One of the most repeated phrases is that the rich are getting richer, and the poor are getting poorer.
Rising income and wealth inequality is a theme that has garnered a lot of attention over the years. The Organisation for Economic Cooperation and Development (OECD) has published a lot of studies on the matter, showing how even in Germany the middle class was being squeezed.
Given what is observed abroad, even in countries with a strong social democratic tradition, it would seem natural to assume that the same has been happening in Malta. And, in fact, this seems to be the received wisdom, especially among opinion writers. Yet, data do not seem to support this.
Every three years the Central Bank of Malta conducts a large-scale survey among households to assess their assets and liabilities. This survey, known as the Household Finance and Consumption Survey, is carried out as part of a study across all the Euro area and is vetted by the European Central Bank.
The main data collected as a result of this survey are reproduced in a table, setting out how the net assets of each income quintile compares in 2010 and 2020, the first time the survey was held and the most recent survey. An income quintile is a measure of socioeconomic status that divides the population into 5 income groups (from lowest income to highest income) so that approximately 20% of the population is in each group.
Net wealth by income quintile
|Less than 20||€125,983||€159,000|
|Between 20 and 40||€175,276||€253,450|
|Between 40 and 60||€176,447||€265,100|
|Between 60 and 80||€240,343||€303,500|
|Between 80 and 100||€380,004||€453,314|
The bottom income in Malta (the poorest households) held net assets of €125,983 in 2010. This mainly reflected the fact that about 60% owned their residence. About 57% held interest-bearing bank deposits to the tune of nearly €9,000. By 2020, this group’s net assets had risen to €159,000, a rise of 26%. The average amount of bank deposits had remained virtually unchanged but now nearly 94% had bank deposits, while home ownership remained around 60%, but the value of main residences had risen.
As for those in the top income quintile, real assets rose from €380,004 in 2010 to €453,314 in 2020, an increase of 19%. So, from having in 2010 three times as much as those in the bottom income quintile, those in the top income quintile in 2020 had 2.8 times as much. The rich definitely got richer, but so did the poor.
More impressive is what happened to those in the middle class. Those exactly in the middle of the income distribution saw their net wealth rise by 50%, or more than twice the rise seen amongst the richest quintile of the population. Whereas in 2010 those in the middle-income quintile had net assets of €176,447, by 2020 these had risen to €265,100. This basically reflected an improvement in the rate of home-ownership, which rose from 78% in 2010 to 86% a decade later. This is testament to the success of the government’s efforts to increase home-ownership with schemes such as the first-time buyer scheme.
Whereas in 2010 those in the middle class held net assets equivalent to 46% of those held by the richest 20% of the population, by 2020 they had net assets equivalent to 58% of the richest 20%.
Even the income quintile immediately below the middle class saw an increase in net wealth that exceeded by far that observed amongst the top quintile. In fact, those in the second-from-the-bottom income quintile saw their net assets rise by 45% over a decade, or more than twice the rise seen among the richest part of the Maltese population.
The evidence for Malta therefore suggests that there was no squeeze for the middle class, but rather that its relative position improved. A prime reason for this was the improvement in participation rates, with most middle-class households today having two-earners rather than just one, as in 2010. This improvement in participation was due to the current administration’s policies to help women join the labour force, key amongst them the free childcare scheme.
The past decade did witness a rise in the fortunes of the wealthy, but this trend was not confined to the top earners. The overall populace also enjoyed an improvement in their financial situation, and when examined in relative terms, the gains for those in lower income brackets were even more substantial.
Main photo credit: Pixabay