Give a man a fish… | Leonid McKay

Despite a generous welfare system and an apparent economic boom, poverty seems to be on the increase. Caritas director Leonid McKay makes the case for more measures to increase the basic income of Malta’s poorest 

raphael_vassallo
Raphael Vassallo
5 June 2016, 10:00am
Caritas executive director Leonid McKay
Caritas executive director Leonid McKay
“I’m not sure I agree with the old expression, ‘give a man a fish and he’ll east for a day; give him a rod and he’ll eat forever’. Sometimes, you have to give that man the fish. You cannot expect a fisherman to go fishing hungry. He must be fed first, and then he can go to work. In cases of extreme poverty, what is needed is a higher income… and that means more money.”

We are in Leonid McKay’s office, tucked away in the idyllic setting of San Blas Therapeutic Community on the outskirts of Zebbug. The 33-year-old executive director of Caritas has just run me through the basic conclusions of the agency’s latest report. The subject (broadly speaking) was poverty… and at a glance, its findings seem to confirm the existence of a growing gap between the steadily increasing cost of living, and the ability of the least well-off to actually keep up.

In the course of the discussion so far, McKay has repeatedly stressed that the study was intended to explore the daily reality faced by Malta’s lowest-income earners. His point about ‘giving a man a fish’ arose directly from the same reality. “The simple truth is that there are people who can’t afford even the most basic necessities on their current income,” McKay goes on. “We can talk about improving things in other areas, but we also have to discuss how to approach the issue of poverty in Malta. I think we have to invest even more is social security benefits, in health benefits… and yes, in giving money, too.”

But let us start with the report itself. When launched last week, Caritas also took the opportunity to reiterate its call for an increase to the minimum wage. This was hardly the first time such demands have been made: but unlike previous occasions, this time government appears to have sat up and taken notice. Before the press conference had even concluded, the prime minister had already tweeted his support for at least a discussion on the subject. Clearly, then, the Caritas report must have struck a nerve. What is it about its conclusions, exactly, that made a discussion on poverty more urgent now than ever before?

“Let’s start with what our study was not about. It was not trying to gauge whether the levels of poverty in Malta have gone up or down in recent years. It was not about whether there is more poverty under a Labour government or a Nationalist one, or anything like that. Our role is very much focused on trying to identify a ‘real’ poverty line for Malta. The National Statistics Office does a similar exercise, but it deals with another category: those ‘at risk of poverty’. We are not very happy with limiting the discussion only to the ‘risk’ of poverty. Through our contacts we meet people who are living in poverty. Sometimes in severe, extreme poverty. So it could be misleading to discuss poverty only from the ‘at risk’ perspective...” 

In practical terms, what the study set out to do was establish a benchmark against which ‘real’ poverty can be measured.

“We tried to identify the minimum essential budget that families need to live adequately; that people need to buy the most essential items. Unlike the NSO criteria, we do not take income into account. Ours is an expenditure-based approach. Over the past years, we have been trying to identify a basket of essential items, including only the most basic essentials: food, clothing, transport, shelter – and after computing this list, we went on the actual pricing/costing phase. By our definition of poverty, anyone receiving an income less than that benchmark – irrespective of whether it’s a salary, social benefits or any other type of income – is a poor person. No more, no less…”

McKay admits that the focus of the study was narrower than others which also look into social conditions. “Our approach was to look at poverty as a financial issue. ‘Loneliness’, for instance, is not a poverty issue. Nor is social exclusion, in and of itself. This is not to say they are not issues at all, but we are not looking from that angle. We are looking specifically at physical, material deprivation here…”

The study drew up three basic models of low-income households, though naturally others also exist. Two adults with two children, according to the findings, would need a minimum income – emphasis on ‘minimum’ – of €953 a month. For a single parent household with two children, it becomes €766. An elderly couple need €543 a month.

