[WATCH] Don’t conflate minimum wage with COLA, Caritas chief urges unions

'Don't conflate minimum wage with COLA' - Caritas director Leonid McKay

The director of Caritas has warned against plans by trade unions and employers’ to scrap a proposed increase in the minimum wage in favour of a revised COLA (Cost of Living Adjustment) mechanism.

Leonid McKay told MaltaToday that the minimum wage must be increased irrespective of any changes to the COLA, which employers add to their workers’ salaries and which is revised every year according to national inflation statistics. 

“The COLA mechanism, the minimum wage and the living wage are three completely different topics that merit separate discussion, and we shouldn’t focus on the COLA at a time when we’re discussing the minimum wage. 

“Consensus on the minimum wage should not only be reached among social partners, but also among people who work directly with people in need. People on the minimum wage are often not unionised, and it is crucial for us to recognize their everyday situations as their voices often go unheard.” 

Prime Minister Joseph Muscat has urged employers’ associations and trade unions to negotiate within the Malta Council for Social and Economic Development (MCESD) on how the minimum wage should be increased, but has pledged to step in to increase it on a permanent basis should they fail to reach an agreement. 

However, newspaper Illum revealed on Sunday that both the major trade unions (GWU and UHM) as well as the employers’ associations are wary of a proposal to increase the minimum wage, currently set at €4.20 an hour. Instead, consensus is shifting towards revising the COLA mechanism so that it better reflects real fluctuations in the cost of living.

Their argument against permanently increasing the minimum wage is that such a move would effectively increase the number of people on the bottom of the salary scale. Effectively, people currently earning slightly more than the minimum wage will suddenly find themselves on the minimum wage. 

A similar argument was also posed last year by Chamber of Commerce president Anton Borg, who warned that increasing the minimum wage would have a domino effect on other wages. This, he said, would increase the cost burden on Maltese industry, thereby damaging the country’s competitiveness and triggering a rise in unemployment. 

Yet McKay counter-argued by citing leading local economists Gordon Cordina and Lino Briguglio, who recently said that increasing the minimum wage would increase the purchasing power of workers, and hence actually have positive effects on the economy. 

“In my opinion, a harmful domino effect will take place if we don’t increase the minimum wage,” McKay said. “We tend to keep focusing on the potential dangers of increasing the minimum wage while forgetting the merits of such a move, both for the economy in general as well as for the families who will directly benefit.

“Increasing the minimum wage will not eradicate poverty, but it will certainly have a positive effect on the 3,000 or so households who rely on it as their main source of income and who don’t have enough money to purchase essential goods.”

Caritas is one of 14 NGOs who grouped together in October to launch the Campaign for a Decent Minimum Wage movement. The NGOs are lobbying for the minimum wage to increase by 3.5% for three consecutive years, over and above the annual COLA increase, so that it would finally settle at between €11,000 and €12,000 annually.

The proposal, the brainchild of veteran economist Karm Farrugia, has earned the support of Opposition leader Simon Busuttil.