I’ve great respect for Marisa Xuereb who was President of the Malta Chamber of Commerce and I find her as a decent spokesperson for the business community, but she is wrong on the minimum wage and there is no evidence that shows that increasing the minimum wage in Malta would increase basic prices of goods. Inflation in Malta, especially in the past few years has been an externality problem.
Inflation has sped through in Malta with property prices going up by more than 100% in the past 10 years and wages increasing by only 25% in the same period. Basic prices of goods have increased by at least 25% in the same period. There are no excuses for keeping the minimum wage in Malta at miserable levels.
Cheap labour is also slowly becoming a thing of the past. Technology is increasingly reducing the need to employ jobs which require little skill and effort. Businesses whose model is based on cheap wages should slowly die rather than be kept alive with artificial government subsidies and a cheap labour system and this is a good thing in capitalism.
Naqbel mija fil-mija. Marret tajjeb fuq il-podcast ta’ John. Għoġbitni ħafna. Imma l-argument ta’ Wayne huwa sod. U r-rebuttal ta’ Marisa huwa żbaljat.
The consequences of raising a minimum wage are complex. Different sectors are affected differently. For example, many factory jobs are easily automated, so workers in unskilled manufacturing may find themselves unemployed. On the other hand, serving tables cannot be easily automated, so restaurant workers will still do well.
Raising a minimum wage may also have a ripple effect on other wages. If those at the bottom of the ladder start getting paid more, those on higher rungs may expect the difference between their wages and the wages of those they supervise to hold, thus, the employer ends up having to pay everyone more.
So where does the money come from? Increasing the price of goods, and hence fuelling inflation, is one possibility, but absorbing the cost and reducing profit margins is another. The third is automating and doing away with the employee’s wage altogether. It all depends on how productive and valuable the employee is, how high the minimum wage increase is, how competitive the sector is (not easy to raise prices if your competitors are not doing so), and how easy it is to automate the job.
One must keep in mind that employers are not going to keep employees at a loss, so there are limits to how much of the increase they would be willing to absorb, so higher-priced goods or lay-offs may be the result if the minimum wage is raised to ‘uncomfortable levels’ (what that ceiling should be is uncertain). Economists used to hate the idea of minimum wage increases, arguing that they would create more harm than good. However, since David Card and Alan Krueger published Myth and Measurement in 1995 (reissued in 2015), the thinking has changed a lot. It is now generally believed that modest increases in minimum wages benefit low-skilled workers without causing too many ripple effects.
The argument against minimum wages is that they set an artificial price on labour: lower than an employee may be personally able to negotiate or higher than the value being produced by the employee. Germany resisted introducing a minimum wage until 2015 for this reason. However, critics of the minimum wage do not fully appreciate the low bargaining power and ability that unskilled workers often have, compared to the strong hand that companies employing them usually possess. A minimum wage (although an imperfect solution) protects workers from abuse by employers.
In an ideal world, the solution would be to improve the skills of employees to a point where they can demand higher wages than the minimum, but upskilling is not that easy. Some workers spend years on end living on nothing else but the minimum wage, and even if such employees upskill, somebody still needs to do the low-skilled work for a low wage.
For Malta, I would say that the minimum wage (and, hence, the living standards of the poorest in society) is so miserable that it can modestly be raised without too many bad ripple effects. We can improve education, skills and productivity (thereby helping those who can move past the minimum wage) while raising the living standards of the poor at the same time. I believe that doing the latter is vital because, unlike you, I do not see low-skilled work going away.
Artificial intelligence seems to be threatening medium-skilled work more than it is threatening low-skilled jobs. Robots are neither dextrous nor friendly. They cannot pick fruit because they will crush them, they cannot serve food because they will drop the plates and get confused if they bump into somebody, they cannot cut hair because they are unimaginative and people miss talking to their hairdresser, they cannot drive delivery motorcycles because fully automated driving is still years away, and they cannot change nappies wash patients or comfort them because they would terrify the elderly.
Malta’s tourist and care-heavy sectors (neither of which are going away) are very dependent on low-skilled and labour-intensive service jobs, so I do not see low-skilled work and the need for a minimum wage to go away. I agree that the minimum wage should be raised. The question is by how much.
The money comes from increasing baseline efficiency of Maltese Businesses, which means cut down mela-nism, nepo-tism and try to attract industries to Malta with an high leverage for the GDP, instead of scamming 30.000 Indians…