Issue link: https://maltatoday.uberflip.com/i/1514782
maltatoday | SUNDAY • 27 MARCH 2022 OPINION 3 LETTERS & EDITORIAL maltatoday | SUNDAY • 21 JANUARY 2024 Mikiel Galea Letters & Clarifications Adjusted top- up COLA has improved real value of pensions, minimum wage THE report published in the edition of MaltaToday of 14 January under the heading Inflation Inequality Between Income Groups Reaches Historical Highs, was markedly selective in re-spect of the findings of a Central Bank note on how inflation has impacted low income households. The report highlighted ailments in- duced by inflationary pressures but failed to mention the corrective social anti- dotes administered by the Social Policy Ministry in support of pension-ers and low-to-medium income households as acknowledged in the same CBM policy note. Notably, the Central Bank study was based on a previous policy note pub- lished in 2021. This "had found that by 2020, even when accounting for the higher inflation experienced by low-in- come households, minimum wages had maintained their 2010 value. This was due to several ad-hoc increments given to minimum wage earners over and above the cost-of-living adjustment (CO- LA) mechanism". The same study had also assessed the real value of minimum pensions and found that their value in 2020 exceeded their level in 2013 even when accounting for the higher inflation. The latest policy note remarks that "nominal pensions have increased markedly over these past 11 years… the growth experienced by minimum pen- sions has generally been larger than that for maximum pensions". While the policy note states that "all weekly pension rates, inclusive of bo- nuses, experi-enced some devaluation in 2022 due to the backward-looking nature of COLA and the lack of incre- ments in statutory bonuses", it also adds that "nevertheless, when considering all benefits, minimum pensions have expe- rienced an increase in their real value in 2022 de-spite the historically high infla- tion." The decline in purchasing power was only recorded for those on the max- imum pension, as they were not eligible for the additional COLA mecha-nism the way it initially operated. Furthermore, the Central Bank policy note's findings about what is expected to happen in 2023 and 2024 show that as a result of the changes effected in the ad- ditional COLA mecha-nism in the latest Budget, the benefit now stands as a top- up to the COLA adjustment for all those earning less than the median equivalised household income. The refined mechanism now greatly underpins the real value of minimum pensions, boost-ing real purchasing pow- er by close to 5% for pensioners on the married rate. More than 95,000 households, with about 194,000 dependents, have bene- fitted from the first instalment, covering the first half of 2024, paid towards the end of 2023, to the tune of €14.7 million. A further 2,500 households with 6,000 dependents will be receiving their pay- ment this month, bringing total outlay to over €15 million. Benefitting households will be paid their second instalment in May. Yearly payments range up to a maximum of €1,500 depending on the household disposable income and the num-ber of dependents. The policy note acknowledged that the modification of the additional COLA mechanism to cover more households together with the increase in the weekly rate and the CLBO by €15 in 2024, will mean that the real value of maximum pensions should start to exceed 2021 levels slightly in 2024. The policy note concluded that "with regards to minimum wage earners, lev- els in real terms are expected to exceed 2021 levels by end-2024… The ability of minimum wage earners to regain the real value of their income reflects the increase in the minimum wage rate, the increments related to the children's al- lowance and in-work benefit, as well as the bonus related to the additional CO- LA mechanism." Stefan Borg Communications Secretary Ministry for Social Policy and Children's Rights