Friday, September 28, 2012
Minimum wage pessimism
The Times, Friday September 28, 2012
Those opposing an increase in the minimum wage are still trapped in the cheap labour mindset. They pessimistically predict that only low wages can enhance competitiveness and fail to have confidence in workers’ contribution to the economy, both in terms of production and consumption.
Progressive economics has long advanced since the gloom and doom mindset of wage-freeze proponents. Indeed, we now know that there are various ways of achieving competitiveness. Singling out the minimum wage as a destroyer of competitiveness is, at best, a one-sided, reductive argument.
A cursory look at the Global Competitiveness Index of the World Economic Forum (http://www3.weforum.org/docs/CSI/2012-13/GCR_Rankings_2012-13.pdf) confirms this.
In the top 20 positions one finds different types of economies, including those on the neo-liberal side (such as the US and the UK) and those with strong social models, including high wages (such as Finland, Sweden, Denmark and Norway).
Incidentally, Malta, erstwhile characterised by a hybrid welfare model, is in the 47th place. Countries with wages higher and lower than Malta’s are found both above and below Malta’s position.
The truth is that competitiveness is more likely to be influenced by a myriad of economic, political, social and ecological factors at national, regional and global levels.
Should the minimum wage level be the single determining factor for competitiveness, one might as well abolish it. But, of course, every policymaker in his senses knows that such a policy would be counterproductive.
The minimum wage issue has taken Malta by storm, following Joseph Muscat’s declaration against its increase. Indeed, the Labour Party has now decided to ally itself with the Nationalist Party and with the Employers’ Association in this regard.
On the other side of the coin, organisations such Caritas, Żminijietna and FORUM have clearly declared their position for an increase in the minimum wage. Caritas produced a scientific report on this and FORUM showed what being an autonomous trade union is all about.
The General Workers’ Union, on the other hand, has officially declared itself for a minimum wage increase in its electoral document presented to political parties a few weeks ago. Yet, its representatives in the PL congress seemed to declare otherwise. Its subsequent declaration was unclear. One augurs that the GWU will not repeat the same mistaken strategy of a few years back when, like Labour, it opposed EU membership.
What is sure is that Alternattiva Demokratika is the only party contesting the election which is for an increase in the minimum wage. The Green party will surely not sell out to big business or betray workers’ interests. Indeed, our long-held official position on the minimum wage is that it should increase and should be extended to part-time and contractual workers.
We believe that such an increase would help improve the quality of life of the workers and boost spending power. Such an increase would also encourage more people to enter the formal labour market, making work pay.
We are also proposing a realistic assessment of the cost of living adjustment so that the yearly compensation truly reflects the rise in inflation. Therefore, an updated methodology should replace the current one on which COLA is based. Such measures can encourage increased productivity, thus minimising inflationary pressure.
The Government should ensure that excessive prices, for example through abuse of dominance by monopolies and quasi-monopolies and collusion generally leading to price fixing, should be curbed. The introduction of farmers’ markets has been beneficial in this regard and should be extended.
As regards energy prices, which do have an effect on workers’ spending power, we believe the State should play a leading role in meeting today’s challenges. It is important that the Government increases promotion of alternative energy, which is conductive to sustainable development and, at the same time, reduces Malta’s dependence on the importation of dirty fuel, the price of which is bound to keep rising. Wasteful practices, and not basic use of electricity and water, are to be penalised while basic use should be subsidised.
This is a far cry from the PN’s lethargy and from Labour’s promise to cut utility tariffs for all and sundry, which, unless clarified, means that low income earners will be subsidising high income earners without taking account of waste.
AD’s economic policy shares the vision of the Green New Deal, erstwhile promoted by Green parties across the world, some of which are in government. Rather than aiming for cheap labour, precariousness and outdated economic models, the Green New Deal links economic, social and environmental priorities to create sustainable development.
In view of Malta’s heavy dependence on exports and pressing national needs, the country’s economic policies should aim to enhance competitiveness through various incentives in areas such as renewable energy, waste management, public transport, tourism, community development, education, agriculture and IT, creating Green jobs in the process. This is more likely to be sustainable then promising wage freezes and bizarre energy tariff reductions or than being overdependent on practices such as construction.
In short, well-paid workers, optimal use of natural resources such as sun and wind, and embracing technological change such as the IT revolution is what Malta’s economic vision should be all about.
Michael Briguglio is chairman of Alternattiva Demokratika