Demography is crucial for economic analysis because the size, structure, and distribution of a population fundamentally dictate a nation’s economic potential and challenges. Demographic factors – like birth and death rates, age distribution (for example, the proportion of working-age versus retired people), and migration – directly influence the size and skill level of the labour force, which is a key driver of economic growth and productivity. Furthermore, population composition shapes aggregate demand and consumption patterns (for example, an aging population shifts demand toward healthcare and retirement services), affects national savings rates and investment needs, and strains or supports public finances for social security and pensions.
Therefore, understanding and forecasting these population changes is essential for policymakers and businesses to accurately model future economic growth, inflation, housing market trends, and to formulate effective fiscal and monetary policies.
The Central Bank of Malta’s recent analysis, titled Malta’s demographic shift: A growing foreign workforce (Policy Note 1/2025), confirms that Malta’s future economic sustainability will be critically dependent on foreign labour due to the persistent decline and aging of the native Maltese population. The report indicates that the local fertility rate remains far below the replacement level, causing the native working-age population to shrink. The number of Maltese nationals, which stood at approximately 405,000 in 2023, is projected to fall by around 14% to approximately 350,000 by 2050.
It is therefore important to examine the root causes behind Malta’s low fertility rate, which is contributing to the decline of the native Maltese population. Studies clearly indicate that the dramatic decline in Total Fertility Rates (TFR) across the developed world, frequently dropping well below the replacement level of 2.1 births per woman, isn’t due to a single cause but rather a convergence of powerful societal forces, often referred to as the Second Demographic Transition. In essence, the decline is a story of postponement and priorities colliding with enduring economic realities.
On one hand, parental leave policies have a varied impact on fertility, with several studies suggesting a positive correlation, while others indicate a negative or nuanced effect. Specifically, a 2008 study across 19 OECD countries by Moss and Deven found that job-protected paid leave was linked to higher fertility rates, emphasising that “the combination of job protection and adequate wage replacement is crucial”. This positive effect was also observed in a 2007 Austrian study by Stütz and Hutter, which noted that extending parental leave significantly increased the probability of women having a second child, and by Sweden’s “speed premium” policy, which offers financial incentives for shorter birth spacing. Conversely, a 2011 study in Spain on the introduction of paid paternity leave showed an unexpected decrease in the fertility rate, a finding the researchers suggested might stem from the resulting change in men’s involvement in childcare and subsequent family-planning decisions.
Below parental leave there are various other research studies that link root causes to a drop in a country’s fertility rate. A 2025 study from the University of New Hampshire highlighted that the rapid increase in housing costs is one of the key factors contributing to the rise in childless women in the US. High housing prices and the growing expense of raising children are major deterrents, making it more difficult for individuals and couples to afford a family.
Various studies by Beaujouan and Sobotka conclude that the pursuit of higher education and greater female labour force participation are major drivers of fertility postponement. Women delaying childbearing to complete their education and establish a career often find that their total number of children is lower than they intended. This finding was further supported by a 2015 study by Ann Berrington, Juliet Stone and Eva Beaujouan on Britain’s 1940-1969 birth cohorts, which explicitly highlighted how educational differences influence both the timing and the number of children born.
There is also the important researched concept of the Quantity-Quality Trade-Off. This economic theory, often cited in fertility research, suggests that as societies get wealthier, parents choose to invest more in the “quality” of their children, for example, by spending more on education, rather than having a large number of children. This leads to a deliberate choice of having fewer, but more well-resourced, children. The Quantity-Quality Trade-Off theory in fertility was pioneered by economist Gary S. Becker in the 1960s and was further developed in his work with H. Gregg Lewis in the 1970s. In this seminal work, Becker argued that parents, in a rational economic sense, derive utility from both the number of children they have (quantity) and the investment they make in each child’s well-being and education (quality). He posited that as incomes rise, parents’ demand for “child quality” increases more than their demand for “child quantity”, leading them to have fewer children but invest more in each one.
Looking then at research based on the Maltese reality, one finds research conducted by institutions like the National Commission for the Promotion of Equality (NCPE) provide valuable insights. The NCPE’s study, Perceptions and attitudes of women and men in Malta towards work-life balance: with a specific focus on family size, highlights that the difficulty of reconciling work and family life is a major cause of Malta’s declining fertility rate and does recommend longer paid maternity and parental leave. However, the study lists a number of other recommendations including solving issues with short school hours and long summer holidays, improving after school services, having more family-friendly tax measures and improving affordable housing, among others. The report emphasised that “government should adopt a holistic approach, addressing all the listed recommendations, avoiding a sporadic approach to ensure effectiveness”.
Malta’s low TFR is also the subject of several key studies from the University of Malta (UoM), including research on fertility by Camilleri (2002), Patap’s (2006) dissertation on female graduates, and Professor Anna Borg’s recent work on gender and fertility intentions. These studies highlight a critical intention-behaviour gap, as the actual TFR is significantly lower than the average aspirational ideal of 1.93 children, suggesting the decline is driven by structural and institutional constraints rather than a change in desired family size.
UoM research identifies the primary suppressors of fertility as the profound shift in the life priorities of educated women, combined with persistent structural economic constraints. The 2006 dissertation on female graduates noted that highly educated young women prioritise securing a successful career from their early 20s, which conflicts with traditional family timelines and leads to the delay or forfeiture of family-raising activities. This postponement carries the negative medical consequence of potentially increasing the possibility of infertility. Economic pressure also significantly contributes to the delay, as a survey indicated that 13.8% of women and 27.6% of men postponed parenthood to save for their first home.
On the other hand, Professor Borg’s study, Balancing acts, investigates the challenges of balancing paid work with family commitments in this high-employment environment, concluding that the initial voluntary delay has evolved into a permanent structural constraint. The resulting lack of support for dual-earner families makes the prospect of managing the care demands of a second child, often disproportionately borne by the mother, the limiting factor to Parity Progression Ratios (PPRs), which measure the likelihood of having a second child.
To address the fundamentally structural barrier to the second child, the UoM findings demand strategic policy interventions. These include policies that actively reduce the “unequal distribution of caregiving and household responsibilities between women and men” whereby this involves moving beyond maternal leave toward mandated, non-transferable parental and paternity leave. There is a crucial need to move away from small, ineffective cash benefits and instead provide long-term institutional support in the form of subsidised, high-quality, and reliable full-day childcare options that genuinely ease the time burden on parents, particularly mothers. Another recommendation is the mitigation of significant economic pressure from the high cost of housing, to allow couples to initiate and progress through childbearing at biologically optimal ages.
In conclusion, based on the findings of various academic and economic studies, increasing paid parental leave on its own is not a guaranteed solution for raising a country’s fertility rate. The relationship is complex and multifaceted, with numerous factors at play. Simply extending paid parental leave, as a standalone policy decision, will most likely not have the desired effect on the country’s fertility rate if the underlying societal and economic issues are not also addressed, which is why a holistic approach is advisable.
Policy decisions should be holistic as it is only in that way that we can truly aspire to reverse the declining fertility rates, rather than deciding to implement policy decisions on the basis of what is easiest to implement or what is the most popular.
This reminds me of policy decisions taken to address traffic problems. Rather than take a holistic approach with implementing an array of policy decisions that affect both the supply side and demand side of car traffic, politicians found it easier and more popular to focus on the implementation of supply side policies, which meant that ultimately the traffic problem has not been solved. Let us not make the same mistake with regards implementing policies to face the complex demographic challenges we are facing.
