Last month, Prime Minister Joseph Muscat suggested that unions and employers should get together to reach a consensus on the minimum wage increase. He was addressing a national conference on the Employment and Industrial Relations Act, organised by the Ministry for Social Dialogue and the Employment and Industrial Relations Directorate.
Dr Muscat is of the opinion that as the country sustained a solid improvement in GDP growth since the election, which is amply reflected in the 2017 budget, the minimum wage was no longer adequate and it was decided to absorb the increase. Does this mean that all workers will benefit from a government one-time handout to cover an increase in minimum wage in 2017? It is obvious to all that poverty among the lower income groups will lead to social unrest and other hardships. It is the collective view of various NGOs that raising the minimum wage would result in a reduction in worker turnover and act as a multiplier in the economy. It is all very well saying that poverty among the unemployed and disabled workers is to be remedied but who will foot the bill? If shouldered by the government out of taxes, this can only mean a better distribution of wealth which is very desirable in a democratic country.
A contrary view is that SMEs struggling to make ends meet may not relish an 11 per cent increase (over three years) as suggested by NGOs. It is easy to blame the government and ask the Exchequer to intervene to help those enterprises that might struggle if the minimum wage is increased. The problem is serious and cannot be swept under the carpet. The coalition of organisations protesting for a revision of the minimum wage is formidable and includes: Aditus Foundation, Alleanza Kontra l-Faqar, Caritas, Forum Boomlet, Integra Foundation, Kooperattiva Kummerc Gust, Malta Humanist Association, Malta Microfinance, Mid-Dlam ghad-Dawl, Millennium Chapel, Moviment Graffiti, Paulo Freire Institute, Peace Lab, The Critical Institute, Third World Group and Żminijietna - Voice of the Left. The minimum wage is €736 a month, which compares badly with some of the other richer EU members. For example, Luxembourg workers enjoy the highest wage at €1999. Furthermore, our minimum wage is less than 50 per cent of the country's median income. One hopes that any revision in minimum wage is fully discussed with Unions and Employers Association to arrive at a satisfactory solution to be proposed in the next budget which is expected to be announced this autumn.
Pensions and minimum wages also move in tandem. This is why the government plans to gradually increase the minimum pension to 60 per cent of the national minimum wage before the end of the legislature. This was announced by Social Policy Minister who recently stated that although the government had "succeeded in improving the lives of some 22,000 people" and lifting many out of poverty, more could still be done.
As for SMEs, it is important not to understate their importance in the domestic market with NSO showing over 87,000 micro and small enterprises. A pertinent question being asked is whether these can afford to pay better wages and remain competitive. No studies exist to assess whether the impact of additional costs in labour component can be passed to consumers in higher product/service prices. Not all these companies are necessarily profitable and many manage to scrape through due to personal sacrifices by owner-manager in their unpaid effort to reduce costs. The political slogan by the Opposition to lure them with lower taxes (small firms to start paying a mere 10 per cent on the first €50,000 profits - instead of the standard rate - 35 per cent) may look quite enticing. In fact, such as Greece, Italy and Portugal have plenty of small firms which, owing to cumbersome regulations, have failed lamentably to grow and register adequate returns on capital employed.
SMEs work hard to maintain market share but unfortunately get little tangible help from the government, although on paper there are a number of glossy brochures. These incentives do not function in practice as benefits are too bureaucratic to interest busy self-employed or managers of small firms. It is true that Unions argue with SMEs that paying better wages will in the longer term generate more harmony at work and improve productivity. The impact of a special 10 per cent tax sweetener to small firms is not scientifically measured and some party apologists claim it could derail our drive to reduce the annual deficit. This tax measure is expected to generate a shortfall of about €350 million in annual government revenue. Unless alternative sources of tax revenue are planned, this will undoubtedly cause headaches for the exchequer. So if SMEs cannot afford to pay higher minimum wages, what kind of effective fiscal incentive will help them to become more innovative, earn higher profits and export more? The answer is not easy and there are no quick fixes. But, certainly something must give since without an improvement in remuneration it follows that those on low-income levels or unemployed cannot pull through in today's competitive environment and consequently face the risk of sliding into a bottomless poverty pit.
Caritas studied the plight of the poor and assessed the real cost of living of the lower income groups had increased by 7.6 per cent over a three-year period, while government's figures say that between late 2012 and late 2015 inflation was just two per cent. The Opposition started a crusade to help the thousands of households that, in the opinion of the shadow finance minister, are struggling to make ends meet. Surely the time has come to gather empirical data using independent surveys commissioned by all stakeholders at MCESD to measure this creeping phenomenon.
It is a fact that for many years, changes in cost of living has been indexed on a basket of household expenses and the COLA mechanism automatically adjusted minimum wage to reflect any upward movement in inflation. The finance minister says why look a prize horse in the mouth ... the COLA mechanism is a social contract that worked perfectly for sixteen years and there is no pressure to change it.
The Association of Pensioners disagree saying that a revision of the content/and weighting of items used in the basket of household expenditure is overdue. Unsurprisingly, the General Workers Union (GWU) presented a proposal for an increase in the minimum wage not paid across the board but by way of an additional top-up from the government. There are thousands of workers who earn the minimum wage, or close to that, who are employed in the construction, hospitality and catering sectors. These amount to an army of workers and since they are working to produce goods and particularly services which are not internationally traded, giving a reasonable boost to wages will not affect exports negatively. So can the quest to offer better wages help to turn the tide? It is a dignified way to show a more human face of capitalism. In the long run, it will strengthen the system of our democratic society and make us more and not less productive.
[email protected]