Caritas - fighting for a decent living budget
Mr Mangion is a senior partner of PKF an audit and consultancy firm, and has over 30 years experience in accounting, taxation, financial and consultancy services. He can be contacted at gmm@pkfmalta.com or on +356 21493041.
Aprevious document on the minimum wage was submitted in 2012 but the 2016 study is not about the minimum wage, but was carried out with the aim of establishing a minimum essential budget for a decent standard of living. In a nutshell, this document says poverty is on the decline. It still persists, but it's much less of a problem now than it was before 2012. Caritas proposed that the minimum wage should increase gradually and the Opposition took this to mean that poverty is on the increase and that the government has lost its social conscience. The Prime Minister Joseph Muscat and Alternattiva Demokratika have reacted positively to such a report which found that the minimum wage is too low and leads to poverty.
Dr Muscat said proposals for a gradual increase in the minimum wage and a study on income adequacy had been noted and he welcomed debate on these important issues. The Nationalist Party said: “The most troubling thing about this report is that rising cost of living is affecting the poorest far more than the government's official statistics suggest.” As can be expected there was no consensus among the two political parties on the conclusions of the study as each gave contrasting interpretations. Nonetheless, one has to observe that while this report is based on studies that takes into consideration smart phones, it strangely left out such important items as free child care, no out-of-stock medicine, free medicine, higher ceiling for non-taxable income and in-work benefits, important cost-saving initiatives introduced by this administration.
The focus of Caritas was on low income families. The methodology used three types of family structures. This included a couple with two children living on one minimum wage with a budget of €11,446. A family including a single parent with two children saw the minimum budget established at €9,197, and an elderly couple aged 65+ with a minimum budget of €6,527. In its 2012 study, Caritas had noted a 16 per cent increase in the inflation rate on food. Shopping basket expenses for food for a couple with two children amounted to €6,211 per year. For a single parent with two children, the amount came to €4,604 and for an elderly couple €2,945. In the 2012 study, the recommendations to increase the minimum wage was not considered favourably by the Gonzi administration, particularly the aspect of having three minimum budgets to guide social security policies in order to determine the adequacy of minimum income for specific households.
One has to take into account that when the 2012 study was finalised, the economy was still reporting high annual deficits and shortly afterwards the Commission had issued a warning to place the country under an Excessive Deficit Mechanism. The employers also were not keen to give across the board wage increases as, according to the MEA (The Malta Employers Association), the fundamental principal of wage setting is productivity; which means that wage determination should be kept distinct from the government function of distribution of wealth.
Again, the union for small and medium enterprises (GRTU) disagreed with the findings of the report because it failed to clearly identify the sources of income of the selected individuals and families. In 2012, the GRTU had commented that upward revisions in minimum wage would only be fair if the income of individuals and families are also properly assessed. SMEs carry a fair share of tax burdens and object to further unsustainable increases in public expenditure. They only support expenditure in schemes that do not further burden employers with increased bureaucracy and increased financial burdens. The GRTU thinks it is the responsibility of the state to provide all means so that all able-bodied individuals of working age can become employable with their specific trainable skills potential and it supports all schemes that ensure that Malta gets the benefit of the maximum productivity of the largest number.
Ideally, the solution for the Gonzi administration would have been to improve the productivity of the state and create more sustainable jobs as loading the cost of production on SMEs or extending the welfare benefits could lead to economic stagnation. The 2012 report carried a number of recommendations but what set the cat among the pigeons was the proposal to have the statutory minimum weekly wage raised from €158 to €180.