Last Updated on Saturday, 3 September, 2022 at 10:55 am by Andre Camilleri
The recommendations by The Malta Chamber of Commerce, Enterprise and Industry for the upcoming budget have sparked a much-needed national debate on the economic realities we are facing. The proposal that attracted most attention related to COLA and was made in the spirit of the law regulating COLA which contemplates the possibility of tweaking the mechanism in exceptional economic circumstances, subject to agreement by the social partners.
The Malta Chamber is particularly concerned about significant wage inflation characterised by multiple rounds of wage revisions within the same year for jobs in the private sector that require some level of skill. This is an issue that will not only erode our competitiveness in export markets but will also negatively impact those on lower incomes, as they will have to cope with persistent inflation in the cost of services that is neither imported nor due to the war in Ukraine and hence transitory, as is the case with international energy prices. The dire situation in our labour market is a result of excessive public sector employment; an education system that lags behind; inefficient third-country national recruitment procedures that encourage abusive practices; and poor retention of skilled foreign workers due to lack of adequate policies to support long-term retention of capable resources. These issues predate both Covid and the war in Ukraine, and recommendations to address them have been made for years by various stakeholders including the Malta Chamber, but the situation keep deteriorating.
The Malta Chamber has once again made a number of proposals to address these issues.
Public Sector
According to official statistics, over 51,167 people worked full-time in the Public Sector in January 2022. This equates to an increase in public sector employment of approximately 1,000 people in the previous 6 months. Public sector employment has been on the rise for almost a decade, increasing by 10,000 workers since 2013 (a 20% increase). Whilst it is understandable that the public sector needs staffing at certain levels, it is also evident that there is overstaffing across various strata and in various Government departments and entities. It runs contrary to business competitiveness to have a situation where Government is indirectly soliciting human capital from the private sector. Furthermore, public sector outsourcing is not captured in statistics. The real public sector employment share is therefore significantly higher than indicated by official statistics. Additionally, since many subcontracted workers are being recruited through temping agencies and remain on the books of temping agencies throughout the duration of their employment our labour force statistics are likely to be inflated in terms of employment in professional services under which such companies are categorized and understated across all other sectors in terms of both public and private sector employment.
PROPOSALS
1. Conduct an independent audit exercise to take stock of the skills and output of the human resources currently employed by Government, with surplus staff seconded to the private sector.
2. Adopt a good practice of avoiding to recruit persons who are in full-time adequately paid employment with the private sector, within the Public sector, towards economic recovery and long-term sustainability of public finances.
Third Country Nationals
It is indisputable that many businesses and industries cannot survive, let alone thrive, without Third Country Nationals (TCNs) to supplement the local and European labour market.
While many argue that the employment of TCNs in the local workforce has a deflationary effect on local wages, the data shows that salaries have increased across all sectors and levels, albeit at a slower rate among the unskilled.1
The Malta Chamber recognises that TCNs cannot be the answer to all local labour shortages, and as illustrated in other parts of this document is committed to promoting an educational and digitalisation strategy that feeds into our broader workforce strategy.2 However, The Malta Chamber also firmly believes that having recognised how essential TCNs are to short and medium term functionality of the Maltese economy, the government should undertake particular efforts to ensure that the related visa and permitting process takes place in an expeditious manner.
Amongst the most prominent stumbling blocks in the efficient integration of TCNs into the local labour market is the bureaucracy involved in the current permit procedure which can be costly to employers. This procedure requires employers to submit a rental agreement at an early stage of the process which means that the employer will often need to incur months of rental expenses before the employee has even arrived in Malta.
While bureaucracy and inefficient sequence of procedures can cause substantial impediment to employers, this is further exacerbated by administrative issues experienced when dealing with Identity Malta. The Malta Chamber is aware of several cases in which businesses have experienced issues related to conflicting information provided by different contact persons at Identity Malta. This conflicting information can lead to a degree of uncertainty amongst employers and potentially a lack of trust in the fairness and universal application of the agency’s processes.
A key component when it comes to attracting and retaining the right talent from third countries is an efficient system that processes request for family reunification in an expeditious and fair manner. Unfortunately, the length of time required for administrative approvals for these family members is exorbitant and can have a real impact on the attractiveness of the Maltese labour market.
PROPOSALS:
1. Ensure that once a TCN is approved to work in Malta, he or she should have access to a free labour market without any derived ownership rights of the original employer when changing job.
2. Widen the scope of the Key Employment Initiative scheme to attract individuals in possession of certain critical skills and qualifications that are running short in the labour market.
3. Address the issue of visa delays with relevant service providers to ensure that appointments are granted within a reasonable time frame.
4. Adopt better enforcement and sanctioning regime, particularly in relation to foreign workers to curb blatant abuses.
5. Undergo a full and comprehensive study on Malta’s optimal and sustainable carrying capacity.
Work Incentives
The Malta Chamber advocates a framework revolving around 4 interlinked and reinforcing policy priorities for nurturing, upskilling, attracting, and retaining talent, which underpin our National Employment Strategy Report published in August 2021.
PROPOSALS
1. Introduce a scheme whereby households can claim a tax deduction on fiscal receipts related to services rendered for home renovations, repairs, cleaning and maintenance work, to curb tax abuse through undeclared work.
2. Ensure that workers who qualify for a pension before retirement age and choose to take it would be given the possibility to work on a part-time basis.
3. Revise the capping on pensionable income, as salaries have been increasing for many years and the cap on pensionable income has remained stagnant.
4. Introduce an auto enrolment with opt-out system for employees to incentivise the take-up of supplementary pensions particularly by younger employees.
