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14 maltatoday | SUNDAY • 13 NOVEMBER 2022 NEWS Is population growth behind poverty increase? POPULATION growth, together with rising median incomes and widening in- equalities, were major factors behind the increase in the number of people at risk of poverty between 2009 and 2018, econ- omists Gilmour Camilleri and Melchior Vella say. An increase in population, changes in household composition and widening inequalities are major determinants in explaining why a larger percentage of the population is being left behind while the upward increase in median income has pushed the poverty line upwards. By 2018, the proportion of individu- als in material deprivation had almost halved to 8.7% when compared to when the indicator started being collected in 2009. Yet, with a few exceptions, the number of individuals at risk of pover- ty increased at a yearly rate from 14.4 in 2019, to 16.8% by 2018, the last year covered by the study. In 2021, it was es- timated that 85,000 people, or 16.9% of the population, were at risk of poverty. While material deprivation is based on a head count, the at-risk-of-pover- ty rate is determined by the number of people earning less than 60% of the me- dian equivalised household disposable income. This means that the increase in incomes generally also pushed the pov- erty line up. Perversely, in a recession when incomes are pushed down, the number of those at risk of poverty may actually decrease simply because the poverty line has been lowered. The risk of being left behind Camilleri and Vella explain that mate- rial deprivation and at-risk-of-poverty rates measure two different concepts of poverty: while the concept of material deprivation is based on the definition of unmet basic needs — i.e. the ability to afford at least five out of thirteen things that most people consider desirable or even necessary to lead a decent life, such as the ability to pay rent, utility bills or unexpected expenses — "in con- trast, the concept of at-risk-of-poverty views poverty in relative terms, i.e. rela- tive to the country's standard of living". While the material deprivation rate decreased, an increase in the at-risk-of poverty rate was observed. "The reason lies in the two different concepts of pov- erty. While the proportion of the popu- lation who cannot afford the necessary items for a decent life has decreased, there are more members of society who have lagged behind the others in rela- tive terms." In the same time frame, Malta has ex- perienced a remarkable increase in its population due to the influx of foreign migrants often occupying both highly paid professional jobs and lower paid elementary jobs. According to the two economists, it is expected that as the population increas- es, the likelihood that more people will be at risk of poverty will increase, even if all other factors remain constant. However, population also influenc- es job creation, income inequality and, thus, the poverty line used to distin- guish between relatively poor and non- poor. "In the context of a small island state, the strong population growth in recent years has had a strong impact on poverty statistics." For starters, the nation has a larger population pool that brings together people from different socioeconomic groups. "Even if income inequality re- mained unchanged, the fact that the population has increased would make it more likely that there would be more poor people." Migration has also changed the demo- graphic distribution of the population, whether this be in reference to age, gender or household size/composition. Additionally, since the majority of im- migrants were labour migrants, popula- tion growth has also changed the pov- erty line, as the benchmark is measured as a percentage of median equivalised income. In their article recently published in science journal Xjenza, Vella and Camilleri contend that in 2018, popu- lation increase reduced the impact of economic growth on poverty rates by half. How did this happen? For the two academics, this phenom- enon is intimately tied to the central question posed by their inquiry: that of explaining why the risk of poverty has increased in Malta in recent years with increasing income. The three factors which affect the risk of poverty in an economy are income growth, income inequality and popula- tion growth. "In 2018, 3,600 more peo- ple were at risk of poverty. What drove this increase? In our study, we found that income growth alone would have lifted 5,800 people out of poverty in 2018. But, while income had increased, so too has income inequality. If income inequality alone had increased, it would have contributed to 1,500 more poor people." Since the poverty line depends on me- dian equivalised income, one would also expect this threshold to rapidly rise in a growing economy. "In fact, we found that raising the poverty line in 2018 in- creased the number of people living in After Malta's Budget 2022 — a time of reckoning in determining the economic model of the future — James Debono catches up with economists Melchior Vella and Gilmour Camilleri, the authors of a seminal study tracking poverty rates between 2009 and 2018 which explores why material deprivation is decreasing, while the number of people at risk of poverty keeps increasing