Last Updated on Wednesday, 13 September, 2023 at 8:05 am by Andre Camilleri
A new study has found that households need significantly more than what is today’s minimum wage in order to guarantee a decent standard of living.
A new study commissioned by the General Workers’ Union to establish a National Living Income (NLI) has found that a two-parent household with two children needs anything up to €30,734 to be able to spend anything between the €22,000-26,000 range required to live a decent life.
The study sets out to find what level of NLI could guarantee a decent standard of living in Malta, whose minimum wage presently amounts to a weekly €182.83 – or €9,507 per annum.
But at €12,226, the most conservative NLI estimate for just a single-adult household without children, is already 30% higher than the minimum wage. By way of comparison, the anticipated weekly cost-of-living-adjustment (COLA) of €10 for 2023 would result in a 5% increase in the minimum wage.
The GWU said that while national policies such as benefits-tapering and in-work benefits, as well as tax rebates, assuage the sharp rise in consumer prices, the study provides a guide to understand what a decent living standard involves.
“Research on NLI is necessary in initiating a wide and far-reaching discussion on employment standards and the ability of persons in employment to escape the poverty-trap, particularly in the light of the recent COVID-19 pandemic,” GWU secretary-general Josef Bugeja said.
Rising in-work poverty (IWP) appears to have been one of the consequences of the Maltese economic boom, the latter fuelled by the importation of foreign labour. It is estimated that between 2012 and 2017 there was an increase of 13.5% of those at risk of in-work poverty, and the categories more likely to be at risk were single-adult households with dependent children.
The NLI is more than a minimum amount for survival, but still covers needs and necessities in contemporary social life, not wants or luxuries.
In comparison to the Caritas study that established a minimum essential budget for a decent living, the GWU study finds the need for a higher income: for example, it says a single-parent household with two children requires a €12,820 spend, compared to the €11,038 identified by Caritas, excluding rent. This is because the NLI focuses on the expenses over and above the basic needs required to live a decent life.
“The broader notion of a decent standard of living embraces more than employment conditions and relates to quality of life,” Bugeja said. “It should enable meaningful participation in society beyond mere survival through, for example, leisure, supporting a family and saving against present and future unexpected events.
“NLI is not simply an income level below which people risk further deprivation; instead, it proposes that above a certain threshold, there should be a qualitative upward shift in human freedom and capability,” Bugeja added.
Bugeja said the NLI aims to shift lower-income categories upward, ensuring access to necessary goods and services for all. “A guaranteed NLI for every household would mitigate the steep differences that currently exist between the bottom end of the wage scale, and the average income earners. The NLI is, ultimately, a tool to fight social inequality and to support lower-income categories from falling behind,” Bugeja said.
Household type Cost of decent living National Living Income
Single, no children €10,535-€12,476 €12,226-€14,864
Single parent, one child €13,695-€16,219 €16,215-€20,099
Single parent, two children €16,855-€19,962 €21,078-€26,018
Couple, no children €15,802-18.715 €17,704-€21,316
Two parents, one child €18,892-€22,457 €21,084-€25,746
Two parents, two children €22,123-€26,200 €25,400-€30,734
NLI estimates for different households
The gross NLI for a single adult household with no children is estimated to range between €12,226 and €14,864 per annum. This is the income that would be required by the household to afford a decent living. This is estimated to cost the Single Adult household anything between €10,535 and €12,476.
For an adult couple household with no children, the NLI is estimated to range between €17,704 and €21,316 per annum. This is the income required for the household to be able to spend anything between €15,802 and €18,715 that would be required to live a decent life.
By way of comparison this 1.5 times required by a single adult household without children, reflecting economies of scale at the household level that can be attributed to shared household goods. For example, the cost of internet subscription is likely similar for one and two adult households. So the total cost per adult in a two-adult household is not twice that in a one-adult household.
The data presented here shows that households faring the worst are the single-parent households and those with members over 65 years of age.
Calculating the NLI equation
The NLI equation is based on both data as well as interviews with various households, selected from structured surveys and questionnaires. This method allowed those interviewed to be active participants rather than just passive sources of information. A comprehensive discussion with the interviewees about the data on health, education, housing, transport, food and drinks, and leisure, were eye-openers for the research.
The size of each household was assigned a weight of 1 for the first adult, then 0.5 to other adult household members, and 0.3 for each dependent. Dependent children are persons under 18, or those aged 18-24 years that are economically inactive and living with at least one parent. Otherwise, the person is referred to as an adult.
The ‘equivalent household expenditure’ was then reached by dividing the household’s total expenditure by its ‘equivalent household size’.
Using the ‘equivalent household expenditure’, the range between the top cut-off points for the 40th and 50th percentiles was taken as an indication of how much had to be spent for an equivalised household to afford a decent living.
For the NLI estimate, taxation and national insurance contributions paid on a household income were factored in: so the net NLI is actually the disposable income required for a decent life, while the gross NLI is what is required to ensure a sufficient net income for a decent life.
Finally, the incomes reported in the survey were compared to the estimated NLI.
About the study
The GWU study ‘A Proposal Towards the Definition and Estimates of the National Living Income in Malta’ was carried out together with Alleanza Kontra l-Faqar and Moviment Graffitti, as part of the European Social Fund project ESF.04.076 – Improving General Workers’ Union Capacity for Better Social Dialogue.
The study was carried out by Rethink Advisory, selected by open tender, and presented to the stakeholders at the Malta Council for Economic and Social Development.
The authors are Dr Kurt Xerri, Dr Daniel Gravino and Dr Joseph Gravina, Dr Vincent Marmarà and Mr Jake Adam Azzopardi.
The study was based on the European Union Survey on Income and Living Conditions (EU-SILC) conducted annually by the National Statistics Office (NSO), a detailed survey that measures households’ income based on a sample of 3,826 households made up of 9,555 individuals.
Qualitative and quantitative primary data were collected through individual interviews, focus groups and a survey. The survey focused on households’ expenditure, for which no official up-to-date secondary data is available except for the last NSO Household Budgetary Survey of 2018, whose reference year is 2015.