Issue link: https://maltatoday.uberflip.com/i/817563
maltatoday, SUNDAY, 30 APRIL 2017 6 TIM DIACONO A deal to increase the minimum wage could incentivise employers to sack their staff after one year of employment, a group of activists campaigning for a decent mini- mum wage have warned. The deal, which was formally signed by the government, opposi- tion and social partners on Friday, will see the minimum wage go up by €8 a week by 2019. Minimum wage earners will be automatically entitled to a €3 weekly increase upon completion of the first year of employment with the same em- ployer and a further €3 weekly up- on completion of the second year. Caritas director Leonid McKay warned that this could lead to a backlash, leading employers to sack their staff after a year of employ- ment and that workers on definite contracts and part-time workers are particularly at risk. He dismissed concerns that a sharp rise in the minimum wage could lead to high inflation, argu- ing that inflation – particularly on food and property – have increased dramatically in recent years, despite salaries remaining stagnant. He also sounded a word of caution over recently published national statistics which indicated that the number of people living in material deprivation is down by half when compared with 2013 figures. "Those surveys don't take into ac- count homeless people, people who live in institutions and people who receive services from shelters," he warned. "They don't show the full picture." By 2019, therefore, people on the minimum wage will be earning an extra €416 – in addition to the normal cost of living adjustment (COLA) assuming they remain in the same job. It is a far cry from what the Cam- paign for a Decent Minimum Wage was calling for: an increase of 11% spread over three years. The cam- paign argued that the increase should be based on the principle of social justice, not on the principle of eradicating poverty. Charles Miceli from the anti- poverty campaign Alleanza Kontra l-Faqar and Erica Schembri from Moviment Graffitti said that their proposed rise was already a very conservative demand and that the final deal will not even be half of their proposal. "It is nowhere near enough to ensure decent wages to workers," Schembri said. "Everyone keeps saying that the economy is do- ing well, so if we don't properly increase the minimum wage now when will we?" PAUL COCKS SOCIAL justice has no place in a 'lib- eral' society, a prominent economist told MaltaToday in response to the disappointment of civil society lob- bies who said the agreement signed on Friday by government and social partners to raise the minimum wage by a mere 4.4% by 2019, would not make any tangible difference. "In an increasingly neoliberal economy there is no such thing as 'perfect' social justice," Dr Philip von Brockdorff, head of the econom- ics department at the University of Malta, said. "On the contrary, since joining the EU, Malta's social in- equalities have worsened." That – he said – was what has prompted the European Commis- sion, under pressure from trade un- ions across the EU, to launch the Eu- ropean Pillar of Social Rights which aims to address the problem of in- equalities, social inclusion, and low wages in many EU member states. The rise in minimum wage will see some 4,000 to 5,000 workers enti- tled 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. The agreement stipulates that in 2018 and 2019, persons on the minimum wage will earn an extra €1 per week in addition to this year's COLA, the cost of living adjust- ment. By 2019, therefore, the mini- mum wage will have been increased by a maximum of €8 per week, or around €416, in addition to the nor- mal COLA. This is a far cry from what the Campaign for a Decent Minimum Wage (KPMD) was calling for: an increase of 11% over three years – €80 monthly over and above COLA increases. The increase announced this week works out at around 4.4%. Charles Miceli, an anti-poverty campaigner, told MaltaToday that although pleased that the had been addressed, the increase agreed upon was not enough, especially because of other market forces, like the price of food and rent. "In a way I am satisfied that we came halfway to the targets that the Campaign had established, but this means that we have more work to do to ensure that people earning a minimum wage receive a decent in- crease that could make a difference in their standard of living." Miceli was quick to acknowledge that even though the Campaign for a Decent Minimum Wage had no intention of rocking the economy too much, it was for that reason that it proposed the 11% increase to be spread over three years. "The most important aspect of our proposal was social justice," he said. "We wanted to ensure that the wealth generated was being distributed equally across society." Caritas director Leonid McKay agreed that this agreement could push employers to sack their staff after a year of employment, and warned that workers on definite contracts and part-time workers were particularly at risk. McKay was troubled by the fact that the agreement did not address the issue of part-time workers or specify whether they will benefit from the same time-frames, or if this agreement does not affect them at all. "Don't get me wrong, I think the fact that all social partners have finally acknowledged the need to review the minimum wage is a posi- tive development," he told MaltaTo- day. "I can still recall the skepticism we encountered when we first float- ed the need to raise the minimum wage five years ago." McKay said he felt the debate within the MCESD had been too conditioned by the fear of a knock- on effect on the economy and other wages "The debate was also heavily influenced by competing interests, particularly those of employers and the unions. And unfortunately, civil society is still not adequately repre- sented on a national level." While Malta's inflation rate has stayed relatively low in years, Von Brockdorff expressed concern at the risk of an overheating economy that could continue to erode the pur- chasing power of minimum wage earners. "It will be purchasing power that will ultimately prove whether the increase is adequate or not," he said, saying the staggered increase allows operators to maintain relativity. "Relativity is important as any dis- torting effect would have triggered pressures from trade union mem- bers covered by a collective agree- ment to seek increases," he said. "That would have impacted nega- tively Malta's competitiveness." In the medium-term, the Low Wages Commission will also pro- pose adjustments to minimum wage by using collective agreements in both private and public sectors as benchmarks. Von Brockdorff said that while minimum wage rate can help ad- dress poverty levels, it's not the so- lution by itself. "The active labour market policies have had a positive impact on increasing labour force participation and reducing unem- ployment." Dr Gordon Cordina, the econo- mist who carried out a study for the MCESD on minimum wage, said the method by which the increase will be given would avoid adverse effects on vulnerable enterprises that em- ploy low-wage workers. "A compari- son on the basis of simple numbers (11% vs 4.4%) is neither sufficiently holistic nor fair, especially as there should be other measures to combat poverty," he told MaltaToday. Apart from increasing the cost of each minimum wage employee in Malta by over €450 per year by 2019, the agreement also increases the average cost of each and every em- ployee in by around €120 per year. "The total cost to the economy would likely be in the range of €20 million, of which around €3 million would be ascribed to low wage work- ers, but the relatively small share is due to the fact that minimum wage workers are only around 3% to 4% of total workers," Cordina said, de- scribing the costs as sustainable and not likely to result in job losses. Higher amounts, he argued, would have imposed undue bur- dens on low-wage enterprises and potentially increase the cost of liv- ing in Malta. "The agreement strikes a balance from a holistic viewpoint and on the basis of an informed discus- sion; it does not resolve all poverty concerns in Malta, and it never had the intention to do so," Cor- dina said. Minimum wage deal open to abuse by employers, activists warn No such thing as 'perfect' social justice Malta's new minimum wage increase has struck a balance, but the perils of an overheating economy could unravel spending power Leonid McKay Gordon Cordina