Last week Caritas claimed that there was the need for an increase in the minimum wage. It based its claim on a study, which showed clearly that some families are struggling to make ends meet. It needs to be stated that this is not the first time that Caritas has highlighted this problem. In fact it has been very consistent throughout the years on this point.
There are several considerations to make about this claim. However, there is one fundamental aspect that needs to be stated at the outset to place the discussion in context. Wages in Malta have evolved over the years, thanks to a very healthy economy that has not experienced a severe downturn since the mid-1980s. That is more than a generation ago.
Speaking to the under 30s today about the possibility of high unemployment resembles the time when my parents used to talk about World War II: I could not understand fully what they were talking about.
We should not accept to live in a society where persons have not experienced an improvement in living standards because the benefits of a successful economy have not trickled down to them
For some occupations, wages have evolved at a faster rate than for a number of other occupations.
In Malta wages are increased statutorily by what is referred to as the Cost of Living Adjustment (COLA).
However, the consistent low level of unemployment means that the laws of supply and demand have taken over. And where the demand for labour has increased by more than the supply, wages have tended to increase by well above the inflation rate or the amount of the COLA.
This may lead many to believe that the minimum wage is not an issue. Such a belief would also be strengthened by the fact that today, there are many low paying jobs which Maltese persons are very unwilling to do – unless through the informal economy, working unofficially to avoid paying national insurance and tax.
As a society we should be pleased that our economy has been doing so well for so many years. However, we should not be pleased that living standards have not improved for a large segment of the population.
Reducing the number of persons who are at the risk of poverty is actually one the EU’s objectives listed in the strategy Europe 2020. Malta had also embraced this strategy.
A number of studies have been published within a European context. They include the Statistics on Income and Living Conditions survey (2014), the European Working Conditions Survey (2015) and the European Quality of Life Survey (due later this year).
More recent data is found in the Spring Forecast 2016 published by the European Commission. In that report the European Commission analyses the economic indicators of each member state. Three of these indicators relate to income: compensation of employee per head, nominal unit labour costs and real unit labour costs.
This data suggests that on average nominal income is rising but real income (that is after taking into account the inflation rate) is remaining relatively flat, if not decreasing.
Anecdotal evidence suggests that in a number of occupations real income is forging well ahead of the inflation rate.
As a consequence, the change in real income of other occupations has gone into negative territory, and therefore persons have experienced a drop in living standards.
Maybe it is worth remembering that this year we are celebrating 60 years of social services in Malta. Successive governments have consistently improved social services in this country. History proves this.
However, we should not accept to live in a society where persons have not experienced an improvement in living standards because the benefits of a successful economy have not trickled down to them.
This kills social cohesion and threatens the economic performance of the country.