Political parties bicker over data showing slow growth of wages

The parties are locked in a debate over whether wages are growing at a slower rate than the increase in retail prices, as a survey of average weekly wages shows

A debate over whether there should be an increase in the minimum wage has intensified in the aftermath of Budget 2017, in part heightened in prominence by Opposition leader Simon Busuttil’s warning that many are struggling to make ends meet and that real wages – the purchasing power of salaries – are going down, despite a buoyant economy.

Finance minister Edward Scicluna has refuted these claims, insisting that a wage survey presented in the Budget’s economic survey to which Busuttil is referring, is not reliable because of the relatively small sample of the working population. 

But the Nationalist Party has questioned why the government included the survey in the first place if it was not “reliable”, accusing the minister of distorting the facts by speaking about total wages, which also includes earnings from bonuses, overtime and other allowances – which are not factored in the Economic Survey’s analysis of average weekly wages.

“This is precisely the point. Real wages are on the decline, not everyone works overtime or is paid a bonus,” the PN said this week.

Every year, the economic survey published with the Budget speech includes a survey of average weekly wages – this time between April 2015 and March 2016 – which shows part-time employment increasing by 6.1%, up to 59,388, with the number of part-timers also holding a full-time job increasing by 6.5%.

The survey also shows a slight dip in real wages between the first and the second quarters of 2016, however when compared to the same period last year, real wages have risen.

The real wage refers to the wage of employed individuals in terms of the changing cost of goods and services due to inflation. In the government’s pre-budget document, it is stated that locally the principal contributors to inflation are prices in services, particularly the catering sector.

The economic survey examines sectoral wages using data obtained from collective agreements deposited with the Department of Industrial and Employment Relations. Weekly wages from 46 different sectors of employment are presented, considering employees from 189 firms, amounting to a total of 27,818 – roughly 15% of the gainfully employed population, with 38% engaged in direct production, and the remainder in market services. 

The survey provides average weekly wages for all industries in August 2015 and August 2016. To get an understanding of whether wages increased as quickly as the cost of living did over the last year, the increase in each industry’s wage was compared to the Retail Price index – a 12-month moving average inflation rate. In August 2016, this stood at 0.82%, meaning that a fixed set of goods were 0.82% more expensive to buy than in the previous year. 

If wages increase more than inflation, the money earned by employees is worth more than it did the previous year. If inflation increases but wages decrease or remain the same, then the opposite is true. 

Out of the 46 sampled sectors, 31 saw average wages increase at a rate lower than 0.82%, meaning that if wage increases and inflation were to continue increasing at the same rate, a majority of the workers sampled in this survey would see a continued decrease in their purchasing power.

my plot

The average annual wage of the sampled sectors ranges from €10,000 to €24,000, meaning the survey focuses on the section of the working population that is at the lower end of the income spectrum. The largest wage increases were seen for relatively low paying sectors, with some exceptions. Overall, some sectors seem to be growing at a much faster rate than others and as the economy continues to grow, the government will need to find ways of tackling income inequality.

Owing to differences in sample as size as well as methodological differences in how the data is analysed, the sectoral wage survey is not as representative of the current state of employment as data provided by the NSO.

The average weekly real wage has seen an increase of 3.2%: Between January and June 2015, it stood at €359.3, while for the same period in 2016 it had gone up to €370.9. While this indicates a general upward trend, an average number for the increase in wages could be deceiving.

Average weekly wages are growing in nominal terms, but the real wage line traced here has taken the slightest of dips, which means wages are not buying as much goods and services as they used to in 2015. Image taken from NSO data presented in the Economic Survey
Average weekly wages are growing in nominal terms, but the real wage line traced here has taken the slightest of dips, which means wages are not buying as much goods and services as they used to in 2015. Image taken from NSO data presented in the Economic Survey

“[The average increase] doesn’t give the whole picture, as there are sectors where wages are relatively low and which have remained relatively low during the period January to June. In my view, the increase in the average wage is heavily influenced by wage increases in the professional and technical categories. In the case of low skilled workers, wages have virtually remained unchanged,” said Philip von Brockdorff, Head of the Department of Economics at the University of Malta.

Von Brockdorff added that in terms of the bigger picture, income inequality is still a cause of concern.