Raising the minimum wage could push more people below the poverty line - MEA

The Malta Employers Association has warned that an increase in the national minimum wage could push more people below the poverty line and has appealed for a rational approach to looming national debate.

On the other hand, the Forum Unions Maltin is insisting that the country should rather be debating the introduction of the living wage.

The Malta Independent yesterday contacted a number of unions after Prime Minister Joseph Muscat on Sunday said the time has come to debate an upwards revision of the minimum wage. The debate was sparked by a recent Caritas Malta report, which found that the minimum wage is too low.

It found that the yearly necessary budget for a family consisting of two parents and two children to live decently was found to amount to €11,446. But families on one minimum wage received only €9,353, including in-work benefits and other allowances.

Malta’s minimum wage currently stands at €166.26 per week, or €720.46 a month. Families on unemployment benefits earn €7,463.

According to the Caritas report, a single parent with two children would need an estimated €9,197 for a decent living. Yet such families who were unable to work and are on unemployment assistance earn a measly €6,965.

Dr Muscat also said on Sunday that social benefits for persons with disabilities who could not work should be at par with the minimum wage.

Kevin Bonello, For.U.M

For.U.M President Kevin Bonello said that, rather than discussing the minimum wage, the authorities should be debating on a living wage, a concept that was still largely alien in Malta.

He explained that the current system is to have a fixed minimum wage with varying Cost of Living Adjustment, which was calculated according to inflation. “This means that, irrespective of the COLA increase, the minimum wage stays the same.”

“We have to explore the living wage proposal – a system that is based on today’s needs. We have to ask ourselves – are the needs of today the same as they were 10, 20 years ago?”

Mr Bonello warned that unless the living wage concept is introduced, the social gap would continue to widen. “Families living on a minimum wage cannot improve their situation. How can an unskilled worker afford a parttime course, which would help him find a better job, on a minimum wage? If things do not change these people will remain stuck in the same situation and their children will fare no better.”

Mr Bonello said that, even as President of the Malta Union of Teachers he saw many cases where parents could not even afford buying school lunch for their children, and the government had to step in and provide for them.

“If there was ever an opportune time to discuss introducing a living wage it is now, when the economy is doing well and unemployment is low. We cannot discuss the subject when things are going south. It is true that this will result in an expense on the employers but we should not just see the short-term effects. In the long run this is beneficial for the country. If unskilled workers receive training and improve their income the economy as a whole will benefit.” Mr Bonello noted how many employers were engaging foreign workers because of a lack of local skilled people. “This is about investing in people.”

The For.U.M president said he expected short-sighted employers to offer resistance but said he believed that many employers were not short-sighted.

Joe Farrugia, Malta Employers Association

The Malta Employers Association is taking a more cautious approach. MEA Director General Joe Farrugia said the Caritas report which triggered the whole debate had identified several vulnerable groups, including families living on a single minimum wage salary, single parents and pensioners. “For a start the minimum wage issue does not address the pensioners segment. We also have to identify how many families are truly living on just a minimum wage.” With respect to single parent families, he added that it is a social issue which has to be addressed through focused interventions such as welfare benefits. There is no need to tamper with the wage mechanism.

The Caritas report found that a family consisting of two parents and two children needed at least €11,446 to live decently. “If both parents work and both earn a minimum wage - which is unlikely - they would still be earning considerably more than this amount.”

“The minimum wage should not be too low to discourage people from working, but it should also not be too high as it would keep people from participating in the labour market because of a lack of job opportunities. If the hourly rate of some unskilled jobs goes up, it might become cheaper to automate, and drive people out of employment.”

Mr Farrugia pointed out that Malta’s minimum wage was higher than the EU average and the highest among Mediterranean countries, excluding France. Some countries, like Cyprus, do not even have a minimum wage.

The MEA Director General believes that only a small number of people in Malta earn a minimum wage, and most of those contributing to the low income/poverty scenario are pensioners or families with social problems. “As such the issue here is how to improve pensions or social security schemes, not increasing the minimum wage.”

Mr Farrugia also warned that an increase in the minimum wage would lead to an increase in all salaries, to maintain relativities. “If you earn €1,000 over the minimum wage and the latter was increased by €1,000, many would suddenly find themselves on the minimum wage and demand an increase. There are many implications that have to be thought through before increasing the minimum wage. There has to be proper research.” Raising the minimum wage, he said, could push many more people below the poverty line.

Such an increase could also have adverse effects on vulnerable groups, including the elderly. “Many elderly people are paying for the services of carers, many of whom are foreigners and earn a minimum wage. If their minimum salary were to be raised, their employers (the elderly) would incur higher costs.”

Mr Farrugia said he was not criticising the Caritas report which, after all, indicated the lowest level of income needed for a decent living. “But the answer is not necessarily an increase in the minimum wage.” The MEA, he said, had issued a position paper on the subject some years back and many of those recommendations were still valid. “One of these recommendations was to introduce policies that reduce the number of people earning a minimum wage, rather than increasing the minimum wage itself. This can be done through education and offering better quality jobs.”

“Emotionally it is very easy to argue in favour of an increase but the issue has to be approached in a rational manner. The unifying factor between the social partners should be to agree on strategies to minimise the number of persons on the minimum wage, rather than increasing the minimum wage itself”.

Pointing out that no one had actually mentioned what the increase would likely be, Mr Farrugia warned against politicising the issue, as this could turn the whole thing into a disaster. He questioned why the issue had cropped up now. “Is this some other form of diversionary tactic by the government. And how will the Opposition respond? Will it oppose such an increase or propose a higher minimum wage to compete with the government? Will this turn into a vote grabbing exercise by the political parties, with the employers caught in the crossfire?”, he concluded.

Tony Zahra, MHRA

Malta Hotels and Restaurants Association President Tony Zahra said he believed that the issue of a minimum wage was not directly linked to the tourism industry. “In my opinion there are not many people in this industry earning a minimum wage. This is due to the competition between operators to find and engage the most skilled personnel. This is pushing salaries upwards. Salaries in the sector are dictated by ability and the going rates more than the average wage.”

The fact that unemployment was low and that some operators were struggling to find enough people was also another factor that was pushing salaries upwards.

With regard to the minimum wage increase, Mr Zahra said this was a matter for the Malta Council for Economic and Social Development (MCESD).

Oliver Scicluna, KNPD

The National Commission for Persons with a Disability (KNPD) reacted positively to the PM’s proposal to bring social benefits given to disabled people who cannot work at par with the minimum wage.

The KNPD’s Oliver Scicluna said he was satisfied that the proposal, which the commission has been pushing for a number of years, even as a budget proposal, has been taken on board and is being taken seriously.

“It is particularly positive because we see many disabled people who are living on the poverty line and this is the first step towards helping them improve their situation.”

Mr Scicluna said disabled people who were unable to work had to get by on just €400 a month. “This meagre amount is certainly doing nothing to get these people out of poverty,” he said.

The KNPD does not have an exact number of disabled people who are unable to work. “There are more than 16,000 people on our register, which includes pensioners and people with multiple disabilities. I would think that the latter make up many of those we are speaking about.”

Whilst welcoming the PM’s proposal, Mr Scicluna said this should only be the first step as, at the end of the day, “a minimum wage was still a minimum wage.”

He also warned against abuse, saying that the necessary safeguards should be in place seeing that these would be public funds. “If abuse is avoided the government could be encouraged to extend and evolve this form of assistance.

Another story collating more reactions will be published in tomorrow’s edition of The Malta Independent