Not just an economic conundrum

In his article last Sunday, Michael Falzon raised a number of arguments related to the proposals presented by the Campaign for a Decent Minimum Wage (Kampanja Paga Minima Diċenti) representing a number of NGOs that believe in social justice. While acknowledging that such a rise “cuts both ways” as he put it, he tends to put much more weight on the downsides than on the merits of the proposals, expressing particular concern with regard to the effects of such an increase on the “economy” and on the difficulty of curbing abuse.

While he agrees that the COLA adjustment mechanism needs to be revised since it does not reflect current economic realities, he does not think that the minimum wage should be increased. Otherwise a number of economic catastrophes will befall our economy, despite the fact that it is thriving as never before and, as confirmed by the economists we consulted, is able to withstand the rather conservative increase we are suggesting.

Such arguments, not unlike those behind the warning of the Malta Employers’ Association, are reminiscent of others that tend to be presented every time that any progressive socio-economic measure is put on the socio-political agenda. The same catastrophes had been professed in the wake of proposals for equal wages for men and women as well as during discussions leading to the introduction of social benefits and the minimum wage itself back in the 1970s.  

Falzon also seems to be concerned, like Minister Scicluna, that raising the minimum wage will not solve the problem of poverty.  We certainly agree with this argument. Indeed Kampanja Paga Minima Diċenti has neither stated that an increase in the minimum wage is the solution to poverty nor that it will solve all our social problems. Paying workers a decent wage is not about solving the issue of poverty but about a just redistribution of wealth; respecting the dignity of workers and giving them a decent pay for their input.  

Poor wages

Wages in Malta are still relatively low and the minimum wage, which was introduced in the 1970s with the aim of ensuring a basic pay for workers, has been used to ensure that a category of workers do not earn a cent more than the established minimum. The compensation for inflation (COLA) is not meant to make the minimum wage decent but to make up for the increase in the cost of living and is received by all wage earners, regardless of income. Furthermore, while supplementary handouts to low-income earners may help in the here and now, these benefits will not be reflected in their pension. They are also payments which are financed through taxation and which therefore burden other workers and taxpayers rather than profit-making enterprises which are benefiting from the current economic bonanza. What we are demanding is a small step that will enhance the overall wellbeing of the least well-off in society.  

Our demand is not simply about those “people who cannot cope with the current cost of living” but about workers in the lower echelons of the occupational ladder who deserve better. By measures which are “less damaging economically”, does Falzon mean less pleasing to employers who would prefer to continue reaping bumper-profits without paying their workers decently? 

Falzon’s argument that not many workers receive a minimum wage makes our demands even more plausible since raising the minimum wage will not cause such a tremor to the economy if it involves only a few workers. May we add, however, that we see demands by other low-income earners for a proportionate increase in income as a positive, since workers on little more than the minimum wage are also underpaid. However, relativity can still be maintained if they are also given an increase which amounts to 3.5% of the minimum wage.

As to his arguments about how a rise in the minimum wage will encourage further illegalities, we find such reasoning disturbing. His logic is both fallacious and dangerous. First of all, abuse can exist in any context. This should not be a deterrent for legal or social policies to be implemented. Secondly, if, as Falzon suggests, employers are engaging workers in terms of illegal practices, more effective enforcement is required. If Falzon is so concerned about the abuse of immigrants and other vulnerable groups, he should have suggested ways in which such practices can be controlled.

Not less competitive  

On the issue of competitiveness, Malta’s competitiveness does not depend on cheap labour. Malta’s advantage is due to fiscal incentives and a decrease in bureaucratic measures (this is what the Prime Minister has claimed). We acknowledge that there are sectors of the economy such as small, family-run enterprises which might be hit harder if the minimum wage were to increase. In such cases, the government may consider fiscal or other incentives to offset such negative effects. Employers and their champions should also keep in mind that increasing the minimum wage can boost the economy by putting more money in people’s pockets, which is most likely to be spent on everyday needs rather than saved, especially considering the ever increasing cost of living. Unlike what Falzon says, inflation occurs with or without minimum wage increases.  

Angele Deguara is a Sociologist and an activist in the Campaign for a Decent Minimum Wage