Labour market – shifts and challenges

Last Updated on Thursday, 19 January, 2023 at 12:42 pm by Andre Camilleri

Silvan Mifsud is director of Advisory at EMCS Tax & Advisory

You can hardly meet a business owner and employer today who is not concerned about the huge problems they are facing when coming to retain and employ persons. It is therefore useful to understand the huge shifts we had in the labour market in the past 10 years to form a basis of understanding of how we got at this point in the first place.

The below figures provide a good overview of the shifts in the labour market in Malta between 2012 to 2022.

Source: NSO

As can be seen above the overall number of persons involved in the economy has increased by circa 100,000 persons in a span of 10 years. A good chunk of this increase came from women whose employment increased by around 88% over 10 years. As can also be seen above the economic sectors, which saw the largest percentage increases of people employed, are all coming from the service economy with gaming leading the pack, followed by administrative activities, real estate activities and professional activities. Even other service-oriented economic sectors like the finance sector, the information and communication sector and the accommodation & food sector saw strong increases in persons employed.  

What is also quite evident is the fact that by 2022 the labour market become very tight, with a huge reduction of persons unemployed when compared to 2012. While by end 2012 almost 7,000 persons registered for work, this number has shrunk to below 1,000 by 2022.

This clearly indicates that it was only possible to increase the amount of people employed in Malta’s economy through the heavy introduction of foreign workers to Malta in the past 10 years, as can be seen below:

Source: Jobsplus

As seen above, while in Malta we had some 12,000 foreign workers by end 2011, they increased to around 78,000 by end 2022. This meant that while Malta managed to increase its GDP and wealth creation by somehow managing to level the increased demand for workers through the introduction of more foreign workers in the labour supply.

However, the introduction of foreign workers and hence the increase of Malta’s population cannot happen ad infinitum, as this is already resulting in capacity problems across the board, considering Malta’s tiny territorial space.

The below Eurostat figures published on 19 December, 2022 gives a clear indication of the end result of the present labour market challenges.

As seen above, Malta’s % increase in the Total labour costs in Q3 2022 was among the highest for Industry at 12.2% just behind the Eastern Block countries, which are suffering from double-digit inflation. On the other hand, the % increase in the Total labour costs for Services in Malta in Q3 2022 was double the Euro Area average increase (7.3% increase Malta vs 3.4% Euro area increase) and trailing just behind the European block countries and some other countries with much higher inflation rates.

In my opinion this requires attention from all policy-makers and social partners. We need a shift in our economic model which assures that each person involved in Malta’s economy can deliver a higher output and hence requiring to add less persons to increase Malta’s economic output. Moreover, businesses need to look within themselves and become more efficient at all levels, including through the introduction of more automation and technological solutions. If we are to defend Malta’s competitiveness, we need to understand that the labour market today is very challenging and such challenges need to be addressed. Policies, labour market dynamics or messages that push employees to expect unsustainable wage levels, will ultimately result in eroding Malta’s economic competitiveness at all levels.

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