Editorial: Controlling population growth is only part of the equation

Measures aimed at slowing Malta’s population growth are welcome, particularly when they address the country’s over-reliance on foreign workers and the pressures that rapid population expansion places on infrastructure, services and quality of life. But while the government is right to give the issue greater importance, it must not lose sight of another equally important consideration: Malta’s economic needs will not necessarily diminish simply because fewer foreigners are attracted to work here.

Finance Minister Clyde Caruana’s Budget measures relating to Third Country Nationals (TCNs) are intended to make what was previously considered cheap labour no longer cheap. The increased fees and expenses imposed on employers are meant to encourage a change in direction, one that moves away from a model of economic growth heavily dependent on importing workers.

There is merit in this approach. For too long, businesses have been able to rely on an abundant supply of foreign labour, often at a relatively low cost, rather than investing sufficiently in productivity, technology and better working practices. A system that encourages employers to reconsider their business models is not necessarily a bad thing.

However, the challenge facing Malta is considerably more complicated than simply reducing the number of foreign workers entering the country.

If fewer TCNs are attracted to Malta, the demand for labour will not automatically disappear. Businesses will still need employees, certain sectors will continue to depend on foreign workers, and the economy will still require growth to sustain public finances and the country’s standard of living.

This is where the government needs to demonstrate that its population policy is part of a broader economic strategy rather than an isolated exercise.

The minister has been vocal in criticising businesses that, in his view, are overly focused on profits and population growth. While such criticism may be justified in certain cases, it should not obscure the fact that businesses operate within an economic environment that successive administrations have helped create.

An economy built around expansion through additional workers cannot be expected to change overnight merely because the cost of employing them has increased.

The government must therefore identify alternative ways of generating economic growth. Greater investment in automation, digitalisation, skills development and higher-value industries should become central to its ambitions. Malta needs to produce more economic value without necessarily requiring a corresponding increase in its population.

This would be a far more sustainable model, one that could improve productivity while easing pressure on housing, transport and public services.

Of course, such a transition is easier said than done. Some sectors will continue to require foreign workers, and a smaller labour supply could create difficulties for businesses that are unable to adapt quickly enough. These realities must be acknowledged rather than dismissed.

Caruana’s intervention has given population growth a more prominent place in the economic debate. That is a positive development. But controlling population growth is not an economic strategy in itself.

If Malta is to attract fewer foreign workers in the years ahead, it must also find ways of making its economy less dependent on them.