Wealth and social mobility: Beyond the “rich got richer” spin

A recent report on wealth distribution and social mobility issued by Eurofound, the reseach agency of the European Union, has attracted quite a lot of media attention in Malta. Invariably it has been interpreted in ways that suited the narrative of the person speaking. Some have argued that it shows that in Malta the rich have got richer, but conveniently left out what it said about what happened to those at-risk-of-poverty and to the Middle Class.

Before delving into the Eurofound study, which looks at wealth, it is important to give a background in terms of income inequality. Eurostat data indicates that across the EU, the 20% of the population with the topmost income, have disposable income 5.1 times the 20% with the lowest incomes. In Malta the ratio is 4.1 times. In neighbouring Italy, the ratio is 6 times. The statistic for Malta is better than that of Sweden, widely held as the standard bearer for social solidarity. This consideration stands also for other measures of income inequality, including the Gini coefficient. Income distribution in Malta is way more equal than in the rest of Europe.

Turning more specifically on the Working Class, in Malta, 5% of those in employment are at-risk-of-poverty. In the EU, the ratio is 12%, while in neighbouring Italy it stands at 16%.

The rate of severe material deprivation in Malta is now around half that in the rest of the EU, while back in 2013 it hovered around the average. When the Leader of the Opposition recently insisted in Parliament that there was a high number of Maltese who say they cannot afford a holiday, he failed to note that in 2013 the proportion of the populationwho said that was nearly twice the current proportion. Similarly, when referring to the current rate of those who say they have fallen behind on bills, Dr Grech failed to mention that in 2013, the proportion was again close to twice that observed now.

While some have spun the results of the Eurofound study as something new, in truth this study comments on results that were already widely studied. In fact, Eurofound simply quote material from earlier studies made by the European Central Bank and the Central Bank of Malta. These studies have two major conclusions.

Firstly “the estimated household median net wealth in Malta, which is defined as households’ total holdings of real and financial assets net of liabilities…is more than double the euro area median value”.

Secondly “in Malta, despite increasing marginally over the previous waves of the survey, inequality in households’ net wealth stood at 0.602 in 2016, notably lower than the average of the Euro Area as a whole”.

The Central Bank of Malta study even goes into the issue of how the relative position of the rich in Malta compares with the rest of Europe, stating that “the wealthiest 10% of Maltese households have only three times more wealth than the median household; this is the second lowest ratio in the Euro Area after Slovakia. By contrast, in the Euro Area as a whole, the net wealth of the highest income group is more than five times that of the median household.” Hardly the Wild West myth that was floated around by some who selectively quoted these studies.

Another significant conclusion of the Eurofound study, is that Maltese families are the second-wealthiest in Europe. In fact, Middle Class families in Malta have net wealth amounting to 81,000, or double the amount held by German Middle Class families and more than one and a half times the net wealth of Italian middle class families. Compared to the average Latvian family, Maltese families are 9 times better off.

Maltese families are the second-wealthiest in Europe

More importantly, the study also indicates that the 20% of our population with the least amount of net assets are the best placed in this category across Europe. On average, they have net assets of close to 9,000, or twice those of their counterparts in the second-best placed country, Luxembourg. The Eurofound study indicates that in half of the countries reviewed, the net assets of those at the bottom of the wealth distribution do not exceed €1,000, that is 9 times less than those of the most vulnerable Maltese families.

The Eurofound study notes that “within-country wealth inequality in the EU is lowest in most of the eastern and southern European Member States: Poland, Slovakia, Slovenia, Lithuania, Greece, Malta, Italy and Croatia”. Moreover, the authors remark that “people in central European countries and in Greece tend to be much poorer than people in Luxembourg, Cyprus, Belgium and Malta”. 

Malta is pointed out as the country where there is the lowest proportion of people who have more debt than assets. The study also underlines that Maltese youths are the second-most likely to own their residence. While 80% of German households up to the age of 34 rent their property, in Malta the share is just 15%. While across the rest of Europe people are struggling ever more to become home owners, here in Malta homeownership has risen from 77% a decade ago to close to 81%.

While all this does not mean that current and future administrations should stop focusing on addressing poverty and inequality, to plan properly to further improve the situation, one has to base discussions on facts and not on some narrative based on a partial reading of evidence. 

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