Brain Freeze

Malta Independent Sunday, 7 October 2012, 00:00 Last update: about 14 years ago

The PN billboards showing Joseph Muscat holding an ice cube to promote the concept that a new Labour government would freeze the minimum wage reminds me of the prostitute that calls the virgin a whore for wearing a skirt two inches above the knee.

No one person, organisation or entity has suggested that the Cost of Living Allowance (COLA) – legally enforced annual increments – should not continue to apply to the minimum wage. Employers and unions disagree over whether or not it should continue to apply across the whole spectrum of wage setting, but they are in agreement that it should continue to apply to the minimum wage. The issue only arose because, last spring, Caritas issued the results of a study that revealed that, in spite of being subjected to COLA, the minimum wage does not offer sufficient protection from poverty and should be increased by at least 16 per cent.

I had written that this suggestion, while noble in its aim, suffers from a simplistic approach to a complex question and, if adopted, could suffer from the law of unintended consequences where measures intended to achieve an objective deliver precisely the opposite result. Minimum wage earners are generally short of skills and vulnerable to redundancy risks if their cost increases disproportionately with economic growth. Such redundancy risks generally come from the economic demands to outsource the low-skill functions performed by minimum wage earners if the direct employment costs exceed the cost and flexibility of outsourcing. So there is a grave risk that any disproportionate increases to the minimum wage would lead to job losses rather than better earnings.

I argued that if minimum wage earners are to be really helped, the best way would be to facilitate their further training to achieve skills enhancement and thus provide them with access to better jobs with better pay. In cases where particular circumstances make such skill enhancement impossible, then it is up to the social security system to respond to ensure that those concerned stay above the poverty line.

Joseph Muscat has endorsed such thinking but has never, absolutely never, suggested that COLA should no longer apply to the minimum wage. Indeed, if COLA applies to all wages, how can anyone even dare to think that it should stop applying to the minimum wage? Everyone understood this, including the mosquitoes that are taking away the pleasure of staying in the garden these hot autumn nights.

Even the PN must understand this and when they proclaim that Joseph Muscat will freeze the minimum wage, they must be referring to the long practice of increasing the minimum wage only by COLA. But the PN have been doing just that since they came to power in 1987, so how can they accuse the Opposition for continuing with a policy that has been standing under their rule for 25 years?

This year is one of important anniversaries. Apart from the PN’s silver wedding to executive power in government (bar Alfred Sant’s 22 months short interlude), we are also commemorating the 50th anniversary of the Beatles first record (Love me do) and the first James Bond 007 (Sean Connery’s Dr No). But we should also be commemorating the 30th anniversary of the last time that the minimum wage threshold was raised in excess of the cost of living. In the four years between the end of 1978 and the end of 1982, the minimum wage was raised from Lm17.38 (€40.48) to Lm29.88 (€69.60). This was a whopping increase of 72 per cent to the minimum wage threshold over a short period of four years. While many remember Mintoff economics by the wage freeze of the third Labour administration between 1982 and 1987, few remember the positives such as the fact that, during the second Labour administration between 1976 and 1981, the minimum wage was more than doubled from Lm13.25 (€30.86) to Lm26.88 (€62.61).

The last real increase to the minimum wage was in 1982, when it was increased by Lm3 (€6.99) – from Lm26.88 (€62.61) to Lm29.88 (€69.60). After that, we had a wage freeze between 1983 and 1987 and gradual COLA or COLA-like (the COLA mechanism as such was introduced in 1990) every year since 1988. Here is a table of some important sign-posts (election years) on the journey of the minimum wage over the last 36 years since 1976.

Year Minimum wage € % increase

1976 30.86

1982 69.60 125%

1987 69.60 0%

1992 82.99 19%

1996 98.72 19%

1998 106.29 8%

2003 123.76 16%

2008 142.39 15%

2012 158.11 11%

It should be noted that, whilst in the second Labour administration of 1976-1981 the minimum wage raced ahead by 125 per cent, it has taken the PN administrations since 1987, Sant interlude included, 25 years to achieve the same percentage increase, i.e. 125 per cent increase over the base of €69.60 in 1987 equals €156.60, which is where the minimum wage currently stands.

It is therefore more than a bit rich for the PN to accuse Labour of plans to freeze the minimum wage. If they are inferring that Labour will not allow COLA increases to the minimum wage, then they are inventing. If they are inferring that Labour will not raise the minimum wage beyond COLA, then they have been doing just that for a whole generation.

If anyone is suffering from freezes, it is more likely to be found in the PN stables – as their election strategists seem to be suffering a brain freeze. They are frozen in the 1980s and are attempting to hinge their fortunes at the next election by hammering the fact that a new Labour government would be like Labour’s third administration between 1982 and 1987. Firstly they came out with a perfect replica of Margaret Thatcher’s 1979 election campaign billboard by proclaiming “Labour won’t work”, and now they are scaremongering by referring to the minimum wage freeze enforced between 1983 and 1987.

Today’s electorate cares very little about what happened in the 1980s. The actors are different and so are the circumstances. What Labour’s third administration of 1982-1987 has in common with current realities is that a third consecutive tenure of power never works. It did not work for Labour in the 1980s and it is certainly not working currently for the PN.

What the electorate of 2012 is interested in is how the PN are proposing to lead the country forward in unity when their internal strife is being played out in full view of the public like a never-ending reality show. What the electorate of 2012 wants to know is for how long the Prime Minister is going to deny the rules of mathematics, according to which he does not command a majority in parliament, his government has lost its moral mandate to govern and it is in the national interest to give the mandate back to the electorate through a general election this autumn.

If the PN is suffering a brain freeze, the electorate is not. Labour paid for their shortcomings between 1982 and 1987 through six election defeats out of seven. It is now the PN’s turn to settle their bill.