[ANALYSIS] Is the PN’s living income a repeat of Muscat’s living wage pledge?

By focusing on low wages the PN addresses a crucial bread and butter issue which could potentially raise living standards. But abstract concepts like “living income frameworks” are reminiscent of Joseph Muscat’s living wage pipe dream

Taking a leaf from Joseph Muscat’s pre-2013 playbook, on Sunday Opposition leader Bernard Grech pledged to introduce a “living income framework”: “We will make living income a reality after discussing and seeing with experts on how best to implement it. Every day spent unable to live a decent life is a day wasted,” he said.

The PN’s proposal addresses a social reality faced by thousands of workers, including foreign workers in sectors like hospitality and construction, whose exploitation contributes to the creation of a two-tier society and could have a depressing impact on wages in general. The proposal is also timely, as international food prices are taking a greater bite from already low incomes. Statistics show that the in-work poverty rate – based on the proportion of working people who earn less than 60% of the national median income – has increased from 5.2% in 2012 to 7.4% in 2021.

But it remains unclear how the PN plans to address this problem. On Friday, PN MP Ivan Bartolo said the party was still looking at several financial models that would see an adjustment in wages, without straining taxpayers or employers while allowing low-wage earners to attain a decent standard of living. Bartolo hinted that the proposal will be beefed up in the party’s electoral manifesto.

But it remains unclear how the PN can ensure a “living income” without actually increasing the wage bill for employers, or supplementing low incomes with greater public expenditure. Both avenues could be anathema for a centre-right party, which constantly lambasts government for over-spending and which in government excluded any increase in the minimum wage.

And while concepts like “living income” and “living wage” are in theory more inclusive and comprehensive than that of the minimum wage, as their aim is to achieve a decent standard of living for the entire household and not just the individual employee, the only legal mechanism to increase wages is by raising the minimum wage.

Moreover, increasing the minimum wage also militates against wage stagnation, as such increases trigger a domino effect on wage scales, to ensure that those just above minimum wage levels do not fall behind.

One advantage of a living income is that in assessing the minimum level of income required, it takes into account family size and location. While a living wage is applied in the context of hired workers, a living income includes any income earner – including the self-employed, pensioners and welfare recipients.

Semantics or real change for working people?

The risk is that the PN’s proposal could be an exercise in semantics. For if not clearly articulated, the proposal will even be ignored by those who would benefit from it.

Gaining the trust of working class voters – most of which tilt towards the Labour Party – remains an uphill struggle for a historically elitist PN. If the PN wants to present a socially progressive vision it needs to rally popular support for it and it could only do so by presenting clear life-changing proposals which can be translated into pounds, shillings and pence. For example in Germany, the new government has announced a plan to undertake a one-off adjustment of the minimum wage to €12 per hour (which would mean a further increase of 15% on its current level of €10.45 per hour), while leaving it to the country’s Minimum Wage Commission to continue deciding on its regular adjustments.

Yet the PN – like Labour – have opposed an EU directive pegging the statutory minimum wage at 50% of average wages and 60% of median wages, which would mean a pay rise for 24,323 Maltese workers. Even Parliament’s own Foreign and European Affairs Committee criticised the European Commission’s “one size fits all model” on a matter which should remain a national prerogative.

In fact, the greatest risk of embarking on a discussion on living income while minimum wages remain amongst the lowest in the European Union, is that it could be a way for political parties to avoid taxing commitments and still give the impression that they are giving importance to this issue. In reality the only parties who are making taxing commitments on this issue are the small centre-left parties; namely ADPD and Volt, with the latter proposing a minimum wage of €1,100.

In this sense one has to acknowledge that large political parties with an aspiration to govern the country have to take into account the competitiveness of small and medium-sized businesses who create most jobs, many of which are still reeling from the pandemic. But parties like the PN can still strike a balance by coupling incremental increases in wages with fiscal incentives and funding. Ultimately any progressive political party has to recognise that businesses who are unable to ensure decent wages over a restricted time frame, are simply not sustainable in the long term.

The living wage déjà-vu

It was Joseph Muscat who first proposed a “living wage” in 2010, just two years after being elected Labour leader. Yet as it turned out, advocating a living wage was Muscat’s way of excluding a more taxing commitment to raise the minimum wage at a time when he was busy reaching out to the business community.

In fact Muscat immediately qualified the proposal by making it clear that its implementation will be voluntary and that the state will simply offer assistance to employers who subscribe to this idea.

Similarly to the PN today, Muscat insisted that “this issue will be the subject of detailed discussions and consultations with all stakeholders on this and other proposals with regards to the living wage concept.”

One of the possibilities he was considering at the time was making the living wage a condition in awarding government and public tenders. While not excluding an increase in the minimum wage, “should competitiveness conditions allow”, as the election approached Muscat was more categorical in excluding an increase in the minimum wage.

Hypocritically, before the election, the PN – which had in actual fact left the minimum wage unchanged except for COLA adjustments for decades – lashed back at Muscat, accusing him of “freezing” the minimum wage. Under Labour, the only revision to the minimum wage came as a result of an agreement between the social partners through which minimum wage earners became 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.

Effectively the agreement excluded those in precarious and temporary employment from any benefits.

The last budget also envisaged a separate COLA mechanism for low-income earners, which could eventually result in higher, wage increases for low-income earners. But once again Labour is avoiding any taxing commitment, which would entail higher wage bills for employers.

Malta is falling behind

A recent study by the European Foundation for the Improvement of Living and Working Conditions shows that while in 2022 minimum wages are expected to increase by 6% across the European Union, the minimum wage will only increase by 1% in Malta. With the exception of Bulgaria and Latvia where no increases are foreseen this year, Malta will register the lowest increase in minimum wages in Europe.

Moreover in Malta 21% of minimum-wage earners live in materially deprived households, compared to 15% of minimum wage earners in the EU who live in materially deprived households.

Malta is a part of a small group of six countries where rises in the statutory minimum wage, have not kept up with the growth in average wages between 2009 and 2021. The other countries in this group – Belgium, Germany, France, Ireland, and Luxembourg – all have a much higher minimum wage than Malta’s.

Overall statutory minimum wages have increased faster than average wages in more than two-thirds of EU countries, which means that in these countries the lowest-paid employees have experienced higher wage growth than the average employee.

But other eastern European countries like Slovenia, which has seen a sharp increase in its minimum wage over the past decade, has surpassed Malta’s and now has a minimum wage of €1,164 a month. In 2009 Slovenia had a minimum wage of €589 a month, which was lower than Malta’s €630. Now its minimum wage is €315 higher than Malta’s. Portugal, whose minimum wage in 2009 was €115 lower than Malta’s, now has a higher minimum wage of €823 a month; while Spain’s minimum wage is €3336 higher than Malta’s. Malta’s minimum wage is now just €16 higher than in Greece, a debt-ridden country whose minimum wage was cut in 2012 and subsequently frozen until 2019.

Curiously, despite its relatively low wages, Maltese wages were more likely to follow the pattern of older richer member states than those in Eastern Europe.

During the past decade, growth in minimum wages has been modest among the older member states that have the highest minimum wages: Belgium, France, Germany, Ireland, Luxembourg and the Netherlands. On the other hand, there has been remarkable progress among countries that have the lowest rates, which have at least doubled those rates over the period.