The Malta Chamber of Commerce has blasted potential wage hikes as “naïve at best, suicidal at worst”, as unions and employers’ associations get ready to thrash out terms for a possible minimum wage increase in key talks on Wednesday.

The meeting is the final act of the work carried out by the Low Wage Commission, a consultative body of Malta’s social partners that was set up earlier this year.

On Sunday, Prime Minister Robert Abela said that Malta’s minimum wage “must be increased”, with discussions among the government and social partners under way.

Times of Malta is informed that while some social partners are holding out against an increase, others are more open to the suggestion, with some pushing for part of the increase to be shouldered by the government.

It is believed that the government is unlikely to agree to this request, with Finance Minister Clyde Caruana having told social partners during a pre-budget consultation meeting that this suggestion is off the table.

Minimum wage hikes ‘must be matched by increase in productivity’

In a strongly-worded statement, the Chamber of Commerce on Tuesday morning said that increasing minimum wages is not a silver bullet and the risks of fuelling higher and more persistent inflation are high.

The Chamber warned that inflation is set to persist if policymakers “ignore fundamental economic principles and put our country on the path of implosion”, particularly in light of the “unsettled” global situation.

Speaking to Times of Malta, The Malta Employers’ Association adopted a similar position, reiterating its previous warning of a wage-price spiral which, it fears, will get worse once a minimum wage increase comes into effect.

MEA director Joseph Farrugia warned that an increase in minimum wage, over and above other increases such as COLA and collective agreement increases could lead to dire consequences.

MEA director Joseph Farrugia. File photo: Matthew Mirabelli

Businesses that depend on exports are particularly at risk, Farrugia said, as they may be unable to compete with international competitors.

“Ultimately, an increase in wages must be matched by an increase in productivity. The final decision is the government’s and it will have to carry the economic consequences of whatever decision it takes”, he said.

David Xuereb, chair of MCESD, which is leading the discussion among social partners on the issue, preferred to remain tight-lipped, saying that he was “working hard to have all parties listen to and respect each other”, adding that “progress has been made but current discussions are sensitive”.

What about workers earning above minimum wage?

Contacted for comment, Paul Abela, president of the Chamber of SMEs also kept his cards close to his chest, calling for the potential impacts of a minimum wage increase to be studied before any increase comes into effect. As things currently stand, Abela argued, it is unclear quite how many people in Malta receive the minimum wage.

Finance Minister Clyde Caruana recently told parliament that some 2,372 people received the minimum wage in 2022.

Abela, however, questioned how an increase would impact workers earning slightly above the minimum wage threshold. Arguing that wages in Malta’s workforce are tightly compressed, Abela said that increasing the minimum wage could lead to a “ladder effect” where other income group rungs are impacted.

Need for ‘strategic overview’ not ‘sporadic interventions’

While declaring himself in favour of upping the minimum wage, UĦM secretary general Josef Vella argued that it is high time to adopt a more proactive approach by developing a more strategic review of wages across the board.

Vella argued that a 2017 agreement between all social partners and the government for minimum wage increases to be based on collective agreement revisions has been ignored in favour of “sporadic interventions”, such as COLA increases and similar mechanisms.

UHM Secretary General Josef Vella. File photo: Matthew Mirabelli

Describing collective agreements as “the natural way to increase wages”, Vella argued that mandatory union membership for all low-income earners would ensure that wage increases are implemented in a way that does not “distort the market”.

“It’s not just the minimum wage that needs to increase, but also the median income, which is currently €18,500”, he said. “We need to ensure that wage increases are consistent and respect the relativity between different income tiers”.

GWU secretary general Josef Bugeja is broadly in agreement, arguing that an increase in wages is necessary and in line with the 2017 agreement’s provision for the minimum wage mechanism to be revised every four years.

Bugeja described current talks among social partners as “very sensitive”, saying that he is nonetheless “confident that an agreement will be reached”.