The COLA - Trick or Treat?

Hal­loween is a sec­u­lar fes­ti­val. It is char­ac­terised by chil­dren’s par­ties, teenagers in grue­some cos­tumes and oth­ers be­lieved to en­gage in macabre spir­i­tual ac­tiv­i­ties.

Malta Independent - - NEWS -

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Hal­loween is an old tra­di­tion aimed at ward­ing off roam­ing ghosts, though Catholic the­olo­gians have a dif­fer­ent per­spec­tive. Hal­loween’s trick-or-treat hardly fea­tures on my radar, but the min­i­mum wage does.

With the first signs of a gen­eral elec­tion loom­ing on the hori­zon, po­lit­i­cal par­ties have started to po­si­tion them­selves to com­bat for ev­ery vote. Noth­ing will be left to chance. What­ever the out­come, I re­tain that po­lit­i­cal power is a huge re­spon­si­bil­ity and this should not be claimed through ma­li­cious ma­noeu­vres and empty prom­ises.

The re­cent past has showed that the de­sire for power was such that the elec­torate was led to be­lieve that a new power sta­tion was nec­es­sary to ad­dress most of the eco­nomic ills for both low-in­come earn­ers and en­trepreneurs. A new mid­dle­class was to emerge from the ru­ins of world-wide eco­nomic woes, which had squeezed dry the pock­ets of many. With the ben­e­fit of hind­sight, three and a half years later, we can draw our own con­clu­sions.

Statistics show that Malta is ex­pe­ri­enc­ing one of the best un­em­ploy­ment records and ro­bust GDP growth. Not­with­stand­ing these achieve­ments, the num­ber of peo­ple in real dan­ger of fall­ing into the poverty trap is grow­ing. Why? Some­thing is se­ri­ously wrong. Ev­i­dently the dis­tri­bu­tion of the gen­er­ated wealth is not be­ing fairly dis­trib­uted and the econ­omy is cre­at­ing more low-paid em­ploy­ment op­por­tu­ni­ties than value-added ones.

This has pushed on the na­tional agenda the aug­men­ta­tion of the min­i­mum wage be­yond the COLA. Ac­cord­ing to the 2017 Bud­get, come 1 Jan­uary 2017, the na­tional min­i­mum wage would in­crease by a weekly €1.75, bring­ing it to €169.76 per week. The Deputy Prime Min­is­ter Mr Louis Grech will be head­ing a se­ries of meet­ings with the so­cial part­ners and other in­ter­ested groups on the is­sue of the min­i­mum wage. The COLA is mea­sured on the Re­tail Price In­dex ac­cord­ing to for­mu­lae agreed be­tween the so­cial part­ners, decades ago. The COLA is not awarded to im­prove the stan­dard of liv­ing; if any­thing, it re­stores the pur­chas­ing power which was eroded due to higher prices in the pre­vi­ous 12 months.

This an­nounce­ment was im­me­di­ately fol­lowed by four­teen or­gan­i­sa­tions de­mand­ing a 3.5% in­crease in the min­i­mum wage for three con­sec­u­tive years, in ad­di­tion to the yearly COLA. Since then, the pro­posal has gained sup­port from other or­gan­i­sa­tions. With­out caus­ing alarm, it is ap­pro­pri­ate to have a look at its im­pli­ca­tions be­fore we set forth with the rec­om­men­da­tion.

Some easy mul­ti­pli­ca­tions and ad­di­tions on the back of an en­ve­lope should help us un­der­stand the wider im­pli­ca­tions.

Ac­cord­ing to that pro­posed, the min­i­mum wage would in­crease by €19.00 weekly by the end of the third year. This in­crease does not in­clude the COLA for the three years. Tak­ing a con­ser­va­tive as­sump­tion the COLA for these three years would in­crease sub­stan­tially due to in­fla­tion, then the min­i­mum wage would have in­creased by €25/€27 weekly at the end of the three years. In ef­fect, this means that by the third year the an­nual in­crease in the min­i­mum wage would ap­prox­i­mate €1,300. If on the re­ceiv­ing end, then this could be per­ceived as a ‘treat’. But the vul­ner­a­ble should not be ‘tricked’ with bo­gus wage in­creases, pur­port­edly aimed to im­prove the stan­dard of liv­ing of those liv­ing on the min­i­mum wage, but in­evitably eroded be­cause of price hikes.

But taken on board, this in­crease would have to be given to all work­ers across the board to en­sure wage rel­a­tiv­ity be­tween one grade and an­other. With­out doubt, trade unions will mark time to put for­ward wage in­crease claims on be­half of their mem­bers to en­sure that wage and salary rel­a­tiv­ity is main­tained. When­ever such rel­a­tiv­ity is dis­turbed, in­dus­trial ten­sions be­tween em­ploy­ers and work­ers of­ten en­sue, re­sult­ing in in­dus­trial strife.

In ad­di­tion to these con­cerns, wage in­creases would also trig­ger in­creases in a good num­ber of pen­sions, which in it­self is also pos­i­tive. But the ques­tion which begs an an­swer is: Can the na­tional cof­fers sup­port such pen­sion in­creases? If yes, then by all means. But if this is solely a po­lit­i­cal par­ti­san ‘treat’, then shame on those who, to re­tain power, would re­sort to such po­lit­i­cal ‘tricks’.

I will not deal with Malta’s com­pet­i­tive­ness and other re­lated is­sues; en­trepreneurs do that best. Per­haps Govern­ment will break the news that the liv­ing-wage is in the off­ing for the ben­e­fit of low-in­come work­ers and their de­pen­dants, un­less this is just a po­lit­i­cal ‘trick’.

The Malta In­de­pen­dent Tues­day 8 Novem­ber 2016

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