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MT 5 June 2016

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maltatoday, SUNDAY, 5 JUNE 2016 15 an inevitability, than a question of personal responsibility. "There is another misconcep- tion that we have to push people into the labour market, or into better education. It's like blaming the labour market, or the educa- tion system, for poverty in Malta. Sometimes, however, the problem is not the lack of education or job opportunities… it's the simple fact that low earners don't have enough to make ends meet. Another thing this report reveals is an explosion in food prices in the past four years. We were surprised to see an infla- tion rate of 16% emerge from our study. But it was confirmed by the NSO. We actually asked them, does this reflect in your statistics? They said yes. There was an inflation rate of 16% in terms of food: which is a very basic, essential item…." This has to be counterbalanced by price decreases elsewhere. On the other hand, we are very happy to see that certain service sand commodi- ties – gas, utilities, school uniforms – have gone down in price. But we have to be very careful how we ap- proach the issue. People who argue in favour of cutting back social ben- efits, and invest in job opportunities and increasing the skill-base, are barking up the wrong tree." At the same time this seems to in- dicate a paradox. The Caritas report emerged at a time when (in all other areas) the Maltese economy ap- pears to be booming. International credit agencies have reaffirmed their positive outlook for the next few years; government boasts about setting new records for economic growth, while employment is at an all-time high. It is not, therefore, the case that the economy is far- ing badly, so the lowest-earners are (naturally) the hardest hit… "I don't necessarily agree that eco- nomic growth will reflect in greater income for the lower brackets. The 'trickle-down effect' in economics is a myth. And it shows, because we've seen a boom in the economy, but we didn't see any correspond- ing reversal in the poverty rate. Economic growth, on its own, does not guarantee anything. It has to be the State, rather than the market, to take an active role to distribute to fruits of the economic boom more fairly…" Caritas has made no secret that it expects this 'active role' to include a revision of the national minimum wage. Government's response so far has been to await an agreement between private employers and the unions. Is Mckay suggesting that it should go ahead and impose the minimum wage increase regard- less? "No, we do have to be very cau- tious. The government is aware that such a policy measure would have an impact. So are we. In our case, we are confident it will be a positive impact. We are sure that an increase to the minimum wage will translate into more incentives to join the labour market, to retain one's job… the extra money would be re-invested into the local econ- omy through increased expendi- ture… It would also send out the message that social sustainability is just as important as economic sustainability. This is our view. On the other hand, the govern- ment is justified in being cautious. It should enter discussions with the social partners: with the Malta Employers' Association, and with the employers themselves. Even we at Caritas say the same thing: we believe the minimum wage should increase after consultation with the social partners. But we should at least be brave enough to discuss it, instead of sweeping it under the carpet. "Even if the minimum wage does not increase, he continues, there are other measures that can be taken. As long as these measures address the issue of low-income earners not making ends meet, I am sure that Caritas will be happy." Traditionally, the measure pro- posed by government as an anti- dote to increasing the minimum wage has always been the 'Cost of Living Adjustment' mechanism. Given that the cost of living seems to have increased by much more than the usual rate in the past four years… is this still an appropriate response? "I have learnt during the pro- cess of this study that the COLA mechanism was calculated on the entire population, not just the low- income bracket. But the overall consumption figures for the typical Maltese family are very different from those of low-income earners, and very different again from pen- sioners. So COLA does not really reflect the actual basket for those households. This is another issue to be discussed. With regard to the elderly, we also have to accept that people are living longer, and there- fore require longer-term expendi- ture on issues related to health… This in turn implies that the benchmark calculated by the Cari- tas study can only be expected to increase in future. Suddenly, the choices seem to be more straight- forward. Government can inter- vene directly by either increasing its own expenditure on social welfare, or legislating to increase the mini- mum wage (in which case, part of the expense is passed on to the pri- vate sector). It can do a bit of both, but the one thing it can't really af- ford to do is… neither. "To be fair, government has taken some initiatives already. It increased pensions in the 2016 Budget. It has provided a basic income for per- sons with disabilities. It has shown that it is not afraid of making such changes; so I'm sure in their coming Budgets we will hopefully see more social measures. Does he expect the minimum wage increase among those meas- ures? "Well, it was a measure intro- duced by a Labour government in 1971… and one would expect a Labour government to discuss the adequacy of the minimum wage in Malta today; as much as discussing the adequacy of social welfare ben- efits. Because while the minimum wage is important, it is not the only issue. The most vulnerable people by far are not the ones in the labour market. They are those who, for whatever reason – mental health is- sues, disabilities, and various other social factors – cannot participate in the labour market, and therefore have no income at all. These need a decent living as well. So social ben- efits need to be discussed, too. They are a very important safety net for particular segments of our society." Interview Despite a generous welfare system and an apparent economic boom, poverty seems to be on the increase. Caritas director LEONID McKAY makes the case for more measures to increase the basic income of Malta's poorest

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