Have you seen any trickle-down? I doubt it

The trickle-down economics theory claims that benefits for the wealthy trickle down to everyone else, as any extra cash from tax cuts helps to expand businesses. Hence, investors will buy more companies or stocks; banks will increase lending and the rich will invest in their operations and hire workers. All of this expansion will trickle down to workers. They will spend their wages to drive demand and economic growth.

Has the impressive economic expansion that we have seen under the current administration produced this trickle-down effect? I doubt it.

Last week, we learned that Malta’s gender pension gap is the widest in Europe: ‘The gender pay gap revealed different realities that people face in their professional and personal lives,” according to a report by the European Institute for Gender Equality.

Even worse, according to a Europe-wide review carried out by the Eurofound, the minimum wage increase in Malta is the fourth lowest across the 22 EU countries that have a statutory minimum wage.

In fact, a report published by the National Statistics Office last August, titled ‘The European Statistics on Income and Living Conditions’, shows that 19.2% of the population was at risk of poverty or social exclusion in 2017, a decrease of 0.9% on the previous year’s figures, but that the at risk of poverty rate had marginally increased by 0.3% up to 16.8%.

The Prime Minister had shown satisfaction at these figures, saying in a tweet that the 19.2% figure was the lowest rate that Malta had ever seen, describing the decrease as “prosperity with a purpose”.

But, in fact, the gap between the highest and the lowest paid in Malta is widening even though statistics about the average income of people working in Malta tend to hide this fact.

In recent years, the government introduced a number of measures aimed at tackling this problem. These include increases in pensions and allowances for the elderly, such as those living in their own residence or for those caring for them. There were also measures aimed to encourage the participation in the labour force, such as in-work benefit schemes, increases in rent subsidies for people, and schemes promoting an increase in the supply of social housing. These measures have indeed made an impact on reducing poverty levels, but the incomes gap remains. And – I sense – it is becoming wider.

A Central Bank paper on ‘Wage Income Distribution and Mobility in Malta’ written in 2018 by Clemens Knoppe uses information from a detailed administrative database on reported full-time employment incomes to study the distribution of wage incomes and mobility between 2000 and 2015 in Malta. The main conclusion was that while inequality in Malta remains subdued by international standards, there has been an increase in recent years as low wages have remained stable in real terms, while those in the middle and at the top of the distribution have seen significant rises. Due to the rising demand for certain types of skills, wage mobility appears to have declined, particularly for older workers.

During the last three years that are not covered by this study, the situation got worse, not better – with the difference between the income of the top 20% and that of the bottom 20% becoming more pronounced.

People who do not own their own home or who pay rents that are not protected by law are the worst off. These are a small minority of households, but are they to be ignored?

Those who feel they have fallen backward might be the first to dent Muscat’s popularity among the low-income groups – as opposed to his ever increasing popularity among the higher-income groups.

The truth is that at the lower end of the scale, there are people struggling to make ends meet. Ask the parish priests of certain areas that are still economically depressed and you will hear a tale that is very different from the best of times (l-aqwa żmien) touted by the Muscat propaganda machine.

This is a political issue that the Opposition should take up – because it resonates amongst those who have fallen behind.

But the PN has been dragged down into a morass of puerile arguments between factions: those in favour of Adrian Delia in contrast with those against him, and national political issues have been put on the back burner.

The ‘Sette Giugno’

A hundred years have passed since that fatal day in Maltese history: 7 June 1919.

Four people were killed when British troops fired at a rioting crowd in Valletta that attacked the house of a leading Maltese grain importer, and the offices of ‘The Daily Malta Chronicle’, viewed as the leading mouthpiece of the British Empire in Malta.

This riot occurred in a background of unemployment, hunger and an ever-increasing cost of living, including a threefold increase in the price of bread, the staple food of the lower income groups. These events contributed in no small way to the development of democracy in Malta as they eventually led to the first Maltese representative government.

As Professor Henry Frendo puts it in his forthcoming book ‘The Sette Giugno in Maltese history’, it was “a mass manifestation of unrest which was violently suppressed by British troops just as a national congress was demanding self-government.”

Much has been said about this event that we remember every year on June 7 – of the Maltese fight for their political rights.

The riots pushed forward Malta’s quest for a representative government, and cannot be dismissed just as a violent protest by a bunch of criminals – as some have kept saying during the last 100 years.

They miss the wood for the trees, of course. The big picture is much more than that.

Among them, there was the late Daphne Caruana Galizia who once put it this way: “We make so much fuss about the ‘Sette Giugno’ riot as though it was some kind of civil rights uprising, but it wasn’t. It was about the price of bread. Typical: put cheap bread in a Maltese person’s mouth and money in his pocket, and he’s content to live with corruption and abuse, minding his own business and keeping his head down.

How very primitive.” (June 8 2015).

Enough said.