“But we are taking a very conservative approach to computing this basket, and you must also take into account that, being low income households, they will be in receipt of some kind of subsidy: on gas, water and electricity, housing. In fact, the study assumes – and this is a very crucial point – that these families live in social housing. So for rent, we are only estimating €200 per annum. The reality for people who are not in social housing, and who pay rent at commercial rates, is very different. They are actually paying more than €200 per month… not per year. We all know that single-parent households are now seeking rental opportunities in Qawra, Msida, Gzira, and other places… but are finding it very difficult to find anything for less than €400 a month. It’s the bare minimum, I would say…”  

Another point Mckay is keen to stress is that the study only focuses on low income earners, and is not intended to be interpreted in any other way. “It is not a reference budget for Maltese society as a whole. Nor is it a recommended budget.  What we are saying is that you need no less than this amount to meet your most basic needs. It’s the minimum that is needed not to qualify as ‘poor’…” 

This points towards the first of many problems. Under scrutiny, it turns out that the established poverty benchmark for pensioners is more or less exactly the same amount most pensioners actually receive. A basic pension in Malta, then, only guarantees you the barest minimum you need to survive. 

“Yes, the study points this out as well. For pensioners, the basic benchmark is in fact achieved. But – and it’s a very important ‘but’ – the study goes on to say that this minimum budget of €540 a month does not envisage the cost of social participation, or of private transport… and therefore, greater mobility. We’re also excluding paid cultural activities, social outings… not to mention weekend breaks or holidays. Another point is that there is no budget for medical expenses as a result of chronic illnesses, particular dietary requirements, and so on. All these expenses have to be added to that basic amount.”

Coming back to the official reactions, and the fact that a discussion on the issue is already (more or less) under way… what is Mckay’s interpretation? Is it a case that the stark reality outlined in that report was something that government, and society in general, felt it could no longer realistically ignore?

“I think so, yes. The prime minister has stated that he welcomed the report, and also that he welcomed a discussion on poverty. I don’t know if it was specifically because of Caritas – government also launched a basic income for persons with disability in the same week, so it was clearly already in the pipeline – but I think that our very conservative and frugal study may have served as a wake-up call. I am sure that policy-makers were taken aback, when they realised that persons on social benefits cannot achieve even such a conservative benchmark. That not even persons on minimum wage were achieving it. Surely, it would have rung alarm bells. Again, I am not saying it is all thanks to Caritas… but soon after we published the report, government announced it was willing to discuss the issue of raising the minimum wage. We welcome the fact that this issue is on the agenda, and we welcome even more the fact that some measures, such as the disability income, are already being taken.”

At the same time, the revelations may come as an eye-opener to people who may never have realised the extent of poverty in Malta. For various reasons, poverty has always been easier to ‘hide’ (as it were) in small communities with their own inbuilt social security networks… family, Church institutions, charities, etc. – than it larger, more impersonal cities. You don’t, for instance, see as many people sleeping in cardboard boxes in Malta, as you would in most European metropolises.

Is it possible that we may have deluded ourselves regarding poverty as less of an issue than it really is?

“I partially agree with that, but only partially. I think the most worrying trend is that people do acknowledge poverty as a reality in Malta… but they blame the victim for his own predicament. Very often people comment along the lines that ‘the poor are poor because they took the wrong decisions in life’. At Caritas, we argue that poverty is not self-inflicted. Poverty is more of a structurally-induced phenomenon, than a question of individual choices. Trying to blame the victims for their own situation is a disservice to the whole of society...”

Again, McKay points towards structural deficiencies which sometimes make poverty more of an inevitability, than a question of personal responsibility.

“There is another misconception that we have to push people into the labour market, or into better education. It’s like blaming the labour market, or the education system, for poverty in Malta. Sometimes, however, the problem is not the lack of education or job opportunities… it’s the simple fact that low earners don’t have enough to make ends meet. Another thing this report reveals is an explosion in food prices in the past four years. We were surprised to see an inflation rate of 16% emerge from our study. But it was confirmed by the NSO. We actually asked them, does this reflect in your statistics? They said yes. There was an inflation rate of 16% in terms of food: which is a very basic, essential item….”

