Is income inequality in Malta a reward for higher education?

Last Updated on Thursday, 24 June, 2021 at 9:24 am by Andre Camilleri

In 2018, the richest 20% received 4.3 times more disposable income than the poorest 20%. This reflects a marginal increase of 0.33 from 2005. Compared to the EU however, Malta’s distribution of income is more evenly distributed. These results were published during a digital conference last Tuesday organised by the University of Malta.

During this conference, titled ‘Measuring and Understanding Inequality Dynamics in Malta’, two economists commissioned by the Malta Centre for Employment Studies, Melchior Vella and Gilmour Camilleri, presented their findings on a study they conducted on how income inequalities have changed in Malta over the past 13 years and the drivers of such change.

The study was incited by the lack of clarity surrounding income inequality in Malta. ‘The discussion in Malta is hindered by an element of judgement – viewing inequality as a reward for higher education’, Camilleri said. The aims were thus to identify factors that may have contributed to change, using data collected by the National Statistics Office between 2005 and 2018. This data is from the EU-SILC survey which interviewed around 4,000 Maltese households each year.

The Lorenz Curve shows that there were no substantial changes from 2005 to 2018 when it comes to percentage of household income in relation to percentage of population. In 2018, ‘the bottom 40% of the population earned 22% of the total income, and the bottom 80% of the population got 63% of total incomes’, meaning the remaining 20% of the population earned 37% of the total income.

When analysing reasons for income inequality in Malta, the study found that the head of the household’s education level is the most important factor, and this has increased significantly over time, from 15% in 2005-2009 to 25% by 2018. Related to education, occupation is also a significant factor when it comes to income inequality, with the study showing how this explains 20% of inequality. The study highlights the importance of education, with an increase in graduates and the level of education meaning better paying jobs and career opportunities.

Another factor is household employment structure – households with more than one income earner have increased. This is due to an increase in number of women who have found employment, as well as an increase in individuals who continue living with their parents until their 30s.

Economist Melchior Vella asked if we should cure inequality or prevent it, and concluded that there needs to be policy intervention, otherwise the imperfectness of the labour market can result in further inequality.

Present also at the conference was a panel of experts, made up of Prof. Godfrey Baldacchino, the Chairperson for the Centre for Labour Studies, Dr Luke Fiorini and Dr Anna Borg from CLS, Dr Anne Marie Thake, the Head of the Department of Public Policy at the University, Dr Daniel Gravino from the Department of Economics, and other distinguished guests from GWU, UHM and MEA.

GWU Deputy Secretary General Kevin Camilleri agreed with Vella in that the government needs to help lower income individuals. Camilleri said that, “if there’s no input from the government, the gap will continue growing resulting in the disappearance of the middle class.”

While education is a major contributor to income inequality, as the study showed, the panel addressed the issue that there is inequality within education itself, with certain degrees and areas of study ranked higher and more important than others in the eyes of employers.

The impact of foreign workers was also discussed by the panel, with many working in the iGaming sector earning good salaries, whilst others, on the opposite end of the spectrum, being taken advantage of by some employers, putting them at risk on the job. UHM Assistant Director, Isabelle Farrugia, proposed that there needs to be a culture change where all workers are registered with JobsPlus and have a clear contract accessible to them.

The digital conference ended with a comment by the Chairperson, Dr. Anna Borg. She said that, “education is not a middle class fad. The way forward for many people is to be given more opportunities for further education.”

- Advertisement -