Poverty and Social Exclusion: A Comparison of Malta and the EU

By Isaac Bezzina, Advisory Intern at PKF Malta

Before diving into the details of this article, it's important to clarify what it means to be at-risk-of-poverty or social excluded (AROPE). This term is used by the European Union as terms for persons who are at risk of poverty, materially deprived, or have limited access to employment. Specifically, AROPE applies to individuals who meet at least one of the following criteria: earning an income below 60% of the national median disposable income, experiencing severe material deprivation (such as being unable to afford essentials like heating or access to proper nutrition), or living in a household with very low work intensity, where adults work less than 20% of their potential hours. Understanding AROPE is significant for interpreting poverty and social exclusion across the EU. 

In countries such as Malta, one would not be automatically defined as poor if their income is below a specific percentage of the median, considering that people with low income can still be able to afford essential needs.  

Poverty and social exclusion are matters of concern across all the European Union, with considerable variations between countries. Malta’s AROPE rate in 2023 was 16.6%, slightly below the EU average of 21.4%, hinting that Malta’s social welfare policies have had a positive impact.  However, despite these improvements, battling poverty and social exclusion is a never-ending battle, and further efforts should be made to combat such social issues.  Malta’s lower-than-average rate of people at risk highlights that no country, even those with strong welfare systems, is immune to social marginalization and economic deprivation. 

Figure 1: Graph on AROPE, 2023 (Eurostat)

What explains such a sharp divide? The reasons are complex and rooted in each country's unique historical, economic, and policy decisions. Nations like Finland and Czechia benefit from robust social safety nets, thriving labor markets, and high levels of education, factors that have helped insulate their populations from poverty. On the other hand, Romania and Bulgaria are grappling with entrenched structural issues such as weaker employment opportunities and less comprehensive social protection systems, which leave more of their citizens vulnerable. 

Households with very low work intensity are particularly vulnerable, with 73.5% of individuals in such households at risk. A stark reflection of the economic vulnerability associated with unemployment. Across the EU, the AROPE rate for the unemployed stands at 66.3%, reinforcing the critical role that stable employment plays in securing economic well-being​. In countries like Spain and Greece, which face long-standing unemployment challenges, the AROPE rates recorded are among the highest in the EU, with 27% and 26.5% respectively in 2023. 

But it’s not just employment that determines one’s risk of poverty—education plays an equally vital role... The relationship between education levels and poverty is glaring, with the AROPE rate across the EU for those with the lowest educational attainment standing at 34.5%, over three times higher than the 10.2% for those with higher education. Malta, too, mirrors this trend, where lower education levels strongly correlate with higher poverty risks. Most notably the gap between individuals with and without higher education is most pronounced in countries like Romania, Bulgaria, and Latvia. Meanwhile, wealthier nations like Germany and Sweden have managed to reduce poverty risks across all education levels, likely due to their significant investments in education and skills training. 

Table 1: At-risk-of-poverty or social exclusion rates (AROPE) by age group and sex (NSO, 2024)

Age is another key factor in determining poverty risk, and the data tells a compelling story. Across the EU, young people, under the age of 18, face the highest vulnerability, with an AROPE rate of 26.1%, followed by the elderly (aged 65 and over) at 19.8%. In Malta, however, the situation is more concerning for the elderly-nearly one in three (29.9%) elderly individuals are at risk of poverty.  This stands in stark contrast to wealthier EU nations like France and Germany, where more robust pension systems have helped lower poverty rates among the elderly. 

The rising cost of living is another pressing issue driving poverty and social exclusion, not just in Malta but across the EU. Increased expenses in housing, healthcare, and energy are hitting lower-income households the hardest, further exacerbating social inequalities. As inflation, driven by global supply chain disruptions and energy price shocks, has made it increasingly difficult for many households to meet even their basic needs. With this in mind, part of the responsibility lies with policymakers to step up and implement targeted actions against these troubling realities. Relief programs, social assistance schemes, housing subsidies, and energy price breaks are critical tools that could help ease the burden on low-income families, preventing further social marginalization. 

Malta, like its Southern European counterparts Italy and Portugal, is navigating the delicate balance between economic growth and social inclusion. While the country has made notable strides in reducing child poverty, bringing the rate down from 27.8% to 23.2%, other vulnerable groups remain in the spotlight. Single-parent households, for example, face an alarmingly high risk of poverty, with 41.6% of single parents in Malta at risk.  This mirrors a broader European trend where one-parent households are among the most susceptible to material deprivation.

As we compare Malta’s poverty and social exclusion rates to the broader EU landscape, several questions remain. While Malta has made strides in some areas, such as reducing child poverty, the persistent challenges faced by other vulnerable groups, like single-parent households and the elderly, demand further attention. How can policymakers address the widening gap between economic growth and social inclusion?  With rising costs of living threatening to reverse progress, are relief programs and social assistance schemes enough to safeguard low-income families from falling deeper into poverty? And, more importantly, what can Malta and other EU nations learn from countries that have successfully curbed poverty rates through robust social welfare systems and investments in education? These pressing issues remind us that poverty and social exclusion are not static problems, they require continuous action, innovation, and commitment from all sectors of society.  How will Malta rise to meet these challenges in the years to come?