Government considering to increase the minimum wage

January 10, 2014

The Malta Chamber of Commerce, Enterprise and Industry took exception to the suggestion made by the Minister Marie-Louise Coleiro Preca, Minister for the Family and Social Solidarity that Government is considering an increase in the minimum wage. This reported suggestion squarely contradicts the Labour Party’s solemn pre-election declaration that the minimum wage would not be increased beyond cost of living adjustments.

The Malta Chamber firmly maintains that wages are a function of productivity and not of spending power. It certainly does not agree that an increase in the minimum wage is a viable solution to eliminate poverty. Poverty is a sensitive matter to which there are no short-cut solutions such as the one being proposed. Increasing the minimum wage is a short-sighted approach. Besides, the effect of this measure on the intended beneficiary would be short-lived. On the contrary, any measure to address poverty needs to be carefully designed and targeted specifically at supporting, in a sustainable manner, the spending power of the cohort of people who are at the risk of poverty.

It is certainly unrealistic to assume that the minimum wage can be altered in isolation. Such an increase will inevitably bring about a domino effect further up the ranks and across the whole economy to the detriment of cost competitiveness. Whilst it is acknowledged that wages are not the sole determinant of competitiveness, the Malta Chamber insists that no further burdens are placed on Malta’s labour competitiveness, particularly at this time when certain other EU member states are instituting painful reform which include an aggressive re-engineering of their cost base. These countries have redesigned their work practices and in some cases instituted pay cuts of 20 per cent or higher.

On this count, the Malta Chamber meanwhile continues to insist on the need for the COLA formula to be revised sooner rather than later to ensure a better alignment of wage and productivity developments through a formula that incorporates a measure for productivity besides inflation.

Besides wages, the safety net that safeguards people from poverty is sustained by the productive side of the economy that contributes taxes and social security contributions. This productive side must never be weakened or this could bring about unnecessary risks to the country’s social security system.

All in all, the Malta Chamber continues to stress that wealth creation must precede wealth distribution and this sequence must not be reversed as it would expose the country to the risk of having less resources to re-distribute. The country only needs to look at the pain and anguish experienced by other countries to realize what reversing the sequence would mean to Malta.