European Commission: Malta with lowest absolute poverty in the EU

The European Commissions research directorate, the Joint Research Centre, has published a comprehensive study which concludes that Malta has the lowest percentage of its population in absolute poverty from all countries of the European Union.

In fact, according to this study only 1.5% of Malta’s population do not have enough income to live an adequate standard of living. This contrasts with a situation where in countries like Romania the proportion of the population in absolute poverty is 60%. In countries in the Mediterranean, rates are much higher than in our country, for example it reaches 10% in Spain, 15% in Italy and almost 30% in Greece.

To determine the number of those in absolute poverty, European Commission researchers arrived at that level of basic income that a person needs to be able to participate adequately in society. This includes the amount of income a person needs to have the necessary nutrition, decent housing, essential transportation, medical protection, as well as the fulfilment of basic social needs (e.g., a once-a-year holiday, internet, mobile, and some use of restaurants).

In the case of Malta, on average, this income is estimated at €500 per month. This is about 50% lower than the amount of income people need to live in a similar fashion in Italy and three times less than the minimum income you need to be able to live adequately in Denmark.

This reflects differences in the cost of living across countries as well as services provided for free in different countries, such as health or care.

This study was conducted to better evaluate the presence of poverty than with existing indicators. The latter indicators specify that for a person to be at risk of poverty they must have an income less than 60% of the average income. But this means that when average incomes fall, as is the case with COVID, those on fixed low incomes – such as those on social services – appear to have become less poor. This is a perverse result that could lead to those most in need after an economic crisis being ignored because they are artificially seen to have performed better.

That’s what happened in Greece after its debt crisis when those at risk of poverty fell by 20%, but this only happened because nationally average income had fallen by the same amount. In fact, during the same time there was an increase of more than 10% in the number of Greeks in a state of severe material deprivation.

Average incomes in Malta have increased by more than 40% since 2013.

In Malta’s case, in recent years we had opposite trends. Average incomes have increased by more than 40% since 2013 as more people started working and wages have improved considerably. This led to the threshold of 60% of average incomes rising very rapidly and much more than the increase in the cost of living during that time.

If one were to use the same income threshold used in 2012 to measure the risk of poverty in Malta and only increase it by the rise in the cost-of-living in recent years, one would find that the rate of those at risk of relative poverty would be around one third of the headline rate.

Opposition spokespersons often refer to the proportion of those at-risk-of-poverty without explaining how the indicator is computed.

In a recent Parliamentary Question, much was sad about the fact that whereas in 2012 there were 5.2% of those in employment who did not earn 60% of average income, in 2020 there were 7.4%. At the height of a pandemic, one would expect those in employment to take a hit in their income. In Germany, the ratio rose from 7.9% in 2019 to 10.6% in 2020. In Malta the rise was less than half that.

Furthermore, the Euro area country with the highest in-work poverty rate is Luxembourg, with a rate of 11.8%. Now if anyone thinks that workers in Luxembourg are poor – let them know that the minimum wage there is the highest in the EU, at €2,100 per month for unskilled workers and €2,500 for skilled workers.

For a Maltese worker to be considered to be at-risk-of-poverty, Eurostat applied an income threshold of €6,869 in 2012, whereas in 2020 it used €9,744. This was not because the cost of living rose by this amount, but just because the average wage rose strongly. During this period, the average wage in fact rose by 4 times the increase in the cost of living.

If one were to apply the absolute poverty threshold developed by the Joint Research Centre, the rate of in-work poverty in Malta would be close to 1.5% in 2020, or nearly four times less than it was in 2012 using the same threshold.  

The European Commission’s study confirms that while in many countries those at risk of poverty are also in absolute poverty, and in some countries, there are more in absolute poverty than in relative poverty, the majority of those at risk of poverty can adequately participate in social life in Malta.

The study also confirmed that in a country where the income level is equally low for all, the risk-of-poverty rate will be low, but then there would be many more that would not be able to have a minimum adequate standard of living found among those at risk of poverty in wealthier countries. For example, someone who is considered poor in Luxembourg still earns six times what someone who is not considered poor in Romania. It is not a surprise that the rate of those in material deprivation in Romania are six times more than that in Luxembourg.

The result achieved by Malta in this study confirms how well the Government has worked in recent years. It focused not just on improving the incomes of those most vulnerable, for example by increasing pensions, but has also taken steps to control the cost of living, keeping stable the cost of electricity and fuel.

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