Prosperity, but not for all

Economic growth is creating jobs and generating wealth; but it also fuels a construction boom that has led to higher property and (especially) rental prices

Cartoon by Mikiel Galea
Cartoon by Mikiel Galea

Traditionally, May 1 is ‘Workers’ Day’. As such, perhaps it is time to consider why – in this age of quasi unprecedented economic growth, a national surplus, record unemployment and a decrease in the national debt – wages have not risen adequately to proportionately reflect our economic success as a nation.

At a business breakfast organised by the Nationalist Party last weekend, economists noted that, while wages have increased, the corresponding increase in profit margins across the board was ‘disproportionate’. Economic growth is creating jobs and generating wealth; but it also fuels a construction boom that has led to higher property and (especially) rental prices. This inflationary pressure has crippling effects on purchasing power; and it stands to reason that the most adversely affected will be the poor and materially deprived.

It is encouraging to note that poverty statistics have fallen in recent years: but we must also question our national definitions of poverty. Malta is simultaneously experiencing the rise of a new economic bracket: people who are not necessarily ‘materially deprived’, but who struggle to cope with rising basic expenditure: rent, food, leisure, etc.

If prevailing economic trends continue, and the same disproportion between economic prosperity and wage-increases persist – we may very well experience a return to the more traditional definitions of poverty: i.e., homeless people eking out a living on the streets.

To avoid this scenario, we should start looking into how wages can fairly and proportionally reflect the economic successes registered. That is the only way to ensure that all workers and families will actually and realistically share in the prosperity currently being generated.

However, recent wage increases already fell short of expectations in 2017: let alone this year and in future. An agreement last year between government and the Malta Council for Economic and Social Development (MCESD) resulted in an increase in the minimum wage. An estimated 5,000 persons on minimum wage are now entitled to a mandatory €3 increase per week upon completion of the first year of employment with the same employer; and a further €3 weekly upon completion of the second year.

The agreement also stipulates that this year and next, persons on the minimum wage will earn an extra €1 per week in addition to this year’s COLA. By 2019, therefore, the minimum wage will have been increased by a maximum of €8 per week – or €416 – in addition to the normal cost of living adjustment (COLA).

This is a far cry from what the Campaign for a Decent Minimum Wage (KPMD) was calling for: an increase of 11% over three years – €80 monthly over and above COLA increases. The increase announced in April 2017 works out at around 4.4%.

Similarly, research carried out by Caritas suggests that the wage rise will not be enough to cover the corresponding increased cost of living. What neither KPMD nor Caritas could foresee at the time, however, was that Malta’s economic performance would also exceed expectation. Given that the country performed better than previous indications, it remains questionable whether that deal – even if concluded just last year – has already been superseded.

One must also ask whether part of this success may be attributed to a low wage structure that permits such high profits in the first place. If so, that would make Malta’s economy reliant on cheap (mostly imported) labour... a perception government strongly rejects.

Moreover, it would only lay the foundations for a very different Malta in future. In a sense, the changing demographics make that future all but inevitable; but there are measures that can be taken to avoid the worst case scenario. The same economists noted that Malta must take steps to prepare for the impending social changes.

As MEA director Joe Farrugia put it: ‘With a resident population fast moving towards the 750,000 mark in a few years’ time, the country needs a strategy on integration; policymakers have to anticipate demographic change to address the economic, social and infrastructural challenges ahead.’

This adds another dimension to the issue: the prevailing trend also leads to precarious jobs, especially among foreign workers who are not unionised. Foreign workers are proving indispensable in industries where Maltese no longer want to work. But this necessity cannot be used to justify or ignore a wholesale disregard for their basic rights and conditions of work.

It is imperative that the rights of these workers are safeguarded, as are Maltese workers’ rights. If necessary, they should be granted right and access to join a union.

This would minimise the risk of an underclass of workers that could potentially put whole industries at risk. It would also ensure that a decent level of wages is guaranteed across sectors, as employers would not be able to resort to off-the-books employees to the detriment of regularised tax-paying workers.

Above all, it would ward off the uncomfortable impression that Malta is carving out its own prosperity – which manifestly does not ‘trickle down’ to everyone – directly from the exploitation of vulnerable workers, with dangerous possible social ramifications.

This would hardly be an achievement to boast about. If we are to grow into a prosperous nation, let’s also make it a fair one, too.