Aaron G. Grech
Since Malta acceded to the EU, its labour supply increased from under 158,000 individuals to nearly 292,000 in 2022. Despite this, firms have consistently indicated that labour is a major constraining factor for their operations. While the focus has mostly been on the gap between labour supply and demand growth, it is increasingly evident that a major cause of these complaints is, in fact, the extent of labour turnover.
Consider an economy with 100,000 jobs. Assume that in a particular year one had 20,000 persons moving into jobs and 10,000 moving out of jobs. The number of employed would have risen by 10%, as the net increase in jobs was 10,000. By contrast the labour turnover rate would be 30%, as the net increase involved 30,000 moves in the labour market. If job tenure, or the length of time people work in a particular job, is declining, one could have a rising labour turnover rate even if employment is not growing much.
Administrative data compiled by the national employment agency, Jobsplus, indicate that the annual total of engagement and terminations forms that have been submitted by employers and/or self-employed persons has risen greatly over time. In 2005 the total number of engagement and termination forms stood at 83,808. By 2008, it had risen to 119,206, an increase of 42%. After falling in 2009, the total of forms remained below the 2008 level till 2012. In subsequent years, both engagements and terminations embarked on very rapid upward paths, such that by 2019 their total stood at 212,681. The pandemic brought the total back to its 2016 level, but by 2022 the sum of engagement and termination forms had reached a new record level of 227,955, or 7% higher than the pre-pandemic record and nearly double the amount observed a decade earlier.
Given the large rise in the labour supply during recent years it might be better to represent the absolute number of engagement and termination forms as a percentage of the number of employed in the country. Using this definition, the upward trend is somewhat less pronounced, with the labour turnover rate rising from 53% in 2005 to 83% in 2022, but remains below the peak of 91% observed in 2018.
These administrative data may, however, overstate the extent of labour turnover as they do not necessarily involve a move between different employers but are also submitted in respect of changes in employment status (such as a definite contract being converted into an indefinite one). These changes have more than tripled since 2010, and accounted for one-eighth of all terminations in 2022. If one excludes these terminations, the labour turnover rate was 61.7% in 2010, rising to 72.0% in 2015, before falling to 70.8% in 2019 and to 68.7% in 2022. Taking a different perspective, using this definition of terminations, the proportion of employees who stayed with the same employer they had a year earlier moved from 72.4% in 2010 to 69.2% by 2022.
Table 1: Labour turnover rate by nationality*
| Nationality | 2005 | 2010 | 2015 | 2019 | 2022 |
| Maltese | 52% | 62% | 71% | 67% | 63% |
| EU citizens | 135% | 196% | 190% | 132% | 114% |
| Non-EU citizens | 85% | 84% | 108% | 167% | 149% |
* Labour turnover is defined as the sum of engagements and terminations as a percentage of the number of persons who were in employment in the previous year.
Source: Author estimates using Jobplus data.
Estimates based on administrative data shown in Table 1 suggest that in relative terms turnover among Maltese workers is approximately half that among foreign workers. They also indicate that initially EU workers were very transient with nearly half of them being subject to a termination notice within six months of being engaged. By 2022 this had halved, but over the same period, the length of stay of non-EU workers moved in the opposite direction. Since reliance on non-EU workers rose substantially over time, this was the main cause of recent developments in labour turnover. These workers now account for 25.8% of all labour turnover, up from 2.2% in 2005. Jobplus data suggest that about 70% of termination forms submitted for non-EU workers are for persons who have been employed for less than twelve months.
Table 2: Labour turnover rate by gender
| Gender | 2005 | 2010 | 2015 | 2019 | 2022 |
| Men | 45% | 59% | 77% | 82% | 82% |
| Women | 69% | 79% | 95% | 92% | 84% |
Source: Author estimates using Jobplus data.
Another major change in the Maltese labour market was the rise in female participation. Before the sharp acceleration in foreign labour flows from 2015 onwards, in absolute terms the increase in employment was mostly of women. This had an impact on labour turnover rates, as administrative data indicate that women tend to be more subject to engagement and termination forms than men. Table 2 shows however that over time the gender difference in turnover has narrowed very rapidly. Initially most women joining the labour force tended to be from younger cohorts, who tend to be more prone to move jobs, and also was mostly in part-time jobs, which tend to have short duration. In more recent years, participation has risen among older women and most job creation has been in full-time jobs.
Finally another factor that contributed towards the development of labour turnover over recent decades is changing structure of the Maltese economy. The declining relative importance of manufacturing and public services partly explains the rise in turnover, as employees in these sectors tend to have longer job tenure. On the other hand, the growth of certain services sectors, such as administrative support and private transport, led to higher turnover.
Dr Aaron G. Grech, Chief Officer of the Economics Division of the Central Bank of Malta. The views expressed in this paper are those of the author and do not necessarily reflect those of the Central Bank of Malta or any other entity. More information on this topic can be found in a Policy Note of the same title that can be downloaded at the Central Bank’s website: https://www.centralbankmalta.org/site/Publications/Economic%20Research/2023/Labour-turnover-Malta.pdf?revcount=4251