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Malta’s Workers Left Worse Off As Salary Increases Eaten Up By Inflation

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The purchasing power of Maltese consumers has declined as inflation outpaced the slight increase in salaries, a new report has found.

A new KPMG report found that the average annual nominal wage (ie. the wage before inflation is taken into account) in Malta increased from €18,967 in 2018 to €22,032 in 2023.

However, the average real wage (ie. the wage post-inflation) only grew minimally from €18,254 in 2018 to €18,359 in 2023. This means there was a €3,600 gap between the average nominal wage and the average real wage in 2023.

“In simple terms, this means that in 2022, workers earned on average €20,953 with this increasing to €22,032 in 2023; however slightly more than the increase of €1,079 was eaten away by rising prices, leaving workers worse off in terms of purchasing power, evident by the slight dip in real wages in the above chart,” the report states.

“Notwithstanding, growth in nominal wages may have arguably not been strong enough to facilitate a meaningful increase in purchasing power. Excluding the impact of the pandemic, nominal wages between 2015 and 2019 increased by an average of 3.8% per year. Annual average inflation during this time averaged around 1.34%, meaning real wages increased by just 2.34% per annum over this period. For perspective, real GDP growth between 2015 and 2019 averaged around 7.67% per annum.”

Moreover, the report noted that the wage tend only looks at the national average but that certain narrow economic sectors could be experiencing higher wage growth.

“Inducing higher wage growth at the national level may necessitate a general improvement in productivity, which would entail a strategic focus on cultivating a more skilled employment mix, with more room for higher value-adding roles,” KPMG said. “Consequently, more people will be better positioned to benefit from better compensation increments.”

From the government’s perspective, KPMG said that while the partial subsidisation of food and energy costs is commendable, the long-term sustainability of this policy remains to be seen.

“Perhaps even more important is to focus on policy drives which enhance productivity and value add, ensuring that businesses have the latitude to offer higher compensation packages in line with increased productivity and value creation,” it said. “The benefits of such policy initiatives will ultimately help to improve quality of life, reduce income inequalities, and maintain social cohesion.”

Have wages in Malta become too stagnant?

READ NEXT: Malta Is The 40th Happiest Country In The World, Study Finds

Tim is interested in the rapid evolution of human society and is passionate about justice, human rights and cutting-edge political debates. You can follow him on Instagram or Twitter/X at @timdiacono or reach out to him at [email protected]

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