Malta sees reduction in wage inequality, contrary to EU trend

Malta has the fourth lowest degree of wage inequality in the Euro Area and the sixth lowest in the European Union. This has been confirmed by Eurostat in the publication of its comprehensive exercise, assessing the structure of earnings across occupations in each EU Member State.

The data relates to 2018, and therefore is not affected by the considerable disruption brought about by the pandemic. In recent years, there has been debate about whether wage inequality has increased, with many commentators arguing that the divide is growing bigger.

The Eurostat exercise confirms that there is quite some disparity in gross earnings across occupations in the EU. On one end of the spectrum, one has managers earning €28.6 per hour, while at the other end one finds those working in elementary occupations with gross pay of €9.7 per hour. This means that across the European Union, on average, managers are paid nearly three times more than the lowest paid occupations.

The largest gap was found in Cyprus where a manager is paid €31.7, or a tenth more than the EU average, while the lowest-paid workers earned €6.3 per hour, or a third less than the EU average. So, in Cyprus the ratio of the highest to lowest paid occupation was five, or nearly double the EU discrepancy.

For Malta, the situation is quite different. Managers are paid, on average, €20.4 per hour while those working in elementary occupations are paid €7.4 per hour. This means that the ratio between the highest paid category and the lowest paid is 2.7. This gap is about one seventh less than the Euro area average one, and one tenth lower than in the European Union. Only Estonia, France, Ireland, Sweden, and Denmark have a lower rate of wage inequality. This means that Malta has the fourth lowest degree of wage inequality in the monetary union and the sixth lowest in the European Union.

Malta’s wage distribution is nearly twice more equal than that in Cyprus. In other Mediterranean countries like Italy and Greece, managers are paid 4 times more than those in elementary occupations, while the most equal country is Denmark with a ratio of just 2.

Malta’s wage distribution is nearly twice more equal than that in Cyprus.

Even by comparison with the relatively more egalitarian societies on the continent, Malta features among the less unequal. The average Maltese working couple pays a tax rate of 20% as against the 26% paid across the Euro area. In Germany gross pay is docked by a third, as against a fifth in Malta.

This Eurostat gross pay exercise reveals that whereas the trend in Europe is that wage inequality is increasing, the situation in Malta is the opposite.

While in 2014, a manager in Malta was paid 2.8 times the lowest-paid worker, four years after the ratio had fallen to 2.75. By contrast, across the EU there was a slight increase in wage inequality, as it rose in ten countries. Inequality increased at both ends of the spectrum, with a rise in both the most equal country, Denmark, and the most unequal, Cyprus. Austerity measures introduced in countries affected by the sovereign debt crisis, such as Italy and Greece, also widened the disparity between the highest and lowest paid workers.

By contrast in Malta, whilst managers saw a gross pay rise of 14%, as against less than 10% in the EU, those in elementary occupations were given a raise of 16%, nearly twice the increase observed across the EU. Moreover, increase in the average gross pay of someone in elementary occupations during this four-year interval was the highest on record since the Eurostat exercise started to include data for our country.

Between 2006 and 2010, those on the lowest pay had seen a rise that was in absolute terms, half that observed between 2014 and 2018. In percentage terms, between 2006 and 2010 the lowest wages had risen by 11%, followed by a 14% rise between 2010 and 2014, and then a 16% increase in the last four-year period.

During the same period, inflation fell sharply, income taxes for those on low incomes were lowered every year, the in-work benefit was introduced, children’s allowance was increased while the freeze on the minimum wage ended.

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