Bring pensioners out of poverty – Carmel Mallia on 02/07/2019

The minimum wage represents the minimum rate of payment to a worker for service rendered to an employer. Currently it is considered to be near the poverty threshold, and workers entitled to minimum wage are labelled as the ‘working poor’.

On the other hand, minimum income is different and it should be clearly distinguished from the minimum wage.

Minimum income for survival is an established amount which should be adequate to keep persons away from the risk of poverty. 

It should further ensure that vulner-able people enjoy a quality of life which befits the dignity of a human being as pronounced by the Charter of the European Fundamental Human Rights.

In our case, it should be pointed out that the national minimum wage (NMW) and the national minimum pension (NMP), which is calculated on the NMW, have been in force since 1978 with the introduction of the two-thirds pension scheme.

It is a reality that the social and economic situation of 40 years ago was quite different from the present day. Compared to the current financial environment, wages as well as prices for goods, services, rent, medicine and other needs were very low. However, the NMW as well as the NMP were still considered a safety net to keep workers and pensioners above the poverty line.

Dramatic changes and improvements have taken place since joining the European Union. Society’s expectations increased and lifestyles have improved considerably. The European Commission’s recommendations on active inclusion state clearly that welfare systems should recognise the individual basic rights to resources and social assistance sufficient to lead a life that is compatible with human dignity, which have increased expectations further.

It can be stated that the current NMW and the NMP are no longer serving their purpose as a safety net. Their expiry date is overdue. 

They are no longer a useful tool to prevent workers and pensioners from falling into the risk of poverty.

The financial crisis faced by thousands of vulnerable persons, including pensioners with low income, is due to the fact that for a long period there were no increases in pension rates, except for the cost-of-living allowance. Pensions increased by €2 per week in each of the last two budgets. 

On the other hand, wages and salaries increased considerably and prices for goods, services, rent and other needs skyrocketed.

These changes proved to be catastrophic for pensioners with low and median income. 

The regular erosion of their purchasing power proved to be the last straw. In this case it is the pensioners’ pockets. In the current circumstances, pensioners expect that the 2020 Budget will address the minimum income as well as the risk of poverty.The national minimum wage and pension are no longer serving their purpose as a safety net

Malta is experiencing an economic boom and full employment but the wealth generated is not reaching these persons. 

It is a pity that in 2020 thousands of pensioners will still be at risk of poverty.

It has been reported that for 2018 the re-venue generated through social security contributions was €966 million. 

The expenditure for work-related benefits, which includes pensions, amounted to €700 million. This resulted in a surplus of €266 million. Another €4.5 million was not paid as State contribution.

The surplus indicated, together with the current economic boom, are the necessary ingredients to push the administration to upgrade the standard of living of pensioners, who for the last years have experienced financial constraints, poverty and deprivation, while the rich become richer. 

The Alliance of Pensioners Organisations wishes to present the following proposals for Budget 2020.

In the light of the above arguments, the first priority should be that of establishing a minimum income, an amount which a person needs for survival and to enjoy a decent living in terms of 2020 standards. 

As a benchmark, the minimum income should be equivalent to 60 per cent of the equivalised median income, based on the number of persons in a household. This measure would be the first step towards reconstructing a new safety net to look after the financial needs of low-income earners.

At present, the equivalised median income of one person is €167 weekly, and for two persons it is €251, while for three persons it is €301. Further measures should be taken to upgrade the two-thirds pension, according to the present needs and well-being of current and future generations.

Among other proposals, pensioners wish to put forward for consideration in the next Budget adjustments in the maximum pensionable income: better indexation of pensions where it includes the inflation rate for all pensioners; and amendments in the law where it discriminates between pensioners born on and before December 31, 1961 and those born on January 1, 1962 and afterwards.

As pointed out by European institutions, the government needs to upgrade pensions and make them adequate in relation to the fast rate of economic growth and the attendant fast increasing living costs.

Carmel Mallia is president of the Alliance of Pensioners’ Organisations