European minimum wage: when more Europe means better conditions

In a country so politically divided, the emergence of cross-party consensus would normally be something to be welcomed.

Yet this is difficult, when both sides are united in opposition to a European proposal to standardise minimum wage in all 27 member states.

If approved, this directive would result in more than 24,000 Maltese workers benefiting for a wage increase. Currently, this bracket consists of people who are living on wages that would be considered manifestly substandard, in most other EU countries.

The position taken by both Government and Opposition is therefore hard to defend: especially when one considers that it appears to be based on a misunderstanding of what the European Commission is substantively proposing.

Malta’s objections are mainly (and understandably) against a common European minimum wage threshold: applied uniformly across the board, regardless of the country’s economic situation.

In reality, however, it is the European Trade Union Confederation that is pushing for a ‘threshold of decency’: that would ensure statutory minimum wages would never be less than 60% of the median wage. Both the UHM and GWU support the idea; but Malta was one of the countries which objected, invoking the principle of subsidiarity.

The EU Commission’s draft directive, however, has included the threshold only as an indicative guide for member states. It is not an obligatory feature of the legislation; which does not aim to bring about equality in wages, but rather to ensure that no EU worker falls behind a minimum standard, devised according to a formula pegged to the level of development of each country.

This is not, as the finance ministry described it, a ‘one-size-fits-all’ approach. So the subsidiarity argument invoked by both parties does not hold water (and, in any case, contradicts Malta’s position in favour of mandatory rules in other matters: for example, burden sharing).

This in turn highlights a major contradiction in our à la carte approach to EU issues: demanding more Europe on some matters (primarily migration), and less Europe on other matters (e.g., taxation and wage policy).

Moreover, one also has to acknowledge that certain businesses have profited from years of accelerated economic growth; and this was not reflected in Maltese wages.  Malta was the only EU country to experience a contraction in wages during the second half of 2018. Finance Minister Clyde Caruana himself acknowledged that “over the past seven years, medium to high earning Maltese workers have seen a steady and solid increase in their salaries, while low-income Maltese workers have seen their salaries either stay the same or increase very slightly. I think for any Government, let alone a Labour one, this is not on.”

Elsewhere, the Maltese government itself has admitted that the minimum wage is not at a suitable level: by providing a Covid emergency wage supplement of €800, an amount higher than the minimum wage. This effectively means that, even in an emergency, people cannot live on less than €800.

Conversely, however, the fact remains that businesses have been hard-hit by the pandemic; and also that Malta relies on the contribution of thousands of small businesses which may not afford any substantial increase in their wages.

Government should therefore explore ways through which taxation revenue from companies, which have benefitted from breathtaking economic growth levels, can be used to soften the blow.

Increasing mimimum wage would also go a long way towards ensuring that certain work remains attractive to both Maltese and foreign workers.  The reality is that certain jobs are now increasingly reserved for foreign workers, simply because nobody used to a Maltese standard of living would opt for such work today.

But having a labour force segmented across ethnic lines is counterproductive to social cohesion.  Are we sure we want to create a segment of exploited and rootless workers: who may be initially more compliant, but could eventually become a hotbed for anger and resentment, as has happened in other societies?

There are, however, legitimate concerns with raising the minimum wage: among others, that this would also push wage increases across the employment spectrum, in order to respect current differences between different grades of workers.

But this can also contribute to a multiplier effect with workers having more money to put back into the economy. Besides, adequate wages also reduce dependency on state hand-outs: saving millions in government expenditure.

Ultimately, however, this is a case of ensuring that everyone is given a good fishing rod to fend for his or her own needs, in a way that nobody feels left behind.  And as Finance Minister Caruana himself admitted: anything less is ‘not on’.