Making poverty history

Editorial | The 2022 Budget fails to address a growing mismatch between the rate of our country’s economic growth and the rate at which the average Maltese income is currently increasing

Budget 2022 has been touted as a ‘budget with a social conscience’; but while it does offer several benefits aimed at lower-income brackets, it also falls short of addressing some of the root causes of poverty in Malta and Gozo.

More specifically, it fails to address a growing mismatch between the rate of our country’s economic growth, and the rate at which the average Maltese income is currently increasing. 

The €1.75 COLA increase, for instance, is unlikely to mitigate the surge in global food prices triggered by the post-COVID labour shortages, drought, and a surge in energy prices.  In fact, it is barely enough to buy two cheese cakes and a soft drink.

And while the budget promises a new mechanism for cost-of-living adjustments, for lower income groups who spend a greater percentage of their income on food; this change is unlikely to be in place before the end of next year.

Elsewhere, the budget itself does include measures targeting low-income groups: mostly taking the form of in-work benefits. 40,000 workers earning less than €20,000, who work atypical hours in various sectors, will start receiving an in-work benefit of €150 a year as from 2022. The budget also envisages lower thresholds for eligibility for this income supplement.  

Moreover, 95,000 pensioners will also be receiving an additional €3.75 per week, over and above the COLA adjustment.  Added to this is the tapering of benefits, which ensures that unemployment benefits are retained in part for the first three years of employment.

But while these measures do help, there seems to be no political will to increase Malta’s minimum wage, in a way which ensures a decent life without reliance on state benefits and supplements.

As established by the EU agency Eurofund, the most recent increase in Malta’s minimum wage – by 1.9%, in 2019 – was the lowest when compared to all other European countries. In contrast, the increase in Spain amounted to 22%.

At €792 a month, Malta’s minimum wage remains considerably lower than that of countries like Luxembourg (€2,202), the UK (€1,903), Ireland (€1,724), Belgium (€1,626); and even Eastern European countries are catching up.  

In 2009, for instance, Slovenia had a minimum wage of €589 a month, which was lower than Malta’s €630. Now, however, its minimum wage is €315 higher than Malta’s.  

It is also worth noting that in the UK, Tory Prime Minister Boris Johnson has pledged to end the “broken” model of a low-wage economy. This will mean that the annual earnings of someone on the “national living wage” — the minimum wage paid to people over the age of 23 — will increase by 5.7 per cent. 

One understands that small businesses are still recovering from the pandemic; and that any such measure would have to be implemented locally with great caution. But it is also true that increased profits, triggered by economic growth over the past decade, have not been reflected in wages of low-income earners.  

The government has also commissioned a study to determine how a basic living income could be implemented in Malta. Announced in August, the study will present cost estimates and analyse how a basic living income will square up with already existing social benefits.  

One hopes that this is not just a delaying tactic to postpone this issue further.  A clear timeframe should be established, to ensure a conclusion to this discussion.  

It is also clear that government should be more proactive than it was in 2017, when the Muscat-led administration succumbed to pressure by business lobbies, and watered down the minimum wage increase which had been agreed upon with the social partners.

This agreement was supposed to increase the minimum wage by €8 per week in 2017. But it only went halfway, because the increase only kicks in once workers have completed two years of employment: meaning it did not really raise the statutory minimum; and it also excluded workers employed for a limited amount of time – including foreigners who are in Malta for short periods; but also, a growing sector of precarious employment across the board. 

Meanwhile, it is positive that the Opposition has committed itself to the introduction of a monthly living wage of €1,000.  But it was also very revealing that while the PN is committed to introduce its tax cut for high income earners in its first post-electoral budget, the living wage proposal is subject to ‘more discussions with social partners’, and with no clear deadlines.  

This suggests that the PN is prioritising high income earners who are more likely to vote for it, over low-income earners who are in greater need.

One possible reason why the plight of low-income workers is traditionally ignored by both parties, is because this group includes foreigners who do not even vote; and whose cheap labour fuels the economy.

But this also explains why Malta is experiencing labour shortages, as more workers are reluctant to take up jobs in lowly paid sectors. And – if true – it would also belie all those claims of a ‘budget with a social conscience’.