Social protection: a success story

Over this last decade, Malta has undergone a remarkable transformation in the way it supports its citizens. Over the past 12 years, the country has not only increased investment in social security but has also reformed the social network to make it more effective, fair and future focused.

The result is a model that empowers people through work, protects the vulnerable and ensures dignity in retirement; all this done while maintaining one of the strongest economies in the European Union.

Since 2012, investment in pensions and social benefits rose by over 88% and is on course to double by the end of this year. At the same time, the country’s GDP has tripled. Thus, while spending as a percentage of GDP may look smaller, the actual support reaching people’s pockets has increased substantially; indeed, it has effectively doubled in these last 12 years.

The social system has been redesigned around the principle of “making work pay”. This is not just a slogan but a strategy, which, backed by a robust economic revival, has helped reduce the number of working-age people on social assistance by 62%. Even more telling is the fact that over 70% of those who moved off benefits and into work are women.

Unemployment, including inactive persons, hovers below 3%, making it one of the lowest in the EU. And, yet, the unemployment support system has been further improved to expand eligibility and increase adequacy, thus making sure that no one is left behind.

This commitment extends across the board. In the past 12 years, the investment on contributory benefits, particularly pensions, has gone up by €543 million. During the same period, despite the huge reduction in social dependency, non-contributory benefits, particularly support for families who have children, caregivers and persons with disabilities, grew by over €148 million.

Family benefits alone have risen by over 215%, thanks to higher children’s allowances, enhanced in-work benefits for working parents, allowances for post-secondary students, enhanced supplementary assistance and a new household based, additional cost-of-living benefit.

Housing has also been made more accessible to low and medium earners, with investment in social and affordable housing programmes soaring by 900% over the past 12 years. Today, nearly four out of five citizens are homeowners, one of the highest rates in the EU.

Some may point to at-risk-of-poverty statistics to question progress taking these at their mere face value. But these figures require context.

Malta’s monetary threshold rose appreciably in the past 12 years, this being based on the strength of a sharp growth in household disposable incomes, especially as more women entered the workforce. That does not mean people are poorer.

The marginal rise of 1.2pp in the at-risk-of-poverty level up to the year 2020, and which has since decreased by 0.3pp, mainly reflects a legacy issue, that most pensioner households today have one pension, as, mainly, only men were in employment in the past while, now, most working age households have two incomes, as most women now work.

Malta is generally considered a case study of how to stimulate economic growth while expanding social fairness- Michael Falzon

The significant rise of female participation in the workforce has led to the poverty threshold (not the poverty rate) to rise at double the rate of the rest of Europe, making pensioner couples living on one pension appear to be poorer. So much so that a closer look at the median incomes of the elderly indicate that those in Malta rose at a sharper rate than in the rest of Europe, primarily thanks to an increase of over €70 weekly in their pension income, this besides enhancement in other benefits.

A look at the at-risk-of-poverty or social exclusion rates (AROPE) and the material deprivation data makes the picture clearer. In terms of AROPE, Malta’s rate since 2012 dropped from 24.6% (then above EU average) to 19.7% (now below EU average), while, in terms of severe material deprivation, Malta’s performance outshines that of the EU substantially and this in all age groups.

In the same period, the rate of people unable to afford essential items fell from nearly 20% to under 10%, severe material deprivation dropped from 10.3% to 4% and the number of people considered energy poor fell by 67%.

What is nowadays called material and social deprivation is also on the decline. At 9%, it is well below the 19.9% we had in 2013.

Malta is generally considered a case study of how to stimulate economic growth while expanding social fairness. On the back of one of the best performing economies in Europe, Malta has doubled investment in social protection, ensuring stronger support for pensioners and other older persons, families with children, persons with disabilities and care givers.

Malta’s high employment rate (second highest in the EU) has also contributed to a substantial reduction in benefit dependency.

Too often, discussions around social policy tend to focus on instances where vulnerable individuals fall through the cracks. Of course, a lot still needs to be done. It will be foolish for policymakers to turn a blind eye on those who still need our social support.

However, as the results outlined above clearly show, Malta factually and concretely offers a good example of what can work when social investment is targeted and built on the notion that economic growth and social justice need to go hand in hand.

Michael Falzon is Minister for Social Policy and Children’s Rights.