Middle class poverty is a phenomenon that is being experienced by many. The very idea is baffling – an oxymoron. How can the middle class experience what the working class should be experiencing? Why is it that many middle class people today feel poorer than their parents? People do not like admitting that they are having a hard time, either because they suspect that others will not believe them or because admitting it may be embarrassing in the first place. While it is no consolation, middle class poverty is affecting millions in the European Union. The Financial Times Weekend recently ran an article in which four middle class families from around Europe were interviewed in the hope of shedding light on this phenomenon. Despite the regional differences three common issues exist that, not coincidentally, also affect the Maltese.

The primary reason why the middle class feels it is slipping into relative poverty is the very high cost of housing throughout Europe. During the last 15 years, real estate prices across Europe have skyrocketed. This has come about because of historically low interest rates and easy borrowing conditions available to prospective buyers. Malta is certainly no exception; indeed the middle class in Malta has been very badly affected by this reality. I would go as far as saying that the situation in Malta is far worse that in the rest of Europe for one reason in particular. Malta does not have an active rental market, primarily due to fear (rational or irrational) brought about by 60 years of heinous rent laws. A properly developed rent market would act as a brake on the price of property “for sale”. Without the alternative of well-priced rent, prices will continue rising vertically.

The second reason why the middle class is feeling poorer is due to the expanding wealth gap throughout the developing world. The well off are getting richer, while the rest are stuck in a spiral of increasing-bills-static-pay. Sounds familiar? This feeling is not an illusion. The most recent statistics issued by the National Statistics Office confirm this feeling in figures. In the first nine months of this year, “Compensation to Employees” (very indicative of middle class income) increased by just 2.6 per cent. After adjusting for inflation of almost three per cent, wages have actually decreased by 0.4 per cent. On the other hand, statistics reveal that during the first nine months of this year, “Gross Operating Surplus” (very indicative of the income of businesses) increased by 8.5 per cent. Even after eliminating inflation, business income has increased by some 5.5 per cent – not bad! The economic reality, throughout Europe, is real and simple – employers are earning more and employees are earning less.

The third reason why the middle class is experiencing relative poverty is less economic and more psychological in nature. We are suffering from the sickness of hyper consumerism, best reflected in the never-ending stream of commercial advertising in the media and elsewhere. How can the middle class feel financially sound when it is being constantly, and convincingly, reminded of the things it should be purchasing? Face it, everywhere you turn there are adverts tempting you into buying more of what you want, regardless of what you really need. We just can’t get away from it. We use media on a daily basis (newspapers, magazines, television, radio, the Internet), media that are, unfortunately may I add, far too dependent financially on advertising income. In addition, we have hundreds of billboards to remind us, as we drive to and from work, what we lack. To add even more insult to tremendous injury, a significant and increasing portion of advertising is targeted at minors, who have no purchasing power but much expertise in guilt-tripping their parents!

Will the middle class be forever trapped in such a situation? Are there any solutions? I would like to propose some. Let me start with the cost of housing. Unfortunately, there is no short-term solution for those with an existing mortgage. We will have to continue paying till our mid-sixties, comforted that we have made a good investment – for our children. However, there is something the government can do for our children. They need to be given a realistic choice between buying and renting. The rent laws need immediate revision; a revision that will include incentives and disincentives to activate a rental market that will act to contain the increase in the price of real estate. We must ensure that the next generation (a property inheriting generation) does not necessarily have to mortgage its future in stone. Sadly, the year 2006 is up, and Minister Cristina has not yet presented the white paper on rent reform. Shame on you!

The way to deal with the widening wealth gap is through social redistribution. This should not be achieved by increasing taxation on earned income, since it is highly likely that the salaried middle class will eventually bear the brunt. It can be achieved by introducing taxes on speculation or by tackling tax evasion, or a combination of the two. When everyone pays his or her fair share there will be more for the middle class. How should the additional funds be distributed? In my opinion the government should consider one of two things; either it should make children’s allowance available to more families, or direct more of future tax reductions to those on middle class incomes.

Dealing with the effects of mass consumerism on the middle class is not easy. However, I believe that, as a first move, the government should consider a total or restrictive ban on advertising that targets children. It would be a big service to the middle class and a clear sign that our society does not permit the commercial exploitation of minors. While the middle class would welcome this decision, we cannot and should not expect this to solve our problem. We also need to get our act together. I believe that many of us are simply not capable of counteracting consumerism by teaching our children that “in life nothing is free”. Out of a sense of love, we want to give them everything. Out of a sense of competition (with the Borgs) we do the impossible to buy them whatever there friends already own. In the process we raise their expectations higher and higher, feeling poorer every time we have to say the dreaded word, “NO!” Next time the children ask for something you cannot afford, offer them any one of two alternatives – a book from a library or some of your time. Both are free, both invaluable.

Have a great 2007 – rich in spirit!