National Living Income needed to combat social inequality – GWU

GWU's general secretary Josef Bugeja

Last Updated on Thursday, 21 September, 2023 at 11:20 am by Andre Camilleri

Malta is in need of a guaranteed National Living Income (NLI) in order to combat social inequality and support those who form part of lower-income categories from falling further behind, the general secretary of the General Workers’ Union (GWU) Josef Bugeja said.

The GWU recently commissioned a study examining Malta’s NLI situation. The study determined that the NLI for an individual without any children to live a decent life would be around €12,200, which is way above the €10,000 minimum wage available at present.

The Malta Business Weekly reached out to the GWU for further comments from Bugeja regarding the study’s findings.

The newsroom asked the general secretary what the GWU wants to see happening or propose in order for the people at the lower end of the social and financial scale to climb upwards. Bugeja replied that there are various things which could be done in order to elevate the people at the lower end of the scale’s quality of life and offer the opportunity of upward mobility. He suggested that the minimum wage and cost of living adjustment (COLA) could be exempt from taxes which would lessen people’s financial burdens. “This should be given in full and not taxed,” he said.

Bugeja explained that the COLA is awarded to all employees according to inflation to maintain and protect their received pay and quality of life. He said that the COLA is awarded in the following year, meaning that employees have to wait a year in order to be compensated for the increase in prices and services. He explained that the GWU’s pre-budget document details a proposal that tax bands should be widened to address the issues of minimum wage and the COLA being taxed.

“There might be cases of individuals earning less than the previous year because they are being pushed into higher tax brackets due to inflationary increases,” he said, adding that if the government were to increase tax bands in line with inflation, it could mitigate this effect and ensure that the COLA is genuinely benefiting taxpayers by maintaining their purchasing power without being subject to additional tax burdens.

“Employees need to be given fair and just compensation for their work,” he said. Bugeja explained that social partners in the Low Wage Commission are currently in “intense discussions” to increase the minimum wage in Malta. He added that a stabilisation of inflation in the region of 1-2% could also help as people’s purchasing power would not erode due to increasing prices. He also said that another important tool would be further training and education to allow people to climb the social and financial ladder. “We need to train them and give them skills and competences to move forward in their career paths.”

He continued that collective bargaining is the right tool to increase wages and maximise people’s pay, adding that the adequate minimum wage directive states that collective bargaining should cover around 80% of the workforce. He said that is why the GWU has been advocating for all workers to be automatically enrolled within a trade union of their choosing. Bugeja said that wherever there is a collective agreement, salaries and wages increase based on efficiency and performance while those who are not covered by such an agreement only have their income increased by the COLA mechanism.

Expanding on the topic of the COLA mechanism, Bugeja was asked if such a mechanism is truly enough to sustain people undergoing financial difficulty. He replied that the COLA mechanism has been a crucial component in Malta’s social and economic policy since 1998 and has the aim of ensuring that the standard of living for citizens remains adequate when faced with rising prices and inflation. With that said, however, Bugeja said that COLA cannot be the only tool to sustain people in financial difficulty. “This mechanism is designed to track changes in the cost of a typical basket of goods and services, including food, housing, transportation and healthcare. Wages and benefits are adjusted accordingly.” He explained that the mechanism was introduced in order to protect those individuals on low income.

He acknowledged that the system has helped many citizens maintain a reasonable standard of living, but maintains that it may not be sufficient for some in severe hardship. He added that it is also the case that the mechanism may not always keep pace with the rapidly rising costs of certain essential items such as food, services and housing. Bugeja said that Malta has experienced a significant increase in property prices throughout recent years, making housing affordability a more pressing issue. He explained that although COLA adjustments do take into consideration housing costs, they may not fully account for the extent of the problem.

The GWU general secretary remarked that another problem is that “certain service providers abuse their position of strength and increase prices unjustly”. He said that it must be taken into account how the government absorbed the difference in price for energy and fuel prices “which has helped business and households significantly”. He explained that the effectiveness of the mechanism varies depending on individual circumstances, such as how people with fixed incomes, like retirees, may find it more difficult to cope with rising costs despite assistance through COLA adjustments. He continued that individuals who rely on social assistance may also find it difficult to make ends meet in the current economic situation.

He said that throughout past years there have been a number of initiatives introduced with the intent of helping the most vulnerable within our communities. He said that pensions have been increasing constantly and that the minimum wage was increased as well. He further added that an additional COLA mechanism was introduced to assist some of the most vulnerable through increased pensions, rent subsidies as well as work benefits. He said that there is still more which needs to be done to help those in poverty or at risk of poverty. “Ultimately, sustaining people in financial difficulty requires a multifaceted approach that considers not only the COLA mechanism but also broader economic and social policies.”

Does the GWU believe that the NLI should be the standard for the minimum wage? He replied that the study’s aims were to define the NLI and then calculate the expenditure of different households to subsequently calculate the income. He said that through the research a comparison was done with the statutory national minimum wage. “Differences between the NLI and the minimum wage are indicative of the extent to which current labour market conditions may fall short of enabling workers to afford a decent life.” The GWU said that after finalising and presenting their study to the Malta Council for Economic and Social Development, it plans on updating the study and also conducting a study on how to reach the level of income to guarantee a decent living to all.

“There are two trains of thought,” he said, “either wages are increased and financed by employers or salaries are increased by government intervention”. It said that both theories can be debated and that there are pros and cons to each theory. “That is why we presented our study to all social partners as well as the government. We want to discuss how to reach an income level that is adequate so every citizen can have a decent living.”

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