While workers and businesses benefit directly from economic growth, typically pensioners are left behind as their benefits are not usually linked to current salaries. Moreover, when inflation hits an economy, their purchasing power is the first to suffer as their income usually does not rise enough to make up for the rising cost of living.
Data published by Eurostat, the statistical office of the European Union, suggest that the median income of pensioners across the Euro area amounted to slightly below €20,000 in 2022, up from €18,000 in 2017 and just under €17,000 in 2012. This marks an increase of some 17% over a ten-year period. By contrast, in Malta median pensioner income went from €10,262 in 2012 to €11,585 in 2017 to €14,681 in 2022. This meant that there was a 43% improvement, or two-and-a-half times the rise observed on average across the Euro area. Thus, from a situation where the average Maltese pensioner earned about three-fifths the average Euro area pensioner, we are now in a situation where they earn about four-fifths the average.
Change in real median income of pensioners
|2012 to 2017||2017 to 2022||2012 to 2022|
Taking everything into consideration
Looking just at income may, however, be deceptive. One must consider what has happened to the cost of living during the same period. In this light, data on pensioner median incomes were modified to reflect the change in the price level over time. As can be seen from the table, the story of the decade changes considerably when one does this adjustment.
Euro area pensioners ended up 2% worse off over this decade, as they faced an inflation rate which exceeded the rise in their income. Between 2012 and 2017 they were registering some minor real gains in their purchasing power, but this was entirely wiped out in the following five years. In many Euro area countries, pensioners lost considerable purchasing power during the last five years. For instance, French pensioners saw their real income fall by 13%, while those in Austria experienced a 7% drop.
By contrast, in Malta pensioners’ income improved by 22% when one also considers the rise in prices during the decade to 2022. This was the fourth highest increase observed across the Euro area. Moreover, the improvement for Maltese pensioners accelerated in the second half of the decade, in contrast to what happened to most other pensioners. While between 2012 and 2017 their real purchasing power rose by 7%, in the five years to 2022 the rise was of 14%.
This reflected the fact that, since 2016, the Maltese government has been awarding increases in pensions well above the cost-of-living adjustment. Additionally, several reforms were undertaken that have targeted the income of specific pensioner groups, such as the gradual adjustment in widow(er)s’ pensions and the improvement of the minimum pension.
These reforms have meant that the purchasing power of Maltese pensioners has steadily improved and has outperformed by far what was happening in neighbouring countries.