EU ‘threshold of decency’ would mean pay rise for 24,000 workers

An analysis by the European Commission shows that 24,323 Maltese workers would get a pay rise with the new EU directive on minimum wage

Prime Minister Robert Abela visits a factory. Both parties in Malta are opposing the EU minimum wage directive. Photo: DOI
Prime Minister Robert Abela visits a factory. Both parties in Malta are opposing the EU minimum wage directive. Photo: DOI

An analysis by the European Commission has shown that 24,323 Maltese workers would get a pay rise with a new EU directive setting an obligation to peg statutory minimum wage at 50% of average wages and 60% of median wages.

Both the government and opposition have opposed the directive, with parliament’s Foreign and European Affairs Committee arguing that the directive imposed a “one size fits all model” on a matter, which should remain a national prerogative.

The European Commission has included the threshold in a draft directive, but only as an indicative guide for member states.

But the European Trade Union Confederation is still pushing for a ‘threshold of decency’ to be included in the law, and is lobbying MEPs to ensure statutory minimum wages could never be paid at less than 60% of the median wage and 50% of the average wage in any member state.

Basing itself on what it describes the Commission’s “conservative figures”, ETUC claims the ‘threshold of decency’ would result in a pay rise for at least a quarter of the workforce in six EU countries. In Malta, 12% of the workforce would benefit.

“A minimum wage that leaves workers in poverty defeats the entire point of minimum wages. Even the European Commission’s conservative figures recognise the appalling situation facing millions of minimum wage earners, but their draft directive would not translate into real pay rises at it stands,” ETUC Deputy General Secretary Esther Lynch said.

In its impact assessment, the Commission calculated that an increase of national minimum wages according to the double decency threshold – 60% of the median and 50% of the average wage – would improve the wages of around 25 million workers in Europe. The analysis confirms that minimum wages contribute to an increase of the general wage level and alleviate wage inequality at the lower tail of the wage distribution. The magnitude of this effect is larger for women than for men, implying that an increase in minimum wages can reduce the gender wage gap.

Contacted by MaltaToday, both GWU general secretary Josef Bugeja and UHM hief executive officer Josef Vella agreed in principle with the proposed threshold, while adding that there are other aspects of the directive which should be implemented.

Collective bargaining crucial – GWU

The GWU was actively involved in internal ETUC discusssions on the directive. “We argued in favour of the directive and put forward amendments to cover Maltese workers,” Bugeja said, adding that the GWU agrees with the benchmark settings of 60% and 60% of median and average wages.

Bugeja pointed out that most of the criteria set out in the proposed directive are already part of Malta’s collective bargaining structures. One important aspect of the directive is that it recognises the importance of collective bargaining and aims at increasing the collective bargaining coverage in each country to at least 70%.

“Member States with high collective bargaining coverage tend to have a low share of low-wage workers and high minimum wages. This happens because we negotiated increases periodically and in accordance with the organisational performance,” Bugeja said.

As regards the impact of the directive on Maltese businesses, Bugeja said the GWU has yet to carry out an economic impact assessment, as there are no official statistics of who is on minimum wage. “The increase in minimum wage will surely have an impact, not just on those who are on minimum wage but also low-wage earners.”

The National Agreement on the Maltese Minimum Wage signed by all stakeholders  in 2017, not only envisaged an increase of €8 per week but also led to the setting-up of a Low Wage Commission which reports directly to the Prime Minister. The commission, which includes both unions and employers, establishes a mechanism to determine whether the minimum wage should be reviewed. The first recommendations are due in 2023.

Raising minimum wage wards off EU scepticism

UHM CEO Josef Vella disagreed with the government’s stance that minimum wage arrangements are a national prerogative. “Nobody says that the EU is in breach of the principle of subsidiarity when it imposes higher thresholds on emissions in its environmental laws…the same should apply to the protection of the most vulnerable sectors of the working class,” Vella told MaltaToday.

Vella warned that without the legislation protecting workers, the EU risks alienating communities being left behind, and becoming more sceptical of the EU project. “Brexit and the rise of populism were a clear warning that the EU needs to reconnect with its most vulnerable citizens.”

He also sees no alternative to State intervention in wages to protect workers in the lowest segments, who are not unionised or covered by collective bargaining. But he insists that an increase in the minimum wage locally has to be accompanied by other measures including up skilling to increase productivity. “One may call this paternalism but State intervention is the only way to avoid the exploitation of these workers. After all that is why Malta unlike some EU member states has a minimum wage,” Vella said, who advocates for compulsory unionisation for vulnerable categories of workers, like third-country nationals.

Vella recognised that the implementation of the measure may have repercussions on the Maltese labour market, as it could push wages upwards to keep wage differences between different grades of workers.

But when asked about the impact on small businesses who might not afford the pay rise, Vella raised doubts on the sustainability of businesses who can’t even afford a decent wage. “What sense does it make to set up a business if you can’t even afford to pay your workers decently as many other businesses actually do?”

He said legislation alone will not eradicate exploitation in the lower tiers of the workforce; much depends on the enforcement of contracts, some of which are often in violation of the country’s employment laws with some workers not even having a contract. “Who is ensuring that more than 250,000 individual contracts are actually in conformity to the law?”