The theme of the seminar held on November 30 and December 1, 2023 was “Adequate minimum wages – The way forward”, organised by UHM (Union Ħaddiema Magħqudin) in cooperation with EZA and funded by the European Union. A total of 41 representatives of workers’ organisations from 11 European countries, and 17 speakers took part.
Important aspects under the spotlight
The event analysed issues revolving around the ongoing debate on the increase in the cost of living and the adequacy of minimum wages. The conference also focused on the social and economic aspects of the subject which in turn have a direct bearing on the quality of life. The issues under the spotlight were the following:
To compare and contrast the current situation across various countries in terms of minimum income
To present possible scenarios on the effect which such directive might have
To exchange experiences on how the challenges faced by low-income workers can be tackled and ways to address the rapid rise in the cost of living
To come forward with tangible proposals for the implementation of this directive, combat inflation and strengthen collective bargaining
The various kinds of models of minimum wage structures and collective bargaining adopted in the EU and a comparative analysis
Present studies on the rise in the cost of living of essential items since the outbreak of the Ukraine war and Covid-19
Explored ways and means how to address the issue revolving around free riders
Debate the impact of higher statutory minimum wages and stronger collective bargaining with respect to economic recovery, employment levels and inflation
Debate whether wage convergence would ultimately start reversing certain brain drains in aspects whereby there is an acute shortage of skilled workers
Explore concepts like living wage, living income and minimum wage and debate which is the best model to ensure an adequate standard of living in the long-term rather than rely on one-off adjustments
Results and calls for action:
The minimum wage is the lowest amount an employer can legally pay their workers. While it serves as a baseline, it may not always align with the actual cost of living, leading to financial struggles for those earning it
A living income encompasses the financial requirements for a decent life, extending beyond just basic needs and apart from wages includes income from various sources, such as social benefits, pensions, and other forms of support
Minimum wage earners should be supported through incentives to upskill in order to be in a position to improve their salary
Despite the fact that there are still large differences in gross minimum wages and take-home pay across Europe, the gap has decreased over the last decade
The EU Minimum Wage Directive aims to reduce in-work poverty by 20% in 8 Member States, reduce wage inequality by at least 10% and reduce the gender pay gap between 10-20% in some Member States
In some countries the advent of the EU Minimum Wage Directive has already served as a stimulus for greater efforts to establish a minimum threshold
The additional wage expenditure resulting from the minimum wage mechanism needs to be affordable through the following sources:
in the short term: profits, slower rate of wage increases at higher levels, business efficiency improvements, higher consumer prices;
in the long term: improvements in economic and social framework conditions which would compensate for transfers in the short run. It is therefore essential that the minimum wage mechanism does not result in an overall net loss of jobs and business activity, possibly requiring:
compensatory measures to remedy excessive impact burdens on firms that are strongly dependent on a low-wage base for their activities
the weakening of automatic relativity links from low to higher wage levels, where these are not justified through improved business conditions
A transition from an economy based on cheap labour to one based on value added is desirable as low-paid workers normally mean low union coverage and hence a higher incidence of abuse. However, the transition must be a gradual process which takes years and requires mobilisation of private capital and higher levels of public investment.
Collective bargaining is the way forward to improve working conditions including salaries, as opposed to sporadic minimum wage increases which risk undermining collective bargaining.
The issue of free riders must be tackled as otherwise this will seriously threaten existence of trade unions and collective bargaining. A proposal for mandatory membership for low-income workers should be seriously considered.
Any compensation for the increase in the cost of living should not be taxed as otherwise this would create a situation of double taxation
Since the onset of Covid-19, food and medicine prices have increased dramatically and have eclipsed rise in wages, thus increasing the rate of in-work poverty and eroded the spending power of middle-income earners
Investing in education and skill development programs empowers individuals to access higher-paying job opportunities, contributing to long-term financial stability.
Conclusion
The two-day event was a good opportunity to discuss what is arguably the biggest challenge faced by workers right now and for the foreseeable future – the increase in the cost of living. The overall message which emerged was that the best way forward to safeguard workers’ rights, but also to improve conditions of work especially for those on low income is through collective bargaining. Any quick fix to increase minimum wages sporadically will risk undermining collective bargaining, distorting wage relativity and discouraging training for career progression. This is why trade unions are necessary to face the challenges posed by inflation.