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Living Wage Debate: Policies for People to Move up the Ladder
The Malta Independent
Annaliza Borg

November 19, 2010
View the Original Article

“In the local circumstances, alternative policies that enable people to move out of low income or poverty would be more effective than introducing the concept of a living wage,” said Joe Farrugia, director general of the Malta Employers Association, at a business breakfast yesterday morning.

During the activity, which was attended by Opposition leader Joseph Muscat, economist and MEP Edward Scicluna, MP Charles Mangion, Parliamentary Secretary Chris Said, trade union members and individuals, the MEA presented its position paper on the Opposition’s proposal for a national living wage.

The living wage as a concept has been the subject of debate in many countries and is aimed at increasing the disposable income. At EU level, the pressure to introduce a living wage is gaining momentum from the socialist camp mainly as a consequence of the recession, the activity heard.

Mr Farrugia said the debate should be based on the fact that the living wage is not an objective in itself, but a policy tool, with the aim of reducing the number of households living in poverty or at risk of poverty.

This could be achieved by heavy investment in education, targeting expenditure and giving people the means to move out of low paid jobs to better ones.

The living wage must definitely not be considered as a political objective and must be compared with other tools addressed at reducing relative poverty, Mr Farrugia said.

Commending its objectives of reducing relative poverty, he argued this was difficult to tackle in the short term. Several questions also need to be answered before the living wage concept can be introduced.

The living wage could be calculated on a number of factors and family-, sectoral-, or individual-based wages could be established. The MEA, however, outlined shortfalls in all these systems.

Would the family-based living wage mean that two people doing identical jobs will be paid differently, depending on marital status? Separated couples may declare themselves to be different households, and therefore eligible where united families are not.

The family-based living wage may work against an increase in the female employment rate, incentivising women to stay at home to qualify.

If the living wage will be based on a basic wage, the element of total income, including overtime, commissions and performance bonuses may be excluded. It also needs to be established whether persons who have income from other sources will be eligible for the living wage.

If the living wage is intended to address particular sectors where earnings are lower than average, a better alternative would be to drop the idea and fine-tune with the Wage Regulation Orders. Consequently the social partners will determine the minimum wage as is the case today in a more focused, practical approach.

Mr Farrugia also referred to a Caritas research showing that €314 per week was necessary for a family of four to live decently. If applied, this proposal will wipe out scales 11 to 20 in the civil service scale (the lowest to the middle grades) and the highest official in the civil service will be receiving less than twice the lowest grade, following taxation, he said.

The wage differentials were low in Malta and a clear distinction between wages and social benefits was necessary. It was imperative not to have any grey areas between the two, Mr Farrugia said.

Moreover, what about the self-employed? Will they too be entitled to the living wage when their business is not doing well, he asked?

Opposition leader’s beliefs

Opposition leader Joseph Muscat praised the MEA for taking the initiative of organising the debate before trade unions. He pointed out that the living wage was a means to an end for improving the standard of living of everyone and there was agreement that the standard of living, together with the purchasing power, needed to improve.

“It is an idea whose time has come,” he said. “It is the most ambitious social mobility concept of the 21st century.”

The questions raised were on how the living wage should be implemented and not whether it should be implemented, Dr Muscat said. A healthy debate was therefore necessary. This also meant no one was happy with the status quo.

Unlike the minimum wage, the living wage was not set in law but was a benchmark – an aspiration to be reached by social consensus between the state, employers and unions.

The hard work ahead lies in the detail, he said.

Reactions from the floor

Pierre Fava, from the MEA, said that if the living wage does come in, the goal posts must be firm and clear. He pointed out that a greater purchasing power was beneficial for employers too.

Prof. Edward Scicluna said we can have a decent minimum wage for all at the moment but a healthy, well-educated workforce was necessary.

“We should start working on indicators to come up with scientific analysis,” he added. This would also serve to identify where and how the economy was failing.

A representative from the Gozo hospitality sector said Gozo should be considered as a region when the living wage is discussed. Rigid parameters were necessary to deter people from abusing the living wage if it is introduced.

MP Charles Mangion noted that wages increased very little over the past years. He commented that the financial services sector was successful and still growing because there was a very good pool of highly skilled employees, who were very well paid. This was because it was backed by a very effective regulatory framework and bureaucracy was minimal so competitiveness was retained.

The discussion must circulate around the standard of living and guaranteeing it, said William Portelli from the Confederation of Maltese Trade Unions (CMTU).

General Workers Union and UHM officials were also present.