Way forward on living income | Carmelo Abela

We must also consider that the minimum wage is not in itself a method for addressing poverty but is rather determined on the basis of productivity and competitiveness

But what is this living income, and how does it compare to a living wage?
But what is this living income, and how does it compare to a living wage?

Those of us who, like me, were born in working class families, have seen first-hand the plight that the underprivileged go through in order to get the same opportunities as everyone else. It is experiences like these that strengthen our conviction to stick up for the disadvantaged: both as representatives of our constituents, as well as executive decision makers in government.

This is not something that started in 2013. When the 1971 Labour government took office, one of the first thing that it did was to introduce the minimum wage in Malta by means of a legal notice, setting a minimum standard of how much employers must pay their employees. Later on, in 1991, the Cost of Living Adjustment was introduced, ensuring that incomes (which include the minimum wage) are adjusted every year.

Moving forward to 2017, a historic social pact, resulting in the first minimum wage increase in decades, was agreed to between the government, the Opposition and all major social partners. And as part of this agreement the Low Wage Commission was also established, ensuring a periodical increase of the minimum wage.

Apart from this, in line with the 2017 Labour manifesto, this government is also studying the concept of ‘a living income’.

But what is this living income, and how does it compare to a living wage? Firstly, a living income encapsulates everything and everyone (including wage earners). Therefore, while a living wage would be limited to employees, a living income would include pensioners, the unemployed as well as minimum wage earners. Secondly, the study being conducted at this point in time concerns the costing and analysis of various viable options in the implementation of the living income across society. It goes without saying therefore, that this government is hard at work when it comes to the protection of the vulnerable.

The proposed EU Directive

The European Union is currently discussing a Proposal for a Directive on Adequate Minimum wages. Malta, being a country where the minimum wage has been established for 50 strong years is naturally in favour of ensuring minimum standards which are adhered to. However, as a member state we want to establish if this is in line with the principle of subsidiarity – that is why it was made clear in Malta’s reasoned opinion.

While looking towards the European horizon, it is also our opinion that such matters should be the sole competence of member states, where local complexities can be taken into consideration. In other words, it is our belief that we are very well capable of taking care of our own.

That is why we’re proposing that this directive takes the form of a recommendation. It is our opinion that instead of a uniform mechanism for the whole of Europe, member states should be given enough leeway in order to implement the substance of the would-be recommendation while also catering for local specificities.

Moreover, we must also consider that the minimum wage is not in itself a method for addressing poverty but is rather determined on the basis of productivity and competitiveness. As a government who has always held social priorities at its core, we believe that poverty cannot be solved solely through private endeavours, and it is for this reason that the government invests around €4,000 per capita on social protection. These are generally directed to those most in need and not equally distributed.

Last but not least, we need to also consider that only circa 19% of those at risk of poverty are in employment and thereby potentially earning a minimum wage. Thereby, increasing the minimum wage will only solve around a fifth of the ‘poverty problem’.

As in all trades, selecting the right tool for the job is not only key, but it is also efficient. Efficient policy-making emerges from the adoption of policies which are directed specifically at the issue at hand, only in so doing are we able to solve the majority of the problem rather than a fraction. And this is why as already explained we’re studying the concept of a living income.

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