Friday’s minimum wage agreement has been hailed as a ‘historic’ step to help lift people out of poverty. However, Malta Employers Association director general Joseph Farrugia insists this was no minimum wage increase but a mechanism to reduce the number of workers earning the lowest amount set by law.

There is some confusion on the details of this agreement. Has the minimum wage increased or not?

Let me make it clear. The minimum wage has remained the same. The changes only affect workers in their second and third year of employment, who will at the end of each year get a weekly increase of €3.

This is the gist of the agreement, which also includes a one-time 1€ supplement in 2018 and 2019, which will be given across the board to all workers.

But this is not what the government and Opposition are saying. There have been declarations that this is the first increase in 27 years.

I stand by what I have said. The minimum wage has remained the same. The agreement is on our website for everyone to see, and its contents are clear.

What is wrong with increasing the minimum wage?

Had we taken such an approach it would have had ramifications across the board, as all workers regardless of their grade and salary would have expected to be treated in the same manner and get an equivalent rise. This would have resulted in a waste of resources. Rather than spend €500,000 to help those most in need as we did, it would have cost €10 million. Moreover, it would also have brought into the equation enterprises with no workers on the minimum wage, as they would have had to fork out the increase, thus denting their competitiveness, which could ultimately threaten jobs.

What was the reasoning behind giving a rise only to minimum wage earners who have been in employment for at least a year?

We have to put the problem in perspective. There are currently some 4,000 workers on the minimum wage, which is less than two per cent of the workforce.

Our strategy was twofold – to have focused measures to address poverty, which strictly speaking is outside this agreement, and secondly to minimise the period for which workers remain on the minimum wage. Consequently this agreement will with immediate effect reduce those receiving the lowest possible income.  Another consideration, however, was not to distort the wage relativity between grades.

The financial services industry is suffering.This is not a mere concern, as there are already worrying signals

But there has been criticism from NGOs that €3 per week is a pittance.

The agreement states specifically that employers and unions cannot be expected to carry the burden of resolving poverty through industrial relations and collective bargaining structures. Nor is the labour market mechanism on its own expected to address poverty.

A drastic increase would risk creating redundancies or making unskilled people unemployable. Let’s take the example of a supermarket owner. There could be a point beyond which it would be cheaper to run automated cash registers, rather than having a cashier. This is already happening abroad. In that case, a drastic increase in the minimum wage would be counterproductive. We wanted to find a balance without creating such risks.

How will the minimum wage revision mechanism work?

This will involve the setting up of a low-wage commission by 2020 comprising employers and unions within the MCESD. Its remit will be to make recommendations to the government based on scientific studies and official data. These will have to factor the impact on competitiveness and the risk of redundancies.

Do you think the minimum wage debate was treated like a political football?

For a time, the debate was more like an auction between the two major political parties, whose intent seemed primarily to score political points only. One of the major achievements of this agreement was to bring government and Opposition together, as they both realised they were playing a dangerous game. Treating the issue as a game of poker and calling each other’s bluff would have resulted in all parties, including Maltese society, ending up on the losing side.

Moving to the political situation. What prompted you to issue a statement expressing employers’ concern?

The financial services industry is suffering. This is not a mere concern, as there are already worrying signals.

What sort of signals are you referring to?

This is like an avalanche, which once it gains momentum cannot be halted. God forbid a similar thing happens to the financial services industry, as it accounts for more than 12,000 jobs. Moreover, this sector has contributed largely to the robust economic growth of recent years. The ripple effect of a decline in financial services would hit the rental market, employment and possibly result in the economy contracting, which in turn would cause a decline in government revenue. On the other hand, one of the strengths of the Maltese economy is that it is rather diversified. Nevertheless, it would still affect the standard of living.

Could the authorities have handled the situation better?

Surely. If you have certain suspicions and see events unfolding on television [the Pilatus Bank owner using the emergency exit with two suitcases amid allegations of wrongdoing], you cannot stay put and not take any steps. This was the reason why we issued a statement to express our concern. Employers are not interested which party is government, but you cannot have issues that may spill over to the private sector.

