How often have we heard statements from ill-informed persons who don't know better or from political propagandists with a hidden agenda but who should know better, that "there is no poverty in Malta"? Yet those individuals or voluntary organisations that work in the lower strata of society know that poverty in Malta exists. When will the plight of the poor draw the same attention as the disincentives being "suffered" by those who pay high tax rates?
Most people seem to judge the pervasiveness of poverty by reference to the fact that we don't have beggars in the street. But the official statistics show otherwise. According to the NSO's Structural Indicators Programme, which provides benchmarks comparable to those compiled by Eurostat, half the country's population, or some 192,750 persons, have an income that is below the median income of Lm3,394 per annum.
The press recently reported that the proposals being discussed by the social partners within the forum of the Malta Council for Economic and Social Development include a suggestion that the maximum tax rate be reduced from 35 per cent to some lower level. This is said to be intended to encourage more work by the top income earners in the country, that is that small minority which probably pays around Lm5,000 per annum in income tax.
I think it is a disgusting proposal. I'm glad Prime Minister Gonzi shot it down on the spot, though he did so not on the high moral ground of social equity but for the more mundane reason that the country cannot afford it. I believe that, even on strict economic grounds, it makes more sense to incentivise the very lowest income earners. These are the persons who would tend to spend most of each additional lira they earn, versus the higher-income ones who would tend to save a greater proportion. They also include the persons, many of them women, who currently do not participate in the labour market.
My readers could perhaps understand why relative, if not absolute poverty, is widespread in Malta by putting our indicators within the context of the EU ones. The poverty threshold is generally defined as a fixed proportion (60 per cent) of average (median) income. Thus, the NSO reports that, measured in Purchasing Power Standards (PPS), while the at-risk-of-poverty threshold in Malta is 6,351, that in the EU15 is 6,125.
This partially explains why our poverty rate (the number of persons whose National Equalised Income lies under the at-risk-of-poverty threshold as a percentage of the total population) is 14.9 to the EU15's 18 per cent.
What is even more disquieting, however, is that children are the worst affected. In fact, compared to the national rate of 14.9 per cent, the at-risk-of-poverty rate among children aged 0-15 years is 20.6 per cent. If those children happen to live in single-parent households, then the rate rises to an astronomical 55.1 per cent! And don't forget that the number of single-parent households keeps going up.
One of the saving graces of the social welfare state we have inherited is that it at least mitigates the threat of poverty which the invisible hand of the free market might otherwise impose on society. For, while if one were to exclude all social transfers, the at-risk-of-poverty rate would be 30 per cent, social transfers push the rate down to 21 per cent if one includes pensions and to 15 per cent if one includes all transfers.
Of course, the St Thomases among us might argue that all this depends on how one measures poverty. While this is not the place for a detailed discussion of how to measure it, there are a couple of technical points with great political significance. However any child poverty measure ends up being defined - as some fraction of average income, as the value of a basket of goods, etc. - it is vital that it can be expressed in liri per week.
Putting things in money terms is the way to convey to people who may have no direct experience of poverty exactly what is being talked about. So for example, in 2000, income poverty meant anything below Lm39 a week. I cannot imagine anybody suggesting that this is a preposterously large amount of money to describe poverty in Malta today.
The really crucial point, however, is the way the measure increases year-by-year. Will it rise in line with incomes (a "relative" measure), as it does now? Or will it, instead, rise only in line with prices (a so-called "absolute" measure)? The relative measure is much the more demanding. Using this measure, low incomes must grow faster than average incomes for poverty to fall. Using an absolute measure, on the other hand, low incomes only need to grow faster than inflation for poverty to fall.
Low pay is not the only factor here. The high cost of housing is another. So too is the extent to which the adults in a household are working. Just under 80 per cent of those at risk of poverty live in households where the persons concerned are either unemployed, retired, or economically inactive. A national minimum wage helps some people, but such a blunt instrument could not be set with reference to what would be necessary to take people out of poverty.
When we add to low pay other problems that characterise life at the bottom of the labour market - problems like insecurity of work and lack of access to training - the case for efforts to eradicate poverty - and for the more fortunate members of society to share that burden - looks overwhelming.
Certainly, it is possible for a government to move society in the right direction, via redistribution through the tax and benefit system. The problem lies with the nature of redistribution. Redistribution is reactive, compensating for the effects of whatever decisions have been reached in the economy at large, whether between employer and employee, buyers and sellers more generally, or between what people spend and what they save. While essential to any approach to the problem, redistribution cannot be enough. To create a country with a relative small degree of income inequality calls for much deeper change, for changes to the bargains that are struck in the economy before the government's redistributive apparatus comes into play, for changes, in other words, to distribution.
Sharing responsibility for eliminating poverty is not just a burden to be shouldered, however, but also an opportunity to be grasped.
The best way to tackle poverty is to help people into jobs - real jobs. But even that is not necessarily enough. For far too many, work is not a route out of poverty but simply a continuation of poverty in a different setting. That is why it is heartening to note that the Labour Party has included the issue of relative poverty in its regeneration plan for Malta.