According to ILO wage data, between 1995 and 2007 the wage share in Malta declined by 1.7 per cent. This does not necessarily translate into a declining total wage compensation and unfavourable income distribution for labour. It does, however, mean that the increase in GDP generated by high value economic activities is not having a trickle-down effect. This may be due to the intensification of the competition that often acts as a wage moderator.

However, this wage moderation has not affected all the workers in the same way as trends in wage increases during the last two decades reveal a wider wage disparity and a growing proportion of low-paid workers. The growth of this wage disparity can be explained by structural changes in employment, notably in higher and growing wages in the tertiary sector and a deterioration in the secondary sector.

The changes in technology and the globalisation of the market have generated outsize rewards for those people most able to take advantage of them. Conversely, the growth of atypical forms of contract has contributed to labour market polarisation. The workers employed under precarious working conditions and confined to low quality, low-paid jobs has been increasing.

Without a legal minimum wage, introduced in 1974, the plight of the latter category of workers would have been much worse than is actually the case. In that sense, the minimum wage has helped in protecting the most vulnerable workers. How far this protection goes in ensuring a decent life to these workers is the main topic surrounding the issue of minimum wage.

The Caritas study – A Minimum Budget for A Decent Living – addresses this issue in a professional way. It is important to note that there is a Council of Europe recommendation that proposes a minimum wage of 60 per cent of the average wage.

Ever since its enactment in 1974, the minimum wage has been indexed with inflation rather than with economic growth. This indexation has, of course, led to an increase over the years – it was €23.33 a week in 1974 and €158 in 2012.

However, in spite of these increases, it has not kept pace with the average wage. Indeed, between 1995 and 2006, according to Eurostat, the minimum wage in Malta in relation to the average wage registered a decrease of 1.4 per cent. Although this is lower than that registered in countries such as Greece (8.4 per cent), Romania (6.4 per cent) and Belgium (12.4 per cent), it is to be noted that in most European states, between 1996 and 2008, a rise in the minimum wage relative to the average wage was registered.

What the foregoing implies is that the COLA increase to which the minimum wage is tied has not caused a surge in wages that has set Malta apart from the European mainland. The effect of such an increase on the competitiveness of our economy is the main bone of contention.

The increase in the unit labour cost which a rise in minimum wage will inevitably bring about may jeopardise the economic viability of those firms that would not be able to absorb this wage increase. Sudden and substantial increases cause uncertainty with business. A smoother and more predictable approach to wage increases might be a wiser recommendation.

The Caritas study makes an attempt to address the concerns of employers. Its recommendation to prohibit wage rises based solely on the relativity with statutory wage increase is meant to keep in check the eventuality of a wage increase spiral. This might not hold as trade unions tend to establish a base on which they deem the income of their members should be weighted.

Whatever the adjustment made to the minimum wage it will still be considered as a wage floor above which every worker aspires to rise. A pay packet close to this minimum wage would not be seen as the ideal by the various categories of the trade union constituency.

The apparent cogency of these arguments makes the vulnerable workers impotent as they are made to believe that the imperatives of the economic market weigh heavily on them. This sense of impotency gives way to a fatalistic attitude to life that is not conducive to a high level of commitment to work and loyalty to the firm in which they are employed.

To be meaningful and valued, work has to be seen as a route out of poverty. The way out for the vulnerable workers is the compromise between capital and labour over income distribution, which has been the hallmark of Europe’s social policy.