Last week, the Maltese government presented the migration policy document relating to labour market and its trends. I am glad that finally we have a document on the table, which gives a truly comprehensive picture on the current statistics and trends within the Maltese labour market.
When I returned to Malta and noticed a drastic change in our towns and villages, starting from Ħamrun, it occurred to me that a regulatory policy is required. Back then, I wrote an article about the neoliberalism occurring in Ħamrun. The topic addressed the changes occurring in the area, highlighting its transformation from predominantly local traditional outlets to a diverse range of ethnic stores along St Joseph High Street. However, the dilemma is not having additional people living and working in Malta. As it was outlined in the labour migration policy document the increase in foreign workers came as a result of rapid economic growth over the past decade. What Dr Adrian Delia and the Leader of the Opposition say – when they reiterate that the economy is growing because of an increase in population – is completely flawed. They can both repeat this ad infinitum. However, they are just mocking themselves. If they had to sit for an advanced level economics exam, with such economic theory, they will both obtain an F. Shockingly, I even saw diagrams on social media fuelling this idea, depicting an increase in GDP due to an increase in population, which subsequently increases aggregate demand – a stupid diagram flow process. Economists, and financial analysts, are appalled by such a populist narrative, even if they don’t say it publicly.
Let’s for a moment assume that the economic theory of Delia et al holds true. Then, for that reason only, several African countries must be richer than some other EU member states per capita GDP. People migrate to another country either for economic reasons or to flee war. And most of those leaving their countries come from affluent areas. I had several engagements about this topic under the development aid in my preceding role. It is illogical to move to another country without even having a job unless fleeing war. There are some exceptions, who believe in the European dream, and that one day they will make it in life. However, they are not the majority but the very exceptional few.
If we take Malta’s GDP growth since 2013, on average, real GDP grew at an annual rate of 6.6%. In contrast, when we compare the level of real GDP growth between 2002 and 2013, the annual average growth rate fluctuated around 2.6%. This means that over the past decade, the PL government managed to expand the economy at an accelerated rate. What does an increase in GDP mean? It means additional financial resources and fiscal flexibility, to cover energy subsidies, improve carers’ grants and reduce income taxes. Certainly, it is important to speak about facts rather than misleading social media perceptions. It is true that Malta needed to manage better its economic migratory inflows, because to a certain extent, the infrastructure required the same level of accelerated expansion relative to economic growth, especially in public health policies. However, temping agencies were functioning like a by-product of a casino.
Not sure why the government took so long to regulate them. Clearly, when unregulated markets start functioning like a by-product of a casino, the government must intervene to regulate. There are no two ways about it. This is what we professional economists, distinct from the economic theory of Delia et al, call market failure. Market failure occurs when the state of equilibrium ends up in a disequilibrium state due to market distortion. When the quantity of imported labour was exceeding the demand for it, especially for some sectors, it created an excessive supply, thereby fuelling market failure at the detriment of the collective. It exerted pressure on our infrastructure. Certainly, it required swift action to regulate temping agencies and not a wait and see approach. Personally, I believe that this is the result of allowing laissez-faire economics. Nonetheless, we still need to pay attention not to overregulate. Excessive regulation might stifle economic growth due to a shortage of labour supply. We do not require draconian measures at this stage. What we need is a proper transition plan to understand the sectors that require additional labour supply.
When an economy expands at an accelerated rate, oversight of what is happening within certain sectors is fundamental. And the response to correct the markets must be instantaneous. Else, some sectors start importing labour indiscriminately, allowing the spawning of additional temping agencies to satisfy demand. Without proper regulation the market of temping agencies functioned like gamblers in a casino. In such a scenario, we have no human rights safeguards, exploitation of workers and increased rental prices, that affect local communities. Analysing the figures presented in the labour migration policy documents, it transpires that between 2013 and 2023, the robust economic growth created a demand for labour, whereby employment soared requiring an additional 120,000 supplementary jobs. The document outlines that most of the jobs were taken by EU and third country nationals (TCNs) due to the Maltese shortage of labour supply.
As I had the opportunity to state in my preceding opinion pieces, most importantly is to have visibility by NACE sectors of the Gross Value Added of each sector for the Maltese economy. Indeed, on a sectoral level, it transpires that the services sector was the main driver of economic growth in Malta over the past decade. The professional and administrative sectors covered the largest contribution. The trends show the evolution of the labour market by sector, whereby Maltese nationals moved out of the conventionally manual jobs like the construction and manufacturing industries to take up professional and administrative employment. Data depicts that in tandem, other EU nationals filled vacant specialised posts, especially within the financial and professional sectors. In contrast, third country nationals, ended filling the positions within the wholesale, retail, transport, accommodation and food sectors. These sectors are now highly dependents on TCNs. Also, TCNs played a crucial role in the construction industry. Without them, we wouldn’t have been able to build our road networks, houses and upgrade our infrastructure. So, the 67,000 new jobs that were filled by TCNs are here to stay even if there is a change in government because no Maltese will be filling the posts.
The size of Malta’s economy outpaced its human capital availability, on hand because we have a small population and a small labour market, and in part because we have one of the lowest birthrates in Europe. Lastly, chapeau to Minister Byron Camilleri and Prime Minister Robert Abela for issuing this policy document. I look forward to its implementation.
