Home ownership a chimera for minimum wage earners

Malta’s minimum wage was just over €460 a month in 2000, and over the past 15 years has climbed painfully slowly to just €672 a month – an increase of 46% over 2000 – according to Eurostat figures.

Property prices, on the other hand, on average doubled since 2000, according to the Central Bank’s price index on advertised properties.

As of the end of 2015, prices for apartments, maisonettes, terraced houses and other properties had more than doubled over the base rate in 2000: an apartment that cost €100,000 in 2000 would cost €210,000 today.

Minimum wage earners are finding it harder to obtain loans for property ownership, as prices rise faster than real incomes.

A loan for a €100,000 apartment, which would necessitate a minimal deposit of €10,000 with a bank, would incur a mortgage of at least €400 monthly on a 35-year loan at 4.1%.

But domestic banks are cautious in loaning out money that would create a disproportionate burden on monthly salaries. Minimum wage earners could expect a mortgage payment equivalent to 30% of their incomes, which would allow them a maximum €60,000 loan.

But that is hardly enough to buy a decent living space on the Maltese property market.

The Church organisation Caritas has long urged governments to raise the minimum wage, and in a second report issued last week said that families could not even keep up with even the most basic costs of living.

“We won’t venture an estimation as to how much the minimum wage should increase by, but the study clearly shows that some families with one breadwinner on the minimum wage cannot meet everyday expenses,” Caritas director Leonid McKay said. “Ideally the minimum wage should increase gradually over a three year period.” 

Caritas’s study found that a couple with two children requires a minimum of €11,466 a year to live a decent life, while a single parent with two children requires €9,197 and an elderly couple on a pension requires €6,527.

Food was the most significant cost – accounting for €6,211 out of the first family’s budget, €4,604 out of the second family’s budget, and €2,945 out of that of the retired couple. 

Caritas said the price of food has shot up by around 16% since the last time it conducted a similar study back in 2011. Inflation on food was 16% between 2011 and 2015. 

The study was based on the assumption that the low-income earners live in social housing, are Pink Card holders, and receive the maximum of state subsidies and benefits applicable to them – including food and medicine aid and energy rebates.

It also assumes that the people are healthy, that they make use of public health, education and transport services, and that their leisure activities are free. 

The essential costs taken into calculation were housing, food, clothing, personal care, health, education, leisure, transport, household goods and laundry, Internet and mobile phones. 

In the EU, 22 member states out of 28 – Denmark, Italy, Cyprus, Austria, Finland and Sweden are the exceptions – have a national minimum wage. In 2016, the monthly wage varied widely, from just €215 in Bulgaria, to €1,923 in Luxembourg.

Malta is part of a group of member states with an intermediary level of minimum wages (€500-€1,000) which also includes Portugal, Greece, Spain and Slovenia.