MEA also criticised the recent recruitment of some 150 employees with the Water Services Corporation. What is wrong with it?

This is money down the drain. I find it hard to understand why the WSC would need 150 technicians.

We are worried about the brain drain of teachers in certain subjects, mainly the result of unattractive working conditions. We have no problem at all in increasing the workforce in sectors like public healthcare.

Is there anything to be done about this?

In our memorandum of understanding given to political parties before the last election, we insisted that no collective bargaining should take place in the last six months of the legislature. On a positive note, we welcome the recent civil sector collective agreement, wrapped up well before the end of the five-year legislature.

Finally, there have been accusations that when it comes to public procurement, there is not a level playing field. What is the feedback from the employers?

We are mostly worried about the amount of direct orders being handed out. The recent case of an IT company being awarded a contract in excess of €1 million to upgrade the prison network is a case in point. Such cases do fuel complaints from our members, who feel that they lack a fair chance.

There needs to be absolute transparency on how taxpayers’ money is being spent.  It is useless having parameters in place without abiding by them.

‘Give the €3 weekly increase to everyone’

A group of NGOs that have been lobbying for a minimum wage increase are calling on the government to extend the €3 weekly increase to the first year of employment.

Kampanja Paga Mimima Deċenti, which comprises 15 organisations, made this appeal in a news conference in which it gave its detailed reaction to the minimum wage agreement signed last Friday.

While welcoming certain “positive aspects”, it expressed its disappointment that its proposal for an 11 per cent increase over three years was not taken on board.

“The €8 per week over two years is too low and does not guarantee a fair and decent wage and is not even half of what we proposed,” they complained.

The NGOs also expressed concern that the agreement could be circumvented if employers decided to fire workers before they complete a year in employment. T

The increase should therefore be given to everyone at the beginning of employment to close this loophole, they said.

On the other hand, it noted that following years of lobbying in favour of a minimum wage review, things have started to move. Satisfaction was also expressed for the creation of the low wage commission.

The NGOs vowed to keep up the pressure for a fair and proper minimum wage increase and a review of the cost of living adjustment mechanism.

FAQ: the minimum wage agreement

■ Has the statutory minimum wage increased?

No, the agreement does not provide for this. Consequently, the minimum wage for persons 18 and over as set by the Department for Industrial and Employment Relations remains €169.76 per week.

■ Who will benefit from the agreement?

The agreement aims to “reduce the number of persons on the current minimum wage and to minimise the period in employment that a person may remain on the minimum wage”.

This will be done through a mandatory €3 weekly increase upon completion of the first year of employment with the same employer and upon completion of the second year at an additional €3 per week.

Existing minimum wage earners who have been with the same employer for more than a year will immediately benefit up to a maximum of a €3 per week adjustment with effect from January, 1, 2017.

This will also apply in 2018, and by 2019, they must have received all of the €6 weekly increase, provided they remain with the same employer.

All of these increases will be over and above the cost of living adjustment mechanism (COLA).

■ What if the employee is transferred to another company within the same group?

The worker is still eligible for the benefits.

■ How does it affect low-wage earners on a definite contract?

Those affected by this agreement whose contract is not renewed cannot be replaced for up to a year, unless there is a “good and sufficient cause”. If within six months of expiry of the first contract, the employee is offered another definite-term contract, the two periods shall be considered “one continuous period”, both in terms of law and for the purpose of this agreement.

■ Will employees earning slightly more than the minimum wage benefit?

The will be entitled to a portion of the increases in the second and third years of employment in order to bring them on par with the minimum established wage for the second and third years.

■ Where does the €8 weekly increase reported in the media stem from?

The agreement says that in 2018 and 2019, there will be a weekly €1 supplement over and above the cost of living adjustment mechanism (COLA). This will apply across the board and not just to minimum wage earners. The latter will thus benefit from €6 over two years and the aforementioned €2 increase.

■ What will happen in the future?

The agreement provides for the setting up of a Low-Wage Commission consisting of equal representatives of trade unions and employer organisations within the Malta Council of Economic and Social Development, whose remit will be to give recommendations to the Prime Minister every four years. The commission will have to be set up by 2020 and give its first proposals in 2023.