Living wage: Muscat going Miliband’s way?

Ed Miliband’s “living wage” plan, presented in May as he was campaigning to become the new Opposition leader in the UK, meant giving workers no less than £7.60 (€8.75) an hour instead of the UK’s current £5.83 (€6.71) minimum wage. A good deal, but not a mandatory one: this would not be imposed on companies by law, but instead encouraged with compensatory tax breaks in return for implementing the policy.

Similarly, Labour leader Joseph Muscat has made it clear that the implementation of this proposal will be voluntary and that the State will offer assistance to employers who subscribe to this idea.

Openly admitting he is not reinventing the wheel, just as he launched the proposal weeks before Miliband’s enthronement, his timing may well indicate the inspirational hold British Labour has over here: Muscat’s Miliband may well be Sant’s Blair.

Living what?

The living wage concept is actually already functioning in London, introduced by former socialist mayor ‘Red’ Ken Livingstone. His successor, the Conservative maverick Boris Johnson has not only endorsed this policy – he raised the capital’s living wage by 15p to £7.60 per hour, applying it to all staff of the Greater London Authority and “all new contracts for staff working on our sites, such as caterers, security guards and cleaners where allowed”.

While the London council has no way of imposing the living wage except for offering its own employees, living wage employers in the British capital include HSBC Bank, PricewaterhouseCoopers, London’s underground subway system, four East London Health Trusts, and the London School of Economics.

The 2012 London Olympics will be the first living wage Olympics, after the Olympic Delivery Authority guaranteed that no job on the site, either before or during the games, will pay less than the London living wage.

And last April, New Westminster in Canada became the first city in the country to pass a “living wage” bylaw, effectively raising the minimum wage paid by the municipality, setting a wage ‘floor’ above minimum wage for city employees as well as firms contracted by the city or which receive economic development money from the city.

But the living wage was no brainchild of Labour’s young Turks and think-tanks. Indeed, it predates Miliband and Muscat by centuries, having been an integral part of Catholic social teaching for over 700 years. It was mediaeval theologian St Thomas Aquinas who wrote, in the Summa Teologica, “No one is obliged to live unbecomingly”, thus proposing a just wage that would provide a worker with enough to live, and perhaps a little more, so as to enable him to live “becomingly”.

And in Malta it was Archbishop Joseph Mercieca who first proposed a “family wage” in the mid-1990s. But the proposal was underpinned by an underlying belief that each family should have a single breadwinner (the father), earning enough money for the entire family.

Muscat beefs up the living wage proposal

Muscat’s proposal for the living wage is to offer employers assistance, that can take various forms, “including fiscal and due recognition and due recognition in public procurement procedures.”

One of the possibilities he is considering, he told MaltaToday when asked, is making the living wage a condition in awarding government and public tenders.

“This issue will be the subject of detailed discussions and consultations with all stakeholders on this and other proposals with regards to the living wage concept,” Muscat said.

He also made it clear that the introduction of a living wage will not replace the Cost of Living Allowance (COLA) mechanism: “One does not exclude the other, so yes, it will work concurrently.”

Muscat also replied in the affirmative when asked whether the government itself should be a “living wage” employer. “The government should lead by example and that is what a Labour government would be aiming at achieving.”

Muscat even said that Labour is not excluding an increase in the minimum wage, “should competitiveness conditions allow”, he says in a proviso. But according to him, raising the minimum wage – a call now being echoed by Alternattiva Demokratika – is a short-term solution.“The living wage proposal is a long term policy which will help ensure workers in the country earn enough to provide their family with basic necessities and lift families out of working poverty.”

Mixed reactions

While most trade unions have warmed up to Joseph Muscat’s proposal, the concept of introducing a living wage has not been welcomed by business organisations, despite the lure of fiscal incentives floated by Muscat for businesses who voluntary choose to implement the proposal.

The Malta Chamber of Commerce, Enterprise and Industry describes the proposal as “short-sighted and detached from the country’s need to grow its economy”.

Insisting that the priority of employers is to ascertain the long-term employment of their workers, Chamber president Helga Ellul said that “if employers pay their workers any amounts over and above productivity levels, the country risks placing its economy and the social welfare model in danger.”

Joe Farrugia, director of the Malta Employers Association, contends that the concept challenges the accepted definition of what a wage is: “a fair compensation to productivity”, and should therefore be approached with caution.

Farrugia also questioned the voluntary nature of the scheme, adding that it would be unacceptable for MEA if companies were penalizing for not implementing the wage, either because they cannot, or because they refuse to.

From the opposite side of the ideological spectrum, AD chairperson Michael Briguglio also questions the voluntary nature of Muscat’s proposal.

“Instead of committing itself to a mandatory increase in minimum wage, Labour has come up with a vague living wage proposal which is devoid of clear commitment and is simply a voluntary tool. The living wage proposal transforms workers’ rights to charity by benevolent employers.”

While noting that the political and economic implications of the proposal still have to be assessed, former finance minister Lino Spiteri thinks that there are merits in implementing the concept “by making the payment of a living wage a condition attached to government awarded contracts” or encouraged by fiscal arrangements. But, he adds, it cannot be enforced.

Economist Gordon Cordina is sceptical on the impact of the measure and how far it goes to create new jobs, which should be the primary aim of any wage policy.

“Would it create more places of work or not? One would have to assess whether this aim is better secured through a more efficient social security system.”

Cordina contends that while wages should primarily serve as an instrument to create work, it is up to the state through its social programmes to ensure that everyone has a decent living. “This is why taxes are important to ensure an element of social redistribution in the country… the devil lies in the detail: one has to see whether the new system will be more expensive than current social programmes.”

Sociologist and industrial relations expert Godfrey Baldacchino is also sceptical, arguing that “the existence of a flourishing underground economy and the culture of having multiple jobs militates against wage increases of any kind”.

Baldacchino claims Malta may be better off “boosting its childcare support services, allowing more women to work outside the home, and augmenting household income in that way.”

So far trade unions, even those not traditionally associated with the Labour Party, have warmed to Muscat’s concept. The Forum of Maltese Trade Unions, chaired by John Bencini, augured that the living wage is discussed in Parliament, as well as among the social partners.

But it also made its implementation conditional on economic recovery auguring that “one day, when Malta has recovered and begun to progress economically, the living wage can become a reality”.

On his part, UHM general secretary Gejtu Vella is proposing a blueprint for increasing the income of those on earning minimum wage, currently set at €152 a week, at no extra expense for employers. “Basically everyone on the minimum wage should be offered training programmes funded from the EU’s social fund to acquire new skills. Workers undergoing these programmes would receive an allowance while gaining new skills.”

Vella also insists that in its procurement policies, the government should not be an accomplice in a race to the bottom, and instead including social criteria to the tendering process. “In this way we would avoid situations like that of the poorly paid cleaners at Mater Dei hospital.”