This has to be counterbalanced by price decreases elsewhere. On the other hand, we are very happy to see that certain service sand commodities – gas, utilities, school uniforms – have gone down in price. But we have to be very careful how we approach the issue. People who argue in favour of cutting back social benefits, and invest in job opportunities and increasing the skill-base, are barking up the wrong tree.”

At the same time this seems to indicate a paradox. The Caritas report emerged at a time when (in all other areas) the Maltese economy appears to be booming. International credit agencies have reaffirmed their positive outlook for the next few years; government boasts about setting new records for economic growth, while employment is at an all-time high. It is not, therefore, the case that the economy is faring badly, so the lowest-earners are (naturally) the hardest hit…

“I don’t necessarily agree that economic growth will reflect in greater income for the lower brackets. The ‘trickle-down effect’ in economics is a myth. And it shows, because we’ve seen a boom in the economy, but we didn’t see any corresponding reversal in the poverty rate. Economic growth, on its own, does not guarantee anything. It has to be the State, rather than the market, to take an active role to distribute to fruits of the economic boom more fairly…”

Caritas has made no secret that it expects this ‘active role’ to include a revision of the national minimum wage. Government’s response so far has been to await an agreement between private employers and the unions. Is Mckay suggesting that it should go ahead and impose the minimum wage increase regardless?

“No, we do have to be very cautious. The government is aware that such a policy measure would have an impact. So are we. In our case, we are confident it will be a positive impact. We are sure that an increase to the minimum wage will translate into more incentives to join the labour market, to retain one’s job… the extra money would be re-invested into the local economy through increased expenditure… It would also send out the message that social sustainability is just as important as economic sustainability. This is our view. On the other hand, the government is justified in being cautious. It should enter discussions with the social partners: with the Malta Employers’ Association, and with the employers themselves. Even we at Caritas say the same thing: we believe the minimum wage should increase after consultation with the social partners. But we should at least be brave enough to discuss it, instead of sweeping it under the carpet.

“Even if the minimum wage does not increase, he continues, there are other measures that can be taken. As long as these measures address the issue of low-income earners not making ends meet, I am sure that Caritas will be happy.”

Traditionally, the measure proposed by government as an antidote to increasing the minimum wage has always been the ‘Cost of Living Adjustment’ mechanism. Given that the cost of living seems to have increased by much more than the usual rate in the past four years… is this still an appropriate response?

“I have learnt during the process of this study that the COLA mechanism was calculated on the entire population, not just the low-income bracket. But the overall consumption figures for the typical Maltese family are very different from those of low-income earners, and very different again from pensioners. So COLA does not really reflect the actual basket for those households. This is another issue to be discussed. With regard to the elderly, we also have to accept that people are living longer, and therefore require longer-term expenditure on issues related to health… 

This in turn implies that the benchmark calculated by the Caritas study can only be expected to increase in future. Suddenly, the choices seem to be more straightforward. Government can intervene directly by either increasing its own expenditure on social welfare, or legislating to increase the minimum wage (in which case, part of the expense is passed on to the private sector). It can do a bit of both, but the one thing it can’t really afford to do is… neither.

“To be fair, government has taken some initiatives already. It increased pensions in the 2016 Budget. It has provided a basic income for persons with disabilities. It has shown that it is not afraid of making such changes; so I’m sure in their coming Budgets we will hopefully see more social measures.

Does he expect the minimum wage increase among those measures?

“Well, it was a measure introduced by a Labour government in 1971… and one would expect a Labour government to discuss the adequacy of the minimum wage in Malta today; as much as discussing the adequacy of social welfare benefits. Because while the minimum wage is important, it is not the only issue. The most vulnerable people by far are not the ones in the labour market. They are those who, for whatever reason – mental health issues, disabilities, and various other social factors – cannot participate in the labour market, and therefore have no income at all. These need a decent living as well. So social benefits need to be discussed, too. They are a very important safety net for particular segments of our society.”