As the old proverb goes, love, cough and poverty cannot be hidden. The measurement of poverty, however, can reveal or hide its various dimensions. There lies a trap.
The one-dimensional measurement of poverty certainly creates difficulties in terms of understanding the real problem of poverty. Relying only on at-risk-of-poverty or social exclusion (AROPE) does a disservice to this society and its main anti-poverty instrumentarium.
The recent study published by Caritas indicates that indeed, under a wide cloak of the EU Commission’s measurement tool, the AROPE rate, lies a small but hyper-sensitive group of people whose existence might be reduced to a basic minimum. These are not the persons in receipt of a national minimum wage (NMW).
On the contrary, the NMW is a well calibrated benchmark which more than protects a person against ARP. The most recent ARP threshold stood at €7,672 (2014 EU Survey on Income and Living Conditions, SILC, data based on 2013 income) while the NMW rate stood at €8,433.88 net of bonuses, i.e. NMW is €761.88 higher than the ARP threshold.
Notwithstanding the provisions already made by the State, it is the increase in the number of hours worked which delivers results against poverty
In addition, the number of workers employed full-time and earning NMW has been declining from 3,556 persons in 2013 to 3,241 in 2015, representing roughly two per cent of all persons in full-time employment in 2015.
Our problem appears to be less related to the NMW level as such, but it emerges more salient when it comes to work intensity. This problem snowballs when the NMW of one adult is accompanied by a nil or weak work intensity of other adult members in the household.
The scenario gets worse with a lone parent and dependent child/children, with remote option of work intensity expansion. It is the work intensity which acts as a poverty trap, rather than the NMW level per se.
Notwithstanding the provisions already made by the State, such as tapering of benefits, in-work benefit, free childcare etc., it is the increase in the number of hours worked which delivers results against poverty.
The hard facts speak for themselves: the in-work-poverty of families with dependent children and adults in low-work intensity stands at 38%, while in the households with highest work intensity, it stands at 0.6% in 2014 (noteworthy is a significant decline from 1.2% in 2013).
Another trap in poverty measurement is the subjective element in the declaration of perceived capacity to afford certain items of material deprivation. A total 1,700 persons in top 20% earners’ households and an additional 13,000 in the next best-paid tier in Malta, declare insufficient funds for items such as a seven-day holiday away from home, even if accommodation is provided for free, or meat, chicken every other day.
Whether true poverty or not, these households do form part of the 99,000 AROPE figure. Are they really anywhere near poverty? There are also 3,000 people in households with low-work intensity, also best-paid persons in the country, not materially deprived, yet even they represent part of the 99,000 persons AROPE. Are they really socially excluded, just because they do not clock eight hours of work a day, but enjoy life in another way instead?
Pensioners and elderly seem to be hardest hit by virtue of their position on the life cycle. It is when old age and frailty kick in – which is why the recent pension reform revision and consequent Budget 2016 measures make such a sound solution in tying retirement pension to the ARP threshold. It is here, to paraphrase Victor Hugo, where poverty is a good neighbour of misery, and where adequacy of pensions is a must.
Comparisons of Malta with other EU states also suffer from an over-used, one-dimensional approach to poverty. In the last years, the ARP threshold in Malta has been consistently increasing by around €400 a year, no mean feat at all, yet the increase in ARP rate was only 0.2% between 2013 and 2014. Rather than quoting the absolute numbers, they fail to look at income distribution – a usual trap in poverty analysis, casually or intentionally picked up by the resident alarmists.
The most recent research warns against mixing the cash with non-cash income for poverty measurement, in the context of international comparisons. Yet, for the national poverty analysis of the most-needy strata, the introduction of social transfers in kind, i.e. non-cash income, is important in order to reveal the real life situation of those who are already in poverty trap and truly living in poverty.
Maja Miljanic Brinkworth lectures at the University of Malta.