a function of productivity and not of spending power. Such an increase would inevitably bring about a domino effect further up the ranks and across the whole economy to the detriment of cost competitiveness.
Any measure to address poverty needed to be carefully designed and targeted specifically at supporting, in a sustainable manner, the spending power of the cohort of people at risk of poverty.
Meanwhile, the Union Ħaddiema Magħqudin stated that the minimum wage should be the first step for a particular category of workers and should not be regarded as a benchmark putting people’s mind at rest that the income from a minimum wage was a decent one.
An increase in the minimum wage as proposed by Caritas would not make a substantial difference for those currently earning the minimum wage.
The enduring solution entailed the drafting of polices aimed at youths without qualifications and continuous training throughout one’s work life.
The case for a living wage
It is high time that a debate on introducing a living wage is reignited, according to the Forum of Maltese Unions.
The living wage is based on the amount an individual needs to earn to cover the basic costs of living. It is the way forward, Forum has argued, adding that the COLA mechanism has become obsolete.
Prime Minister Joseph Muscat promoted the idea back in 2010, but it has since slipped from the radar.
However, he said this morning it was time for Malta to have a serious debate about its minimum wage.
People earning the minimum wage cannot afford to attend courses to improve their level of education and to gain additional skills, meaning that they are trapped in a static socioeconomic status.
Meanwhile, the Malta Council for Economic and Social Development said that an increase to the minimum wage carried both advantages and disadvantages.
On the one hand, it could help reduce poverty, but if labour markets were competitive, a minimum wage could cause unemployment, since firms would demand less labour.
“One has to study the effects of cost push inflation and the possible consequences of people working on the black market.
“At the end of the day, there are other indirect ways and means of how to reduce the number of people who are de facto living in poverty. The MCESD is the right fora where such a discussion on this delicate matter should take place.”