Populism, has unfortunately taken centre stage across politics in Europe and the USA. From Brexit to various national elections, the appeal of quick, comfortable answers over difficult truths has become a defining feature of the political landscape. Regrettably, this same dynamic is also playing out in Malta, threatening to undermine the nation’s long-term economic sustainability.
On one hand we have politicians proposing a pilot a four-day working week. It is not clear whether this proposal is for a 32-hour work week. However, I am sure that many have understood it to be like this. While framed as a measure to enhance work-life balance and boost productivity, the proposal, in the context of Malta’s current economic model, is a classic populist lure that promises gain without pain.
The feasibility of a shorter working week, in whatever format without a corresponding drop in pay hinges entirely on a massive increase in productivity per hour.
An analysis of working time reduction in the EU, as detailed in the European Commission’s 2023 Labour Market and Wage Developments in Europe report, reveals the complex trade-offs involved: The report notes that most empirical studies find that to have a positive impact and for this to be sustainable without raising costs, the lost working time must be compensated by significant efficiency gains. It also notes that historically, such policies, like the 35-hour week in France, have “not been found to create significant employment effects”, contradicting the argument of positive effects from a shorter working week.
The key issue for Malta is its already-tight labour market. Reducing working hours without instant productivity replacement would functionally require employers to increase their headcount substantially to maintain output. This when the business sector is already grappling with acute staff shortages.
The argument for a four-day working week further clashes with the troubling trends outlined in the latest Central Bank of Malta (CBM) Quarterly Review. The Central Bank of Malta (CBM) Quarterly Review (2025, Vol. 58, No. 4) highlights a worrying trend in productivity. The key findings on productivity in this Quarterly Review are that the increase in Malta’s Unit Labour Cost (ULC) index was mainly driven by a fall in productivity per person. This means that the ULC index, when measured on a four-quarter moving average basis, rose at an annual rate of 7.4%. This followed a 6.1% rise in the previous quarter. On the other hand, productivity per person (labour productivity) contracted by 0.1% in annual terms in the second quarter of 2025, a reversal from the 1.0% growth recorded in the first quarter.
In short, Malta is facing a productivity crisis that demands a national commitment to working smarter, not just less.
Addressing this productivity challenge requires the kind of courageous, difficult decisions that politicians universally dread. These policy choices necessitate trading short-term popularity for long-term national gain. These difficult decisions include:-
- Transport Reform: Introducing disincentives for private car use, with the funds ring-fenced for a superior mass transit system. This would reduce the crippling gridlock that acts as a major drag on economic efficiency.
- Fiscal Consolidation: Moving beyond short-term subsidies, together with a review of public spending quality, ensuring expenditure is linked to measurable, productive outcomes rather than simply sustaining consumption.
- Infrastructure Prioritisation: Enforcing rigorous planning policies to shift away from volume-driven construction and instead dedicating national resources to high-quality, value-driven infrastructure and services.
- Human Capital Investment: Conducting a radical overhaul of the educational and vocational system to effectively address the critical skills-mismatch, turning reskilling and upskilling into genuine national priorities.
- Institutional Efficiency: Tackling the pervasive red tape and slow bureaucratic processes that plague business formation, permitting, and public procurement, making public administration more data-driven and accountable.
The prognosis for such painful but essential reforms is poor, given the current political climate. When politicians pronounce themselves that they “won’t govern with the stick”, they indicate a preference for maintaining public comfort over driving strategic change. This is evident in the specific policy decisions taken, such as that pronounced by our political class that “Parking stays as is”, despite the government’s own National Transport Master Plan 2030 recommending the removal of on-street parking to improve bus efficiency, perfectly illustrating how the fear of public discontent trumps evidence-based, long-term policy. This is when the same National Transport Master Plan 2030″ details the comprehensive economic cost of traffic congestion in Malta, outlining that the overall economic cost of traffic congestion
is projected to be €917 million per year by 2030, increasing from a projected €770 million in 2025, with this overall economic cost being driven by longer journey times for passengers and freight and higher vehicle operating costs (fuel, maintenance, and drivers).
In this environment of political expediency, the Malta Chamber of Commerce, Enterprise and Industry remains one of the few realistic and balanced voices in the country. The Chamber has consistently warned against short-term proposals and has been a leading advocate for bold, comprehensive action to ensure Malta’s future competitiveness. It is the Chamber that tirelessly advocates for solutions that go beyond immediate benefit and look towards the long-term, sustainable gain of the whole country.
